[Federal Register Volume 66, Number 113 (Tuesday, June 12, 2001)]
[Notices]
[Pages 31731-31748]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-14739]


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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

[Dockets No. FAA-2001-9852; No. FAA-2001-9854]


Notice of Alternative Policy Options for Managing Capacity at 
LaGuardia Airport and Proposed Extension of the Lottery Allocation

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Request for comments on alternative policy options for managing 
capacity and mitigating congestion and delay at LaGuardia Airport (LGA) 
and the proposed extension of the lottery allocation.

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SUMMARY: The Federal Aviation Administration is gathering information 
on the feasibility and effectiveness of a limited number of demand 
management options that could replace the current temporary 
administrative limits on the number of aircraft operations at LGA which 
are scheduled to expire on September 15, 2001. Because of the unique 
circumstances that exist at LGA and the need to avoid gridlock at one 
of the nation's most critical airports, the FAA is examining various 
demand management approaches--that is, approaches that would continue 
to bring airport demand and capacity into equilibrium. The options 
discussed below are classified into either market-based or 
administrative options. While two specific options submitted by the 
Port Authority of New York and New Jersey (PANYNJ) are included for 
comment in this Federal Register Notice, FAA does not propose, nor 
endorse, either of these options at this time.
    The FAA will use the information provided by interested parties, as 
well as other research, to identify an access management process that 
will allocate LGA's limited capacity among aircraft operators. 
Commenters are requested to discuss how the various demand management 
options would affect other important public policy objectives, such as 
airline competition and small community access to important air travel 
markets, and may raise legal and regulatory impediments, although that 
is not the focus of this notice.

DATES: Comments on Phase One, the temporary extension of the current 
administrative lottery allocation beyond September 14, 2001, must be 
received by July 12, 2001. Comments on Phase Two, demand management 
options to replace the current administrative allocation, must be 
received by August 13, 2001.

[[Page 31732]]


ADDRESSES: Comments should be mailed or delivered in duplicate, to: 
U.S. Department of Transportation Dockets, Docket No. FAA-2001-9852 for 
Phase One and Docket No. FAA-2001-9854 for Phase Two, 400 Seventh 
Street, SW, Room Plaza 401, Washington, DC 20590. Comments may also be 
sent electronically to the following Internet address: DMS.dot.gov. 
Comments may be filed and/or examined in Room Plaza 401 between 10:00 
a.m. and 5:00 p.m. weekdays except Federal holidays.

FOR FURTHER INFORMATION CONTACT: John M. Rodgers, Director, Office of 
Aviation Policy and Plans, 800 Independence Avenue, SW., Washington, DC 
20591; telephone number 202-267-3274.

SUPPLEMENTARY INFORMATION:

Comments Invited

    Interested persons are invited to comment by submitting such 
written data, views, or arguments as they may desire. Comments relating 
to the environmental, energy, federalism, or economic impacts of each 
option are also invited. Comments that provide a factual basis 
supporting the views and suggestions presented are particularly helpful 
in developing reasoned policy decisions. Communications should identify 
the docket number and be submitted in triplicate to the address 
specified above. All communications and a report summarizing any 
substantive public contact with FAA personnel on this notice will be 
filed in the appropriate docket. The dockets are available for public 
inspection both before and after the closing dates for receiving 
comments.
    Before taking any final action on this matter, the Administrator 
will consider all comments made on or before the closing dates for 
comments.
    The FAA will acknowledge receipt of a comment if the commentor 
includes a self-addressed, stamped postcard with the comment. The 
postcard should be marked ``Comments to Docket No. FAA-2001-9852'' For 
Phase One or ``Docket No. FAA-2001-9854'' for Phase Two. When the 
comment is received by the FAA, the postcard will be dated, time 
stamped, and returned to the commentor.

Background

A. History

    PANYNJ operates four airports: John F. Kennedy International, 
Newark International, LaGuardia Airport and Teterboro Airport. These 
airports are used intensively with over 90 million passengers, 2.8 
million tons of cargo, and over 1.4 million aircraft movements passing 
through them each year. Each airport plays a different role, targeted 
for different users and designed to accommodate different types of 
operations. LGA, just seven miles from midtown Manhattan is the close-
in airport offering frequent, short-haul service to meet the needs of 
the business community. As a result, the airport experiences a steady 
and heavy flow of arrivals and departures throughout the day--early 
morning and through early evening. Demand for access to LGA has been so 
great that in 1969 the FAA promulgated the High Density Rule (HDR) \1\ 
which is in effect at LGA and three other congested airports. Given the 
hub and spoke nature of airline service in the United States, delays at 
LGA can quickly proliferate throughout the entire aviation system, 
causing delays and ground holds across significant portions of the 
country.
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    \1\ Title 14 of the Code Federal Regulations, Part 93, Subpart 
K.
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    Recent legislation has made it even more important that the 
capacity/demand imbalance at LGA be addressed. On April 5, 2000, the 
Wendell H. Ford Aviation Investment and Reform Act of the 21st Century 
(AIR-21) was enacted, exempting certain flights from the HDR operation 
limits and providing for the rule to end in 2007. Specifically, AIR-21 
exempts flights operated by new entrant carriers or flights that serve 
small hub and non-hub airports with aircraft with less than 71 seats. 
Exemption requests for more than 600 flights were filed with DOT and 
approved. By September 2000, air carriers had added nearly 200 new 
scheduled flights at LGA, with plans to operate more than 300 new 
flights by the end of January 2001. While direct service to LGA 
increased, so too did delays. In September, as calculated from FAA's 
Air Traffic Operations Network Database (OPSNET), flight delays at LGA 
accounted for 25 percent of the nation's delays, compared to 10 percent 
for the previous year.
    Concerned about the accelerating levels of congestion, flight 
delays, and cancellations and the prospects of reaching gridlock, 
PANYNJ attempted to impose a temporary moratorium on new flights at LGA 
and requested the assistance of the FAA. Using its authority under 49 
U.S.C. 40103 and pending the development of a longer-term solution, the 
FAA published a Notice of Intent in the Federal Register on November 
15, 2000, announcing its intention to temporarily cap AIR-21 slot 
exemptions at LGA and allocate them via a lottery (65 FR 69126; 
November 15, 2000). The lottery, which was conducted on December 4, 
2000, followed procedures published in the Federal Register and was 
based on an airspace management limit of 75 scheduled operations per 
hour (plus 6 ``other'' operations primarily used by the general 
aviation community) beginning January 31, 2001 (65 FR 75765; December 
4, 2000). In order to attain that limitation, the number of AIR-21 slot 
exemptions at LGA was restricted to a total of 159 a day between the 
hours of 7:00 a.m. and 9:59 p.m. The December 4 lottery allocation 
remains in effect until September 15, 2001, unless extended, while the 
FAA explores other options to manage the imbalance between airport 
capacity and demand on a more permanent basis.
    When an airport begins to routinely experience increasing levels of 
delay, the airport operator often considers ways to increase the 
airport's limited capacity such as the addition of new runways. The FAA 
believes that this is the preferred approach for relieving airport 
congestion and reducing delay. However, in certain cases, runway 
expansion is neither practicable nor feasible. For example, at LGA--
located on 680 acres in the Borough of Queens, New York City, bordered 
by Flushing and Bower Bays--there is little opportunity for runway 
expansion. Consequently, delay must be addressed by other means.

B. The Operating Environment at LGA

    The FAA's analysis indicates that an operationally acceptable level 
of daily flights during peak hours at LGA is in the low to mid-1200's 
rather than the mid-1300's or more as occurred at the airport during 
fall 2000. At that higher level of scheduled demand, it was common to 
experience lengthy delays even during periods when there was good 
weather and the airport was operating at maximum capacity.
    In April 2000, prior to the implementation of any AIR-21 
exemptions, LGA had an average of 1,039 daily operations and 104 daily 
delays of 15 minutes or more. The number of allocated slot reservations 
including scheduled and non-scheduled operations was approximately 71 
per hour. During September 2000, airlines began the scheduled operation 
of almost 200 exemption flights. The number of slots and slot 
exemptions allocated during the morning and afternoon periods peaked at 
the low 90's per hour. LGA had an average of 1,163 daily operations and 
351 daily delays during September. Hourly schedules beyond capacity 
compounded operational issues since delays starting in the early 
morning hours frequently impact later

[[Page 31733]]

flights. By November 2000, carriers had added about 300 exemption 
flights and the hourly scheduled allocation exceeded 100 in peak hours. 
Between April 2000 and November 2000, the average daily operations 
increased by over 22 percent and the average daily delays increased by 
over 230 percent.
    During September and October 2000, there was also an increase in 
the number and duration of flight disruptions and irregular operations 
caused by long delays. Airlines had operational and customer service 
issues because aircraft were out of operational sequence, crews on 
delayed flights exceeded the permitted duty time, and passengers missed 
connecting flights. In many cases, the airlines responded to the delay 
situation by canceling flights and accommodating passengers on 
alternative flights. This means that, although the reported delays 
increased significantly along with the traffic growth, the full impact 
of the cancellations and flight disruptions is understated in the delay 
and operational statistics. The impact was particularly burdensome for 
new entrant carriers that operate only a few flights at the airport. 
Because they have less flexibility, they offered fewer alternatives and 
some passengers were either accommodated on competitors' flights or on 
subsequent days.
    Notwithstanding the level of delays in November 2000, carriers had 
scheduled additional flights to begin in the next few months. Capacity 
simply did not exist to accommodate the increased level of flights 
without daily traffic management programs, limiting demand and delaying 
flights to ensure the safety of the operation. The volume-related 
delays at LGA negatively impacted the efficiency of the air traffic 
control system. Therefore, the FAA decided to reduce the number of AIR-
21 operations at the airport and allocate the exemptions by spreading 
them out in a manner that would ensure they could be accommodated 
without substantial delay, at least under good weather conditions.
    The following table reflects operational and delay data for LGA 
before AIR-21, the impact during fall 2000, and after the lottery 
schedules were implemented.

                                         Table 1.--Operations and Delays
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                                                                                                    Post AIR-21
                                                                    Pre AIR-21      Post AIR-21   lottery  April
                                                                    April 2000     October 2000        2001
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HDR Slots/Exemptions............................................           71             104              81
Monthly Operations..............................................       31,116          37,373          34,874
Monthly Delays..................................................        3,109          10,226           2,941
Average Daily ATC Operations....................................        1,039           1,268           1,162
Average Daily Delays............................................          104             330              98
Percentage of Operations Delayed................................            9.97           27.36            8.43
Average Delay Time (minutes)....................................           44.1            40.84           40.51
Average Taxi-in (minutes).......................................            6.49            7.49            7.36
Average Taxi-out (minutes)......................................           26.98           31.79           25.49 
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\1\ Peak.
Source: FAA's OPSNET and FAA's Slot Administration Office.

    Following the implementation of the reduced daily and hourly 
operating levels on January 31, 2001, delays have decreased by 71 
percent compared to October 2000. The data for April 2001 compares 
favorably to the pre-AIR-21 levels for April 2000 despite the increased 
daily flights (i.e., the 159 exemption flights allocated in the 
December 4 lottery). Average daily delays, the percentage of operations 
delayed, average delay times, and average taxi-out times have all 
decreased. In the first three months following the implementation of 
the revised schedules, LGA's share of total airport delays was 11 
percent compared to almost 30 percent in fall 2000. Finally, the most 
recently available on-time arrival performance for March 2001, as 
reported to the Department of Transportation, has improved by 13 
percentage points over the October 2000 levels.
    The FAA believes it is a significant accomplishment of the airport 
and ATC system for LGA to have a year over year growth of twelve 
percent in average daily operations while generally maintaining the 
performance of the airport prior to the implementation of the AIR-21 
exemptions. This would be a notable accomplishment at many airports but 
is particularly so at LGA given the physical limitations of the 
airfield, the complexity of the surrounding airspace, and the 
challenges of accommodating a changing fleet mix. The FAA finds that 
the current cap on scheduled operations manages delay and congestion 
and still accommodates the AIR-21 exemptions to the greatest extent 
practical. At the current demand levels, airlines are better able to 
plan their operations and there are fewer non-weather related 
disruptions and irregular operations. This is representative of the 
level of system performance the flying public expects and can be 
realized at LGA given a combination of reasonable demand and good 
system conditions.
    The FAA will continue to monitor system performance and pursue 
procedural and other capacity enhancements. However, the FAA reaffirms 
that the existing cap of 75 scheduled operations is the current 
practical hourly limit for scheduled flights at the airport (plus 6 
``other'' general aviation/unscheduled operations), and we believe that 
any adopted demand management policies should reflect that established 
operational limit.
    However, there are other factors that must also be considered which 
may have contributed to congestion and delay at LGA. For example, in 
recent years there has been a continuing trend toward using smaller 
aircraft for the provision of scheduled service at LGA. In fact, over 
the last six years there has been a significant increase in the use of 
smaller aircraft serving LGA. For example, as Table 2 illustrates, in 
April 1996, 26.54% of all air carrier operations were conducted by 
aircraft of 77 seats or less. By April 2001 this percentage has 
increase to 36.71%. While the use of small aircraft has promoted 
service to small communities, these aircraft may have also contributed 
to the congestion and delay experienced at LGA while accommodating 
fewer passengers than larger aircraft. A proper balance between access 
and airport congestion must be struck if LGA's limited resources are to 
be used as efficiently as possible.

[[Page 31734]]



 Table 2.--Percent Distribution of Air Carrier Operations at LGA by Seat
                                  Size
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                                                April    April    April
                  Seat Size                      1996     2000     2001
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77...........................................    26.54    30.86    36.71
78-100.......................................    10.82     6.15     4.86
101+.........................................    62.64    62.99   58.43
------------------------------------------------------------------------
Source: Official Airline Guide.

    The Office of the Secretary and the FAA are currently examining the 
broader policy implications of demand management options at congested 
airports throughout the United States from both a local and national 
perspective. It is DOT's intention to develop a full array of public 
policy tools to develop a comprehensive aviation strategy that focuses 
on ways to reduce delays, improve airport capacity management, enhance 
competition, and promote the efficiency of the overall aviation system. 
However, based on the unique circumstances at LGA, the FAA anticipates 
that action will be necessary at LGA in the near term. There are 
several characteristics that make the situation at LGA unique. First, 
given LGA's prominence in the national airspace system, local delay 
events routinely proliferate throughout large portions of the aviation 
system. Second, the amount of airport congestion experienced prior to 
implementation of the December 4, 2000 lottery allocation was on the 
verge of creating gridlock and it is critical that we act to avoid this 
reoccurrence. Third, LGA is a HDR airport at which operations are 
limited by regulation until 2007.
    Given the unique circumstances that exist at LGA, the FAA believes 
that a demand management approach has potential to continue to realign 
demand with capacity and provide for an effective and efficient means 
of allocating the airport's limited capacity once the exemption slot 
lottery allocation is no longer in place. But any special demand 
management measures at LGA would maintain the Federal policy that 
requires airport operators to provide reasonable and nondiscriminatory 
access to air carriers.

Options

    The FAA is considering a phased approach in its implementation of a 
demand management solution at LGA. In the first phase, the FAA would 
extend the existing lottery and hold an additional lottery to allocate 
any unused capacity. In the second phase, one of several demand 
management approaches would be adopted. The approaches currently under 
consideration are discussed below. Beyond these approaches, the FAA 
recognizes that there may be other effective approaches that it should 
consider and strongly encourages the submission of comments on any 
approach that could continue to manage airport delay and congestion at 
LGA. When evaluating each proposed option, commenters are requested to 
consider the following points:
     The option should effectively manage airport delay and 
congestion at LGA.
     The option should improve the efficient use of the 
airport's capacity, and to the extent possible, expand capacity at the 
airport or within those aviation facilities operated by PANYNJ.
     The option may use economic incentives to bring about a 
balance between airport capacity and demand.
     The option should be flexible enough to allow policy 
makers the opportunity to address certain policy goals such as ensuring 
air carrier competition and service to small communities.
     The option cannot degrade aviation safety.

A. Phase One: Extend the Existing Lottery Allocation and Hold an 
Additional Lottery To Allocate Unused Capacity

    The FAA considered three options that would extend the December 
2000 lottery allocation, but proposes only one of the options in this 
notice for comment. The first option was to extend the termination date 
of the current lottery allocation. While this option would not disrupt 
current scheduled operations, it does not have the flexibility 
necessary to take into account changes, such as returned or unused slot 
exemptions, since the lottery was held on December 4, 2000. The second 
option would be to conduct a new lottery of all 159 AIR-21 slot 
exemptions. This option was rejected because, with limited exceptions, 
new entrant and small community carriers have implemented viable 
schedules using the slot times currently allocated. Additionally, the 
FAA determined that it would be too disruptive for the carriers, 
passengers and communities that have benefited from new schedules 
following the December lottery.
    The last option considered is the option proposed by the FAA in 
this notice for comment. The FAA proposes to maintain the slot lottery 
allocation, that began January 31, 2001, and to conduct an additional 
lottery to allocate certain available capacity. This option would 
maintain the current allocation without disruption and provides 
opportunity for new entrant carriers that were limited or excluded from 
the first lottery. It was the FAA's intention for the slot lottery 
allocation to be a short-term solution and that the eligibility 
criteria, which limited participation in the lottery to carriers that 
had received an allocation from the FAA by November 9, 2000, and 
planned to begin service by January 1, 2001, was warranted in order to 
recognize existing service while discouraging the filing of additional 
requests and commencement of new service. Given that it is necessary to 
maintain current operational limits, the FAA believes that unused 
available capacity should provide access to LGA for carriers that 
previously were excluded or did not receive a full allotment as a new 
entrant. However, this access must be within the current operational 
limit.
    The FAA proposes to make available through the new lottery four 
AIR-21 slot exemption times that were selected by Southeast Airlines in 
the December 4 lottery but subsequently not used. Additionally, there 
are 10 slot exemptions in the 9 p.m. hour that were turned in to the 
FAA permanently. Consequently, there are 14 exemption slots that are 
available for allocation. Carriers that permanently returned exemption 
slots, had exemption slots withdrawn for non-use, or otherwise did not 
operate the selected slot exemptions will have their number of slots 
exemptions reduced accordingly. The agency considered whether the seven 
slots selected by Legend Airlines and subsequently allocated by a 
contingency round should be withdrawn and made available during this 
second lottery. Upon consideration, the FAA determined that the 
withdrawal of these exemption slots would further disrupt carrier 
schedules and that these slots should continue to be used by the 
carriers that participated in the contingency round. In the event that 
prior to this proposed lottery additional slot exemptions are 
permanently returned by airlines or withdrawn by the FAA for non-use, 
those slot exemptions would be placed in the available pool for 
reallocation.
    The agency proposes that carriers eligible to participate in the 
lottery for these 14 exemption slots be initially limited to new 
entrant carriers that did not participate in the December 4 lottery or 
new entrant carriers that were unable to select up to four exemption 
slots during the first round of the December 4 lottery. Any slot 
exemption not selected by a new entrant in the first round would be 
offered to all eligible carriers again using the established rank order 
from the December 4 lottery.

[[Page 31735]]

Consistent with the intent of AIR-21 this proposed allocation to new 
entrants through this additional lottery will provide an opportunity to 
maintain approximately the same balance of slot exemptions for new 
entrants and service to small communities.
    Vanguard Airlines is the only carrier which participated in the 
first lottery that was limited to selecting less than the four slot 
exemptions permitted in the first round to all other participating new 
entrant carriers. The FAA believes that allowing Vanguard limited 
participation to potentially select two additional slots exemptions 
places it on equal footing with other new entrant carriers that may 
participate in this proposed lottery.
    The FAA proposes to follow similar lottery procedures as set forth 
in the December 4, 2000, Federal Register notice, with certain 
modifications. All carriers eligible to participate in the lottery must 
meet the eligibility criteria for AIR-21 operations, as articulated 
under OST Order 2000-4-10. A notice of intent to participate in the 
lottery by a carrier must be received by the FAA Slot Administration 
Office by the date specified in a notice of lottery subsequently 
published in the Federal Register. Any slot exemptions not selected by 
participating new entrant carriers would be made available for service 
to small-hub and non-hub airports by carriers that participated in the 
December 4, 2000, lottery and allocated in accordance with the 
established rank order from that lottery. Similar to the December 4 
lottery, participating new entrant carriers would select available slot 
exemption times until the carrier had a maximum of four slot exemptions 
during peak hours. Also, consistent with the first round provisions of 
the December 4 lottery, the FAA proposes that new entrant carriers be 
able to select exemption times without regard to the cap of 75 
scheduled operations per hour. However, the FAA does have concern that 
certain hours may become oversubscribed. For example, in the 5 p.m. 
hour, additional selections by new entrant airlines in the December 4 
lottery had resulted in 80 scheduled slot operations allocated during 
this hour. If flights during current peak periods were to increase, the 
operational and delay consequences to all operators may offset the 
benefits for new entrants. In order to maintain a balance between the 
operational benefits of a limit of 75 scheduled operations per hour and 
the additional flexibility that may be needed by certain new entrant 
airlines, the FAA does reserve, if necessary, that certain hours (for 
example, 5:00 p.m. and 6:00 p.m.) may be limited or excluded for the 
purpose of new entrant airline selections exceeding the 75 hourly cap.
    The lottery procedures are proposed as follows:
    1. New entrant carriers eligible to participate in this lottery are 
carriers that did not participate in the December 4 lottery or carriers 
that selected less than four exemption slots during the first round of 
the December 4 lottery and must have certified to the Department of 
Transportation in accordance with the procedures articulated in OST 
Order 2000-4-10.
    2. New entrant carriers intending to participate must notify the 
FAA Slot Administration Office by the date specified in the notice of 
lottery to be published in the Federal Register.
    3. New entrant carriers will participate in a random drawing for 
selection order. Carriers will select in that order. Each carrier must 
make its selection within 5 minutes after being called or it shall lose 
its turn.
    4. No new entrant carrier may select more than four exemption 
times. Carriers that hold less than four slot exemptions may only 
select slot exemptions so as to not exceed holding a total of four. 
Each new entrant carrier may select one slot exemption time in each 
hour without regard to whether a slot is available in that hour. The 
available times and any applicable restrictions concerning available 
exemption slot times will be announced in the notice of lottery.
    5. There will be one round reserved for selection by new entrant 
carriers. That round will be concluded when all participating new 
entrant carriers have reached their maximum allocation, or carriers 
choose not to select remaining available times. Any remaining slot 
exemption times once the first round is completed will be made 
available to carriers providing service to small hub or non-hub 
airports in accordance with the established rank order from the 
December 4, 2000 lottery.
    6. The FAA Chief Counsel will be the final decision-maker 
concerning eligibility of carriers to participate in the lottery.
    7. The slot exemptions reallocated by lottery will remain in effect 
through October 26, 2002. If circumstances warrant, this date may be 
extended through notice in the Federal Register.
    8. All operations allocated under these lottery procedures must 
commence by October 29, 2001.
    9. All carriers that participate and select exemption slots during 
the lottery must re-certify to the Department of Transportation in 
accordance with the procedures articulated in OST Orders 2000-4-10 and 
2000-4-11, and provide the Department and the FAA with the markets to 
be served, the number of exemption slots, the frequency, and the time 
of operation.
    10. The allocation of slot exemptions by this proposed lottery 
would remain through October 26, 2002. In this notice, the FAA 
discusses several longer-term demand management options. A number of 
these options could not be implemented prior to October 26, 2002. In 
the event that the longer-term option selected cannot be implemented 
before the above date, the FAA anticipates that continued restrictions 
on the operation of AIR-21 slot exemptions in the interim would be 
necessary. Any slot that becomes available during the effective period 
of the lottery allocation will be allocated to eligible carriers using 
the established rank orders. The FAA may extend the effective period of 
the lottery allocation by publication of a notice in the Federal 
Register. If the FAA determines that a sufficient number of slot 
exemptions are available, these slot exemptions would be allocated by a 
lottery. Subsequent notices of lotteries would be published in the 
Federal Register and set forth the details of available slot exemption 
times, any applicable hourly restrictions and required start-up dates. 
Eligibility criteria for future lotteries would be updated to reflect 
prior allocation and operation of slot exemptions.

B. Phase Two: Implementation of a Longer-Term Solution

    It is paramount to assure that all other reasonable options to 
expand LGA's limited runway capacity have been explored. For example, 
should the PANYNJ conduct a comprehensive capacity enhancement study, 
identifying all actions that it will take to increase capacity or 
efficiency at the airport prior to implementing demand management 
approaches.
    Given an apparent inability to significantly expand airfield 
capacity at LGA, the FAA believes that the only way to ensure that the 
demand for and the supply of airfield capacity at the airport remains 
in balance, over the long run, may be to adopt demand management at 
LGA. The approaches that are currently under consideration can be 
generally classified into two categories: market-based and 
administrative options. However, it would be possible to create hybrid 
options based on the characteristics of each approach. These general 
approaches are discussed below.

[[Page 31736]]

I. Market-Based Options

    The FAA is currently considering two general types of market-based 
options to manage demand and allocate capacity at LGA. The first option 
would allow PANYNJ to establish a congestion price for landings and 
takeoffs. The second option is to hold an auction for a predetermined 
number of landing and take-off rights at LGA. Economic theory suggests 
that under perfect information and absent any competitive constraints, 
both approaches (if fully implemented) would yield an efficient 
allocation of resources and would generate an equal amount of revenue. 
The difference between the two options is the role of the market. Under 
an auction, the FAA determines the number of available landing rights 
and the market determines their value. Under congestion pricing, the 
price is set by the PANYNJ and the market then determines how many 
landing rights will be used at that price. The general characteristics 
of each option are described below. In addition to a generalized 
description of these market-based solutions, two specific applications 
of these approaches are outlined below. These specific options were 
developed by PANYNJ for consideration by the FAA and are fully detailed 
in the Appendix. While the specific options submitted by PANYNJ are 
included for comment in this Federal Register notice, FAA does not 
propose, nor endorse, either of these options at this time. Federal 
laws, regulations, and U.S. international obligations presently in 
place may, in fact, prevent PANYNJ from imposing these proposals. In 
this notice we seek suggestions on effective, comprehensive solutions 
that represent the best public policy for controlling congestion and 
allocating operating rights at LGA, and we will consider pertinent 
legal issues in any policy options ultimately put forward for adoption.

A. Congestion-Based Landing Fees

(1) A Generalized Description of a Congestion-Based Landing Fee
    The congestion based landing fee option allocates slots (under the 
HDR) and slot exemptions (under AIR-21 and pre AIR-21 exemption 
authority) based on the aircraft operator's willingness to pay. 
Traditional landing fees could be supplemented or replaced entirely by 
a system of fees that would let the market allocate aircraft operations 
per hour. Under all scenarios, FAA would maintain ultimate control of 
the maximum number of allowable flights at the airport based on safety 
and efficiency. During periods of high demand only those aircraft 
operators that value the use of the airport's runways most would use 
the runways. Other users could choose to operate during periods of 
lower demand or could choose to operate at less congested neighboring 
facilities (e.g., John F. Kennedy International Airport). Proponents of 
this approach have suggested that this type of congestion-based pricing 
policy would encourage the use of larger aircraft at LGA and would 
consequently increase the number of passengers that use the capacity 
constrained facility.
    On a practical level, there are a number of ways in which a 
congestion pricing system could be established. For instance, a two-
part tariff could be created, combining the traditional landing charge 
with a flat surcharge that could vary throughout the day. Alternatively 
a weight-based fee could be constructed which would encourage the use 
of larger aircraft during periods of high demand. Regardless of how the 
fee is constructed, it must be capable of bringing into balance airport 
capacity and demand.
(2) A Potential Congestion-Based Fee Approach
    The PANYNJ has identified two versions of congestion pricing for 
consideration. A complete description of these is provided in the 
Appendix. When evaluating both versions of this option, commenters are 
asked to be mindful of their key characteristics.
    Option A contemplates that the restrictions imposed by the HDR 
would remain in effect until 2007 and that the FAA would increase the 
number of slot exemptions under AIR-21. The PANYNJ would levy the same 
congestion fee on all aircraft operations (both landings and take-
offs), including operations conducted under HDR authority, that occur 
during the Congested Period at LGA, except for a limited number of AIR-
21 flights that would be exempted from the fee. The PANYNJ anticipates 
that the FAA would conduct a lottery (in the same manner as it 
conducted the initial AIR-21 slot exemption lottery in December 2000) 
to allocate three additional AIR-21 slot exemptions per hour for use 
for qualified AIR-21 operations. The congestion fee would be set to 
discourage the actual operation of flights beyond the hourly operations 
target. Each year thereafter, the FAA would conduct another lottery to 
allocate additional slot exemptions for qualified AIR-21 operations. 
Under this option, the PANYNJ expects that the congestion fee would 
range between $350-$700 for each arriving and departing flight. 
Associated annual revenues are estimated to range between $130-$260 
million per year.
    Option B differs from Option A in two ways. The first difference is 
that under Option B the PANYNJ contemplates that the FAA would 
gradually reduce the constraints imposed under both the HDR and the 
AIR-21 slot exemption lottery in conjunction with the introduction of 
the congestion fee and in anticipation of the elimination of the HDR by 
2007 as required by AIR-21. In addition to increasing the number of 
AIR-21 slot exemptions that could be allocated, as in Option A, the FAA 
would (i) annually increase the number of allocated HDR operations in 
each hour by a maximum of 5 percent using the rules established in the 
FAA's HDR regulations to allocate among the airlines the authority to 
conduct these additional operations, and (ii) revise the HDR to reduce 
or eliminate the current restrictions that limit the use of 14 commuter 
slots each hour to small aircraft, which, the PANYNJ indicates will 
improve the operating efficiency of LGA. Effective in 2007, when the 
HDR is eliminated, there would no longer be any administrative 
constraints on the permissible number of operations at LGA, but the 
congestion fee would remain in place and would continue to maintain a 
balance between demand and capacity at LGA.
    The second difference between Option A and Option B is that under 
Option B, the PANYNJ would levy two different congestion fees: one 
congestion fee would be charged for all flights operating between LGA 
and any small hub or non-hub airport qualifying for AIR-21 service, as 
well as general aviation flights, and another, much higher congestion 
fee would be charged for all other aircraft operations. Under this 
option, the PANYNJ expects that the congestion fee for air carriers 
serving AIR-21 markets (and general aviation) to range between $350-
$700 for each arriving and departing flight and a range of $700-$2,000 
for all other arriving or departing aircraft. Associated annual 
revenues are estimated to range between $240-$550 million per year.
    Under congestion pricing, the PANYNJ is also considering the 
desirability of exempting from the congestion fee certain operations 
that serve airports that qualify for AIR-21 small hub or non-hub 
service under 49 U.S.C. 41716(a) and DOT Order 2000-4-11. Three 
potential approaches under consideration are to exempt (i) 80 
operations (or a lower number that may be determined by PANYNJ to 
increase the overall operating efficiency of LGA) qualified under AIR-
21 for small hub or non-hub service; (ii) all AIR-21

[[Page 31737]]

qualified operations serving small hub or non-hub airports within 300 
miles of LGA, for example, given that passengers in markets within this 
distance have few connecting flight options; or (iii) a combination of 
these two approaches. The PANYNJ has also considered whether to exempt 
new entrant airlines from the congestion fee, but presently does not 
anticipate doing so because of concerns that such an exemption could 
disadvantage incumbent carriers vis-a-vis new entrant carriers.
    The FAA is interested in receiving comments regarding the key 
characteristics of the procedure which the PANYNJ has identified for 
consideration and encourages, to the extent appropriate, variations on 
the PANYNJ approaches. Issues such as adequacy, effectiveness, ease of 
administration, and impact on air carriers and the traveling public 
should all be addressed. In particular, comments are solicited on 
whether the proposed range of fees will likely influence air carrier 
behavior and manage congestion and delay at LGA; whether the approach 
would maintain and/or expand service to small communities and foster 
new airline entry into the LGA market; and whether the approach 
provides for a smooth transition to 2007 when the HDR expires.

B. Auctioning of Landing and Take-Off Rights

(1) A Generalized Description of an Auction
    Under this approach, the airport or the FAA would hold an auction 
for a specified number of landing and take-off rights. Each eligible 
aircraft operator would have the opportunity to participate in the 
auction. To ensure that air carriers could build and maintain reliable 
service patterns prior to the elimination of the HDR in 2007, the 
auction would be phased in over a number of years, with a fixed 
percentage of HDR slots and AIR-21 slot exemptions auctioned off each 
year. To ensure that air carrier competition remains vibrant at LGA and 
that all aircraft operators have an opportunity to participate in the 
auction, landing and take-off rights could also be re-auctioned 
periodically. For example, a staggered approach could require 25% of 
the available landing and take-off rights each year be re-auctioned, 
with each landing and take-off right valid for a period of 4 years. 
Auction ``fees'' could be considered as an addition to all other fees 
assessed at the airport. Alternatively, the airport could exempt the 
recipients of the auctioned landing and take-off rights from the 
current weight-based landing fees.
    Comments are specifically requested on the various methods by which 
an auction could be constructed and the frequency of the auction. 
Similar to the congestion pricing option, it is anticipated that an 
auction, would generate revenue in excess of the airport's traditional 
rate base. There are several possible approaches to cap revenue to 
recover only the cost associated with operations affected by the 
auction. The two specific methods that are described here are examples. 
First, actual auction bids/payments could be scaled back 
proportionately to the ratio of airport cost to the aggregate of 
winning bids. Second, rebates could be offered to new entrants and 
limited incumbents to ensure the promotion of air carrier competition 
and service to small communities.
(2) A Potential Auction Based Approach
    The PANYNJ has identified a hybrid procedure for consideration that 
combines both administrative procedures and an auction of a portion of 
operations at LGA. A complete description of this approach is provided 
in the Appendix. When evaluating this option, commenters are asked to 
be mindful of the key characteristics of its proposed application. 
These characteristics are summarized below:
     Airport reservations would replace HDR Slots and AIR-21 
slot exemptions.
     Air carrier reservations would be allocated according to 
the following formula:
     Each carrier given a baseline allocation of reservation of 
up to 20 reservations per day for use for service between LGA an any 
other destination permitted under the LGA Perimeter Rule.
     80 Reservations (allocated by lottery, auction, or a 
combination of these methods) reserved for carriers seeking to serve 
small communities.
     70 percent of the remaining reservations allocated to each 
carrier according to their enplaned market share.
     Remaining reservations auctioned among competing carriers.
    The PANYNJ suggests that this approach could be implemented in one 
of two ways:
    Option A: Immediate replacement of all HDR slots and AIR-21 slot 
exemptions. Reservations would be reallocated every two years according 
to one of the four methods described above.
    Option B: Four-year phase out of the existing HDR slots and AIR-21 
slot exemptions. In the first year, airlines are guaranteed to receive 
at least 75 percent of their current HDR slots and AIR-21 slot 
exemptions through a baseline allocation. In the second year, airlines 
are guaranteed 50 percent; and in the third year 25 percent. In this 
scenario phase out would be completed in year four.
    The Auction for reservations (excluding the auction proceeds for 
the 80 reservations set-aside for small communities) is estimated to 
yield additional annual revenues to the PANYNJ of approximately $60 
million to $90 million for Option A and for Option B once it is fully 
implemented. Option B is estimated to yield additional revenues of 
approximately $18-$26 million in the first year, $35-$53 million in the 
second year, and $53-$79 million in the third year. These estimates 
assume auction prices in the range of $20,000 to $30,000 per 
Reservation per month.
    The FAA is interested in receiving comments regarding the key 
characteristics of the procedures that the PANYNJ identified for 
consideration and encourages comments, to the extent appropriate, on 
variations of this approach. Issues such as adequacy, effectiveness, 
ease of administration, and impact on air carriers and the traveling 
public should all be addressed. In particular, comments are solicited 
on whether the relative distribution of reservations among the four 
potential allocation methods provide sufficient opportunity for service 
by new entrants and provide for the maintenance and/or expansion of 
service to small communities; how much revenue would be derived from 
the auction and if the suggested use of funds is appropriate (see 
discussion in the succeeding section of this notice). Finally, is the 
combination of administrative procedures and market-based solutions 
appropriate or should there be greater reliance on a market mechanism 
to allocate reservations. For example, is it appropriate to allocate 70 
percent of the remaining reservations based on air carrier business 
performance (i.e., enplaned market share) or should more of these 
reservations be included in those that are auctioned off after the 
baseline and service to small communities allocations have been made.
(3) Collection and Use of Revenue Derived From a Market-Based Approach
    As noted previously, it is anticipated for a market-based approach 
to be effective in allocating scarce resources at LGA, the revenue 
generated would far exceed the amount collected by traditional airport 
charges. Furthermore,

[[Page 31738]]

the specific market-based options that have been offered by PANYNJ for 
consideration have suggested that any market-based fee or auction 
payment would be in addition to the airport's traditional landing 
charges. The generation of revenue in excess of the airport's 
traditional cost base raises several policy questions for the FAA.
    As noted above, a market-based approach has the potential to 
generate large sums of excess revenue beyond the airport's traditional 
rate base. What is the appropriate use of this additional revenue? In 
this circumstance, would there need to be specific limitations on use 
of the revenue generated by PANYNJ under a market-based approach? \2\ 
Should the use of such funds be explicitly limited, as a part of the 
FAA's approval?
---------------------------------------------------------------------------

    \2\ At LGA, under current federal legislative authority, PANYNJ 
use of airport revenues is not subject to the general federal 
requirement to use airport-generated revenue only for airport 
purposes, and PANYNJ may use airport revenue to support the general 
obligations of the Authority.
---------------------------------------------------------------------------

    The PANYNJ has identified several possible uses for revenue derived 
under a market-based approach. For example, revenues could be used:
     To pay for projects that increase airport capacity in the 
local airport system or at other regional airports;
     To pay for expenses incurred for AIP-eligible (but not 
AIP-funded) noise mitigation projects, in order to reduce the burden of 
airport activity on nearby communities;
     To lease HDR slots at LGA from airlines, and to hold them 
in abeyance, in order to reduce demand;
     To advance the goals of AIR-21 to increase airline 
competition and small community air service; or
     Periodically to rebate remaining proceeds to airlines 
operating at LGA based on the number of passenger enplanements at LGA 
during a defined period of time, in order to provide an incentive for 
airlines to increase the volume of passengers they carry without 
increasing the number of flights they operate from LGA (by up-gauging 
their fleet of aircraft and improving their load factors).
    In addition to these options, the FAA has also identified some 
potential uses of the excess revenue that would be generated under a 
market-based approach. They include (1) encouraging the use of less 
congested facilities by offering rebates to aircraft operators; (2) 
creating a national/regional trust fund for capacity enhancement; (3) 
using excess revenue to encourage service to small communities. Several 
of these options are likely to require statutory authority and/or 
rulemaking.
    The FAA is seeking comment on these suggested uses of funds and the 
desirability of showing that all capacity and efficiency actions have 
been taken.

II. Administrative Options

    The FAA is currently considering three types of administrative 
options to allocate takeoff and landing rights at LGA. Further 
variations of each option are also possible. The first option would 
encourage the use of larger aircraft at LGA. Three variations of this 
approach are discussed. The second option would replace the HDR with a 
new slot allocation rule that would streamline the slot allocation 
process that exists under the HDR. It would rationalize the pools of 
slots set-aside for small community service by consolidating existing 
HDR commuter and air carrier slots used for service to small hub and 
non-hub airports and AIR-21 slot exemptions allocated for that service 
into a single category and provide a limited withdrawal of air carrier 
slots for new entrants. The third option would repeal the current HDR 
and establish a new rule that would provide each carrier with 
potentially slightly lower percentage of its current slot base. There 
would be a limited withdrawal of slots that would be apportioned to 
three pools to be allocated by lottery: (1) For new entrants, (2) for 
small community service, and (3) for general distribution to all 
incumbent carriers.
    In addition to the three options presented above, there are two 
administrative options that the FAA considered but declined to set 
forth for public comment. One of these options would be to reduce the 
number of reservations provided per hour at LGA in the ``Other'' 
category. Currently, there are six operations permitted per hour at LGA 
in the ``Other'' category that are available for general aviation, 
charter operations and other non-scheduled operations. The FAA 
considered whether to reduce the number of reservations allocated under 
the ``Other'' category and add a corresponding number of AIR-21 
operations per hour. However, the FAA believes it is important to 
ensure access for general aviation and other unscheduled operations. 
Therefore, the agency has decided against reduction of this already 
limited category of operations.
    The FAA also considered whether the HDR should be changed to 
eliminate the authority to conduct extra sections of scheduled flights. 
Extra sections operate based on passenger demand and do not require an 
additional slot beyond the one required for the original scheduled 
flight. The Air Carrier Association of America, some new entrant 
airlines and others have said that by eliminating the authority for 
extra sections, capacity would be available for AIR-21 operations. The 
FAA has decided not to seek comment on eliminating the extra section 
authority in the HDR. While this might result in some opportunities for 
reallocation of operations, the FAA recognizes that the use of extra 
sections predates the adoption of the HDR and is a significant factor 
in accommodating passenger demand in certain markets during peak travel 
periods.
    There have been allegations that extra section authority may be 
abused by airlines when the FAA is conducting air traffic management 
programs, e.g., that some carriers file additional flight plans solely 
for the purpose of obtaining better proposed times for air traffic 
clearance and then a later scheduled flight is substituted in the 
proposed ``extra section'' time. The FAA has investigated these 
allegations. The FAA Air Traffic Control System Command Center 
routinely monitors proposed flights and has addressed this behavior at 
LGA and other airports during traffic management programs. The FAA does 
not find this to be an on-going practice that affects operations at 
LGA.

A. Encouraging the Use of Larger Aircraft

    The first variation of this approach would involve the FAA 
administratively determining the minimum aircraft size operating at 
LGA. By establishing a minimum size, the amount of airport congestion 
and delay experienced at the airport could be controlled, while 
simultaneously increasing the throughput of passengers at LGA. 
Provision for access by air carriers serving small communities would be 
achieved by exempting a specified number of operations, reserved for 
serving small and non-hub airports, from the minimum aircraft size 
requirement. A transition period would be necessary to determine the 
appropriate minimum aircraft size that would balance the demand for and 
supply of airfield capacity.
    For example, the FAA would phase-out the HDR over a period of time, 
perhaps four years. However, a shorter phase-out would also be 
considered if the number of slots that would be phased-out under a 
four-year period would not produce the intended benefits in a timely 
manner. In the first year, the FAA would withdraw 25 percent of the 
slots and slot exemptions either randomly or using the slot withdrawal 
priority number during the congested periods. These withdrawn slots and 
slot exemptions would then be

[[Page 31739]]

made available for use based on aircraft size. In the succeeding years, 
additional slots and slot exemptions would be withdrawn. All slots and 
slot exemptions could be allocated based on a procedure such as the one 
described below, which gives priority to larger aircraft.
    One possible approach for allocating by aircraft size would be for 
the FAA to invite air carriers to submit a series of hourly flight 
schedules for flights to occur over the next six months according to 
aircraft size for those hours during the period of congestion. The 
congestion period would run from 7:00 a.m. to 21:59 p.m. on weekdays, 
and more limited time periods on the weekends. Air carriers would first 
be asked to submit to the FAA hourly flight schedules for aircraft 
serving LGA with 150 or more seats. Air carriers with the largest 
aircraft, would be given priority by the FAA in granting authority to 
implement their schedules. In the event that there still exists excess 
airfield capacity during the congested period, air carriers would again 
be invited to submit hourly flights schedules for aircraft serving LGA 
with 100-149 seats. To the extent that excess capacity still exists, 
the remaining landing and takeoff rights would be allocated among all 
qualified air carriers serving LGA. The allocation, when complete, 
would be effective for approximately six months consistent with summer 
and winter scheduling seasons. Successive six-month schedules would be 
authorized by the FAA using a similar process.
    To ensure that service to small and non-hub airports be maintained, 
an initial baseline allocation of 150 operations could be guaranteed to 
air carriers serving small and non-hub airports. This baseline 
allocation would be done via lottery and reallocated every 2 years. Air 
carriers would be free to determine which small communities they would 
serve and the frequency of service. The baseline allocation of 150 
slots seeks to guarantee a minimum amount of service to small 
communities than is greater than provided under the current lottery. 
Air carriers will be able to supplement this baseline allocation with 
operations received in other allocations. Under this option, the FAA is 
also considering as an alternative to creating a small community set-
aside, the desirability of establishing a baseline allocation for all 
air carriers serving LGA.
    It is possible that over a period of time, for example, five years, 
the FAA would be able to establish permanent minimum aircraft size 
requirements based on experience from the semi-annual schedule 
submission process. Once a permanent solution is established, air 
carrier access would be determined solely by compliance with the 
minimum aircraft size requirement.
    The second variation to encourage the use of larger aircraft would 
be to maintain the HDR and AIR-21 allocations and eliminate the use of 
commuter aircraft (i.e., jets aircraft with 55 seats or less and 
turboprops with 74 seats or less) in air carrier slots. There are 
approximately 80 air carrier slots that are operated with commuter 
aircraft. Under this variation, carriers would decide whether to 
continue this service using a commuter slot, to continue this service 
with a large aircraft or to eliminate the service entirely. Regardless 
of which course is chosen by the carriers, it is anticipated that there 
will be an increase in the average size of aircraft operating at LGA.
    The third variation to encourage the use of larger aircraft would 
be to maintain the current HDR and AIR 21 allocations and eliminate the 
size limitation of the commuter category (merge the air carrier and 
commuter categories). This would provide flexibility to carriers with 
commuter slot holdings, who have the ability to use larger aircraft to 
serve the same community or change the service to a larger market. 
Presently, most commuter slots are held by incumbent airlines or 
airline affiliates that are the largest slot holders at the airport. 
This variation/option could reduce service to small communities because 
of potentially greater economic returns in larger, high-yield markets. 
However, if it is necessary to ensure some level of service to small 
communities beyond that provided by codifying the AIR-21 operations, a 
set-aside for small communities could be incorporated.

B. Establish a Pool of Slots for Small Community Service and Withdraw 
Slots at Regular Intervals for Reallocation to New Entrants

    In general, this option would create a slot allocation rule to 
survive post-2007. It would retain the basic framework of the existing 
HDR, but would simplify and rationalize the pool of slots that is set 
aside for small community service by consolidating into a single 
category the HDR commuter slots serving small communities, the AIR-21 
exemption slots allocated to serve small hub and nonhub airports, and 
the air carrier slots used for small community service. As a result, 
slots dedicated to service to small communities would be set at a level 
that accommodates the current level of service. The number of slots in 
this new category would not increase in the future. Continuing access 
for new entrant operations would be assured by a periodic withdrawal 
and reallocation of a small number of slots from the air carrier 
category to new entrant carriers in order to provide competition and 
avoid the virtual denial of new access experienced under the buy-sell 
rule.
    This option would maintain certain logistical aspects of the HDR 
for purposes of continuity, such as the same slot withdrawal numbers, 
the withdrawal priority system, and the minimum slot usage requirement 
and slot trading. The AIR-21 slot exemptions would be codified and 
added to the HDR slot totals. It is noted that this option would not 
disturb the ``Other'' category of slots used for general aviation and 
other non-scheduled operations. Instead of the commuter slot category, 
a new category for operations serving small communities would be 
established and would be comprised of the current HDR commuter slots 
serving small communities, air carrier slots serving small communities 
and AIR 21 slot exemptions serving small communities. As a result, 
there would be approximately 260 slots in the category for small 
community service with no aircraft size limitation. This encompasses 
the current level of service to small communities. The remaining 
commuter slots, which served medium/large communities, would move to 
the air carrier category with no aircraft size limitation.
    The rule would create a continuing mechanism that would provide for 
a limited withdrawal (3% or less every year, or two years) from the air 
carrier HDR slot category for new entrant service. The withdrawal would 
target individual hours to ensure a distribution throughout the day. A 
lottery process would be used to reallocate the withdrawn slots to new 
entrants. If demand by new entrants is less than the number of slots 
withdrawn, each unused slot would be returned to the incumbent holder. 
Slots used for new entrant service, small community service and to 
support international obligations would not be subject to the 
withdrawal.
    Lastly, it has been argued that current buy/sell provisions of HDR 
have had the unintended effect of limiting competition and new entrant 
access. One variation that could be incorporated in this option is the 
elimination of one-way trades, i.e., a prohibition on the buying or 
leasing of slots. Carriers could only trade slots on a one-for-one 
basis at the same airport. While this would not prevent carriers from 
conducting a two-way trade that

[[Page 31740]]

also involved consideration, it would prevent a carrier or other entity 
from retaining the long-term allocation of a slot that it does not 
operate.

C. Reallocation of Slots Under a Replacement Rule

    In general, the HDR would be repealed and replaced by a new rule 
that would establish and periodically allocate new hourly operational 
limitations. It would also consolidate the current number of HDR slots, 
pre AIR-21 slot exemptions to new entrants, and AIR-21 slot exemptions. 
Most slots would be reallocated to carriers currently holding them, in 
order to provide a stable and continuing base for current operations. A 
percentage of slots (examples are provided below) would be held back 
from larger incumbent carriers at the time of reallocation to provide a 
pool of slots for allocation by lottery to three separate categories: 
(1) New entrants; (2) small community service; and (3) limited 
redistribution open to all incumbents. This option protects the 
investment made in facilities by carriers and avoids major disruption 
in service because of slot reallocation. The periodic withdrawal and 
lottery of slots for new entrants and small community service could 
permit a gradual increase in slots available for these operations in 
the future. Over time, however, slots used by the large incumbent 
carriers for service in major markets could gradually be reduced, as 
slots were withdrawn for reallocation to new entrants and service to 
small communities.
    Slots would have expiration dates and upon expiration (for instance 
every two years) the FAA would reallocate the slots using the following 
process:
    1. Carriers would all receive a base, which is their current number 
of slots held today up to a maximum of 20.
    2. Carriers that hold 21-100 slots would receive 98 % (or some 
percentage) of that portion of operations.
    3. Carriers that hold over 100 slots would receive 95% (or some 
percentage) of that portion of operations.\3\
---------------------------------------------------------------------------

    \3\ Using the percentages given in steps 1 and 2, preliminary 
analysis shows that a slot pool of approximately 35 slots would be 
available for reallocation.
---------------------------------------------------------------------------

    4. Using the above slot pool, the FAA would conduct the three 
following lotteries: (a) New entrant; (b) small community service; (c) 
general distribution. The general distribution lottery would be open to 
all participants and could result in additional growth by new entrants, 
small community service, or other incumbents.
    Slots provided to foreign carriers in response to international 
obligations would need to be excluded from the withdrawal provisions. 
The FAA could apportion the slots available for each lottery based on 
demand or other policy considerations. Potentially, some of the slots 
that large incumbent carriers lose could be recouped by them through 
the small community service lottery or the general distribution 
lottery. This option could continue the existing ability to buy and 
sell slots or, alternatively, incorporate a ban on sales and leases and 
limit slot transfers to one-for-one trades as discussed in the previous 
option.
    Commenters are requested to consider the effectiveness, 
administrative simplicity, transitional issues, and fairness of these 
administrative approaches.

Legal Considerations

    This notice proposes both administrative and market-based pricing 
options to manage airport congestion and delays, which raise complex 
statutory, regulatory, and policy issues as well as difficult issues 
with respect to our international aviation obligations. Federal laws, 
regulations, and U.S. international obligations presently in place may 
restrict the types of alternative fee structures airports may adopt, 
especially if higher/lower fees deviate significantly from traditional 
cost accounting and cost-allocation methodologies. Additionally, 
requirements that grant-funded airports be available for public use on 
fair and reasonable terms and without unjust discrimination could 
continue to make it difficult for airports to design workable market-
based pricing regimes.
    We mention these legal issues and factors as background and, for 
purposes of this notice, request that commenters set aside 
consideration of the current statutory, regulatory, or international 
authorities. We seek suggestions on effective, comprehensive solutions 
that represent the best public policy for controlling congestion at 
LGA. While we will consider pertinent legal issues in any policy 
options ultimately put forward for adoption, perceived legal 
impediments should not unduly limit comments in response to this 
request. Accordingly, we will defer consideration of current legal 
factors.
    With regard to the AIR-21 slot lottery allocation and procedures, 
the FAA, pursuant to its broad authority under Title 49 of the United 
States Code (U.S.C.), Subtitle VII, to regulate and control the use of 
the navigable airspace of the United States, proposes to extend the 
allocation of slot exemptions pursuant to the December 4, 2000, lottery 
and to conduct a limited second lottery for available capacity. 49 
U.S.C. 40103 authorizes the agency to develop plans for and to 
formulate policy with respect to the use of navigable airspace and to 
assign by rule, regulation, or order the use of navigable airspace 
under such terms, conditions, and limitations as may be deemed 
necessary in order to ensure the safety of aircraft and the efficient 
utilization of the navigable airspace. Also, under section 40103, the 
agency is further authorized and directed to prescribe air traffic 
rules and regulations governing the efficient utilization of the 
navigable airspace.
    On April 5, 2000, the ``Wendell H. Ford Aviation Investment and 
Reform Act for the 21st Century'' (``AIR-21'') was enacted. Section 231 
of AIR-21 significantly amended 49 U.S.C. 41714 and included new 
provisions codified at 49 U.S.C. 41716, 41717, and 41718. These 
provisions enabled air carriers meeting specified criteria to obtain 
new slot exemptions at New York's LGA Airport and John F. Kennedy 
International Airport, Chicago's O'Hare International Airport and 
Washington DC's Ronald Reagan Washington National Airport. As a result 
of this legislation, the Department of Transportation (Department) 
issued eight orders establishing procedures for the processing of 
various applications for exemptions authorized by the statute.
    Again, the agency notes that Section 231 of AIR-21, 49 U.S.C. 
41715(b)(1) expressly provides that the provisions for slot exemptions 
are not to affect the FAA's authority for safety and the movement of 
air traffic. The reallocation of certain exemption times by the lottery 
procedures described in this Notice is based on the FAA's statutory 
authority and does not rescind the exemptions issued by the Department 
under Orders 2000-4-10 \4\ and 2000-4-11.\5\ As

[[Page 31741]]

provided in those orders, carriers that have filed the exemption 
certifications also need to obtain an allocation of slot exemption 
times from the FAA. The limiting and reallocation of these exemption 
slots is in recognition that it is not possible to add an unlimited 
number of new operations at LGA, especially during peak hours, even if 
those operations would otherwise qualify for exemptions under AIR-21.
---------------------------------------------------------------------------

    \4\ Order 2000-4-10 implements the provisions of 49 U.S.C. 
Sec. 41716(b), which states in pertinent part, that exemptions must 
be granted to any new entrant or limited incumbent airline using 
Stage 3 aircraft that proposes `` . . . to provide air 
transportation to or from LaGuardia or John F. Kennedy International 
Airport if the number of slot exemptions granted under this 
subsection to such air carrier with respect to such airport when 
added to the slots and slot exemptions held by such air carrier with 
respect to such airport does not exceed 20.'' Applications submitted 
under this provision must identify the airports to be served and the 
time requested.
    \5\ Specifically, Order 2000-4-11 implements 49 U.S.C. 41716(a), 
which provides in pertinent part that an exemption must be granted 
to any airline using Stage 3 aircraft with less than 71 seats that 
proposes to provide nonstop service between LaGuardia and an airport 
that was designated as a small hub or non-hub airport in 1997, under 
certain conditions. The exemption must be granted if: (1) The 
airline was not providing such nonstop service between the small hub 
or non-hub airport and LaGuardia Airport during the week of November 
1, 1999; or (2) the proposed service between the small hub or non-
hub and LaGuardia, exceeds the number of flights provided between 
such airports during the week of November 1, 1999; or (3) if the air 
transportation pursuant to the exemption would be provided with a 
regional jet as replacement of turboprop service that was being 
provided during the week of November 1, 1999.
    According to AIR-21 and the Department's Orders, air carriers 
meeting the statutory tests delineated above automatically receive 
blanket approval for slot exemptions, provided that they certify in 
accordance with 14 CFR 302.4(b) that they meet each and every one of 
the statutory criteria. The certification must state the communities 
and airport to be served, that the airport was designated a small 
hub or non-hub airport as of 1997, that the aircraft used to provide 
the service have fewer than 71 seats, that the aircraft are Stage 3 
compliant, and the planned effective dates. Carriers must also 
certify that the proposed service represents new service, additional 
frequencies, or regional jet service that has been upgraded from 
turboprop service when compared to service for the week of November 
1, 1999. In addition, carriers must state the number of slot 
exemptions and the times needed to provide the service.
---------------------------------------------------------------------------

    Lastly, section 93.225 of Title 14 of the Code of Federal 
Regulations sets forth the process for slot lotteries under the High 
Density Rule. The process described in the regulations is similar to 
the process described herein and allows for special conditions to be 
included when circumstances warrant special consideration.

    Issued in Washington, DC. on ???, ??, 2001.
Louise Maillett,
Acting Assistant Administrator for Policy, Planning, and International 
Aviation.

Appendix \6\.--Demand Management Options Submitted to FAA for 
Consideration by the Port Authority of New York and New Jersey

Demand Management Alternatives for LaGuardia Airport
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    \6\ The FAA has inserted in square brackets dates associated 
with PANYNJ's reference to various Federal Register Notices. These 
changes were made to comply with Federal Register formatting 
standards.
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    The allowable number of aircraft operations at LaGuardia Airport 
(``LGA'') is currently limited by two primary administrative 
mechanisms. First, there are a limited number of slots and slot 
exemptions authorized under the High Density Rule (``HDR slots''). 
The HDR slots were established in 1968 to reduce delays at LGA and 
several other highly congested airports. See 14 CFR part 93, subpart 
K. Second, following enactment of the Wendell H. Ford Aviation 
Investment and Reform Act for the 21st Century (``AIR-21''), which 
exempted certain aircraft operations at LGA from the High Density 
Rule and which calls for the abolition of the High Density Rule 
slots at LGA by 2007, the Federal Aviation Administration (``FAA'') 
authorized only a limited number of AIR-21 slot exemptions on an 
interim basis and used a lottery to allocate these exemptions among 
eligible airlines. See 65 FR 75765 [December 4, 2000] et seq. These 
limits on AIR-21 slot exemptions are currently scheduled to expire 
on September 15, 2001.
    In conjunction with the U.S. Department of Transportation 
(``DOT'') and the FAA, the Port Authority of New York and New Jersey 
(``PANYNJ'') has been considering a variety of alternative market-
based demand management programs that might be implemented at LGA 
when the existing limits on AIR-21 slot exemptions expire. The 
PANYNJ's principal goal in exploring various demand management 
alternatives has been to find ways to use market forces to bring the 
level of demand for use of the LGA airfield into alignment with its 
limited capacity, and thereby improve airline schedule reliability, 
reduce flight cancellations and avoid excessive delays. The PANYNJ 
strongly believes that the millions of passengers who use LGA each 
year should not suffer from gridlock on the airfield or in the air. 
At the same time, the PANYNJ respects the twin objectives of AIR-21: 
to facilitate the entry of new airlines to the LGA market, thereby 
promoting airline competition, and to enhance service between LGA 
and small hub and non-hub destinations.
    The PANYNJ is confident that the implementation of a market-
based demand management program at LGA will encourage the efficient 
use of the airport's scarce airfield capacity, thereby allowing 
continued growth in the airport's passenger volume, by providing 
incentives to use larger aircraft, while promoting competition and 
maintaining reasonable stability in the air services provided at 
LGA. The PANYNJ expects that an ancillary benefit to the traveling 
public of the use of an effective market-based demand management 
program will be the availability of new revenue that can be used to 
encourage development of increased airport capacity in the region. 
In developing effective market-based demand management programs for 
consideration at LGA, the precise roles to be played in implementing 
such plans by the PANYNJ, as the local airport proprietor, and the 
FAA and DOT as the federal regulators, remain to be determined. The 
PANYNJ's firm belief, however, is that the PANYNJ together with the 
FAA and DOT have the combined statutory authority to implement an 
effective market-based demand management program at LGA.
    The FAA and DOT have encouraged the PANYNJ to develop and submit 
for public comment two alternative sets of potential demand 
management alternatives for LGA, in anticipation of the expiration 
of the current limits on AIR-21 slot exemptions (currently scheduled 
for September 15, 2001) and the elimination of all HDR slots no 
later than 2007. These alternatives are the focus of this document. 
The PANYNJ expects to select a demand management program for LGA 
after carefully reviewing the public comments on the programs it is 
currently considering, and after consulting with the FAA and DOT, 
the airlines operating at LGA, and other affected constituencies. 
The PANYNJ has not yet determined what demand management approach it 
will favor, and invites public comment on both the general 
structures and specific parameters of the alternatives that are 
described below. The PANYNJ anticipates that it (and the FAA and 
DOT) will provide another opportunity for public comment before a 
demand management program is implemented at LGA.
    The first set of alternatives the PANYNJ is studying would use 
congestion pricing in combination with administrative constraints to 
keep demand in alignment with the limited airfield capacity at LGA. 
These congestion pricing alternatives are described in two options. 
Under Option A, the HDR would remain in effect until 2007, but over 
time the FAA would expand the current number of slot exemptions that 
can be used for operations qualifying under AIR-21. This would allow 
only AIR-21 service to expand, but would create the potential for an 
excessive number of aircraft operations seeking to use LGA's 
airfield. To bring the level of demand arising from both HDR and 
AIR-21 service into alignment with airfield capacity, the PANYNJ 
would levy a congestion fee on all aircraft landing or taking-off 
during a defined ``congested period'' at LGA, except perhaps for a 
limited number of daily flights between small hub and non-hub 
airports and LGA that would be given an exemption. Under Option B, 
the FAA would simultaneously phase out the limits imposed under both 
the HDR and AIR-21, by separately allowing the numbers of operations 
permitted under the HDR and under AIR-21 to increase, and congestion 
pricing would be used to align the level of demand to provide these 
services with the limited airfield capacity at LGA.
    The second set of alternatives under consideration by the PANYNJ 
would use a combination of administrative mechanisms and auctions to 
allocate time-specific ``reservations'' that would be required in 
order to conduct an aircraft operation at LGA. These alternatives 
are also described in two options, but both options would include 
four groups of reservations: (i) each airline would be allocated up 
to 20 reservations each day (subject to an aggregate limit of 300); 
(ii) 80 reservations each day would be set aside for use only for 
service to or from small hub and non-hub airports, and would be 
allocated by a lottery, an auction, or a combination of these 
methods; (iii) 70 percent, or a lesser share, of the remaining 
reservations would be allocated among the airlines serving LGA in 
proportion to each airline's share of the airport's total passenger 
volume; and (iv) the remaining reservations would be allocated among 
all airlines by auction and would not be limited to use for any 
particular type of service. The main difference between the two 
options concerns the timing of elimination of the current system of 
HDR slots. Under

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Option A the HDR slots would be eliminated at the outset, while 
under Option B the current system of HDR slots would in effect be 
phased out over four years.
    The remainder of this document, submitted to the FAA and DOT by 
the PANYNJ, has three sections. Section 1 summarizes the factual and 
procedural background of the PANYNJ's work on demand management 
programs for LGA. This section describes the PANYNJ airport system, 
and explains the capacity constraints and demand management problem 
at LGA. Section 1 concludes with a brief description of various 
approaches that were reviewed during the process of developing the 
two sets of alternatives that are presently under consideration by 
the PANYNJ. Sections 2 and 3, respectively, detail the essential 
features of the congestion pricing and auction alternatives the 
PANYNJ is currently considering. The DOT, FAA, and PANYNJ all seek 
public comment on these possible long-term solutions to the demand 
management problem at LGA. The commitment of all stakeholders to 
constructive dialogue will yield the optimal solution for airlines, 
local communities and air travelers.

1. Background

    Since 1968, the number of aircraft operations at LGA has been 
managed primarily through administrative mechanisms. The DOT, FAA, 
and PANYNJ have been exploring ways in which market-based mechanisms 
could best be used in the future to manage demand at LGA, while 
achieving the goals of AIR-21 to facilitate greater competition in 
scheduled air service, and to permit new service between small hub 
or non-hub airports and LGA.

1.1  Description of the PANYNJ Airport System

    The PANYNJ operates a four-airport system comprised of 
LaGuardia, John F. Kennedy International, Newark International, and 
Teterboro Airports. Each of these airports plays a different role, 
targeted for different users and designed to facilitate different 
types of operations. LaGuardia Airport, just seven miles from 
midtown Manhattan, is the airport offering frequent, short-haul 
service to meet the needs of the business community. For many years, 
the PANYNJ has implemented a perimeter rule at LGA (limiting 
scheduled flights to destinations no more than 1500 miles away) and 
imposed minimum landing fees on non-scheduled aircraft operators. 
John F. Kennedy International Airport (``JFK'') has for many years 
served as an international gateway, designed to meet the needs of 
the long-haul traveler, but with the capacity to accommodate 
additional domestic flights as well. With the recent introduction of 
new domestic service and the scheduled completion of the PANYNJ's 
AirTrain rail service in 2003, JFK is expected to accommodate an 
increasing share of the region's domestic and origin-destination 
traffic in the coming years. Newark International Airport combines 
frequent service to business centers with growing international 
traffic, and will also benefit from improved ground access. 
Teterboro Airport is the key reliever airport for the immediate 
region, serving the needs of corporate and general aviation. These 
four airports are intensively used, with over 90 million passengers, 
2.8 million tons of cargo, and over 1.4 million aircraft movements 
passing through them each year. The PANYNJ's four airports 
complement other aviation facilities within the New York/New Jersey 
region that are capable of providing service to some of the same 
markets served by the PANYNJ's airport system.

1.2  The Capacity Constraints and Demand Management Problem at 
LaGuardia Airport

    A key operational challenge at LGA is to maintain a balance 
between flight operations and the limited physical capacity of the 
airfield. As the FAA has previously found, ``LaGuardia Airport 
simply does not have the capacity for the unlimited addition of new 
flights.'' [65 FR 75768, December 4, 2000]. LGA is small. It 
consists of only 680 acres. It is surrounded by Flushing Bay on one 
side, a major arterial highway on the other, and dense residential 
neighborhoods. LGA's two 7,000-foot runways are perpendicular and 
intersect one another, which means that arriving and departing 
flights must be carefully timed and synchronized. The PANYNJ has 
been making and continues to plan capital improvements to handle 
larger aircraft at LGA, so that the physical infrastructure is in 
place to serve more passengers without increasing the numbers of 
flights. However, LGA does not have the physical space to add 
runways to handle additional numbers of operations.
    In the first seven months after AIR-21 was enacted on April 5, 
2000, airlines sought to schedule more than 600 new flights a day at 
LGA, even though during the previous 18 months LGA actually handled 
fewer than 1000 flights each day on average, but had experienced 
serious problems of congestion and delay. As of November 1, 2000, 
about 300 of those new flights had begun operations. The immediate 
result was greatly increased levels of flight delay at LGA, which 
the FAA has previously described in some detail. See 65 FR 69127, 
November 15, 2000; 65 FR 75766, December 4, 2000. The FAA found that 
``[t]his increasing level of congestion and delay makes carrier 
schedules impossible to meet, frustrates passenger travel plans, and 
places an unnecessary strain on carrier ground operations and on air 
traffic control services.'' 65 FR 69128, November 15, 2000. As an 
interim solution, the FAA adopted a limit on the number of AIR-21 
slot exemptions that could be used and allocated them by a lottery 
in order to achieve a limit of 75 scheduled operations per hour at 
LGA. 65 FR 75770 [December 4, 2000]. The FAA found that ``[t]he 
limit of 75 scheduled operations per hour would limit daily and 
hourly demand on airport facilities and the air traffic control 
system to a number of flights that can be accommodated, at least in 
good weather conditions.'' 65 FR 69218 (sic 69128, November 15, 
2000. The FAA imposed limits on AIR-21 slot exemptions and conducted 
its lottery in December 2000 as an interim step, in order to provide 
time to develop a long-term mechanism to prevent undue congestion at 
LGA. 65 FR 75769 December 4, 2000. The FAA's limits on the number of 
AIR-21 slot exemptions that can be used took effect on January 31, 
2001, and caused a significant reduction in the volume of operations 
and resulting levels of delay and flight cancellations at LGA. 
Nevertheless, LGA has remained among the most highly congested and 
delay prone airports in the nation.
    Because the physical capacity of the airfield at LGA has been 
reached, the number of flights at LGA during current periods of 
congestion cannot be raised without re-introducing the especially 
high levels of flight delay and cancellations that plagued LGA last 
year and caused serious problems throughout the nation's aviation 
system. As a result, methods for managing the level of demand so 
that it matches available capacity must be ready to put in place 
when the FAA's current limits on AIR-21 slot exemptions expire.

1.3  Development of the Alternatives Presented Below

1.3.1  Focus on Market-Based Solutions

    The PANYNJ has considered many approaches to managing demand at 
LGA, including the use of new systems of administrative controls 
with no market-based features. However, any purely administrative 
system of managing demand will almost inevitably display the 
characteristics that have led to persistent criticism of the system 
of HDR slots that has existed since 1968. Purely administrative 
methods for allocating capacity are generally less efficient and 
less responsive to market conditions than economic allocation 
methods. Efficient, economic allocation methods can be augmented 
with administrative measures, exemptions or subsidies to address 
competing policy goals. With encouragement from the FAA and DOT, the 
PANYNJ has therefore been particularly interested in exploring ways 
of using market forces to achieve the most efficient use of the 
limited capacity at LGA consistent with its overall goals and 
objectives. Two general types of economic demand management tools 
are available under these circumstances.
    The first is congestion pricing. The logic of congestion pricing 
is to use price to bring the level of demand for use of the airfield 
at LGA into alignment with its limited capacity. Under a pure form 
of congestion pricing, the market alone would determine which 
flights are operated. Congestion pricing can be combined, however, 
with administrative constraints on allowable operations. Congestion 
pricing has the advantage of promoting efficient use of scarce 
capacity at LGA. Under a congestion pricing program, the PANYNJ 
would raise the price charged to aircraft operators for use of the 
airfield during congested periods, and the demand for use of the 
airfield would adjust to the congestion price. The new fee would be 
set with an expectation that demand would align with capacity. 
However, if the resulting number of operations turned out to be 
substantially higher or lower than the capacity of LGA, the 
congestion price would be adjusted accordingly.
    The second economic demand management tool available at LGA is 
to use an auction to allocate a fixed number of allowable operations 
among competing

[[Page 31743]]

airlines. Under a pure auction approach, the allowable number of 
aircraft operations would be fixed to match the limited airfield 
capacity at LGA, and the airlines would establish the market price 
for each allowable operation through an auction. An auction would be 
expected to improve the efficiency of use of the airfield by 
allocating the allowable operations to the bidders that can make the 
most productive use of the opportunity to use the airfield at LGA. 
Auctions can effectively be combined with administrative allocations 
or subsidies funded with auction proceeds to achieve desired policy 
objectives.

1.3.2  Development of Congestion Pricing Alternatives

    Congestion pricing at LGA would necessarily have a different 
character than the forms of peak-hour pricing that have been 
considered at other airports. Some airports have a few hours of peak 
demand each day, and might be able to use ``peak-hour'' pricing to 
encourage scheduled and unscheduled aircraft operations to move to 
less congested times. At LGA, in contrast, the demand for aircraft 
operations exceeds available capacity for almost the entire day on 
weekdays. Adopting a ``peak-hour'' price for a few hours a day in 
order to shift operations to other times would not solve the 
problem. Shifting flights to the late night or early morning hours 
is not a desirable alternative, due to lack of market demand for 
service at those times and concern about adverse noise impacts on 
the surrounding residential neighborhoods. Since the airfield 
capacity of LGA cannot be significantly increased, this means that a 
pricing scheme cannot succeed as a demand management tool at LGA 
unless it can keep demand in alignment with capacity throughout the 
entire day. The PANYNJ has been exploring the possible parameters of 
such a congestion pricing approach.
    The PANYNJ determined early in its examination of alternatives 
that a congestion price which was limited to the recovery of the 
airfield's capital costs and operating expenses would not be 
adequate to achieve the goal of aligning demand with capacity. 
Accordingly, the PANYNJ has focused its attention on congestion 
pricing alternatives that are not based on the recovery of the 
airfield's historical costs and operating expenses. The PANYNJ 
considered the potential effects of the immediate elimination of the 
operational limits imposed by the HDR slots, coupled with the use of 
a congestion fee alone to bring the level of demand for use of the 
airfield at LGA into line with its limited capacity. The experience 
during the fall of 2000, when the airlines rushed to secure hundreds 
of AIR-21 slot exemptions, suggests that sudden removal of all 
operational limits would again produce a tremendous surge in 
aircraft operations. A congestion fee would need to be very high to 
counteract this surge, and bring demand back in line with capacity. 
This approach would not be a good way to achieve the PANYNJ's 
overall goals and objectives. The PANYNJ has, therefore, focused 
more attention on ways to combine a congestion fee with a gradual 
elimination of the constraints on HDR and AIR-21 operations imposed 
by the FAA.
    In exploring such an approach, a range of possible targets for 
operations during periods of congestion at LGA has been considered. 
The tradeoffs here are real. With fewer operations during congested 
periods, delay will be reduced, schedules will be more reliable, and 
the burden on air traffic control will be more manageable. However, 
aiming for too low an operations target risks not making full use of 
LGA's capacity, and making it more difficult for all market segments 
to receive reasonable levels of access to LGA. In the opposite 
direction, aiming for a higher target permits more flights, making 
it easier to achieve the AIR-21 goals of facilitating entry by 
additional airlines and increasing service to smaller airports. But 
too high a target would result in a renewed increase in flight 
delays and cancellations, disrupting the operations of the airlines 
that AIR-21 seeks to foster, and could unreasonably tax the capacity 
of air traffic control. The problem is further complicated by the 
fact that the effective capacity of LGA's airfield is significantly 
lower under Instrument Flight Rules (``IFR'') and certain wind 
conditions than it is in good weather under Visual Flight Rules 
(``VFR'') with favorable winds. Lower airfield capacity conditions 
often occur at LGA, and if the target level of operations is set too 
high, the frequency of gridlocked operations will be unacceptable to 
the PANYNJ and the traveling public.
    The PANYNJ has also considered whether the same congestion fee 
should apply to all flights, or whether certain kinds of flights 
should be exempted or pay a lower congestion fee. Once again, there 
are inevitable tradeoffs. Exempting certain flights means that some 
of the economic benefits of promoting efficient use of limited 
capacity at LGA will be lost, while applying the fee to all 
operations means that uneconomic, but socially desirable service may 
not be available.
    The alternative congestion fee options described in Section 2 
below reflect these and related considerations.

1.3.3  Development of Auction Alternatives

    The PANYNJ also considered a variety of ways in which auction 
mechanisms might be used to manage demand at LGA. In contrast to 
congestion pricing alternatives where prices are established with 
the goal of producing a target level of aircraft operations, in an 
auction the number of permitted aircraft operations is established 
in advance, and airport users set at auction the price for 
permission to operate at the airport.
    Auctions are used to allocate resources and transfer asset 
rights in many industries, including utilities and 
telecommunications. For example, the Federal Communications 
Commission has been using auctions to allocate spectrum licenses for 
wireless communications. Auctions have proven to be effective in 
circumstances where demand for a resource is much greater than 
available finite capacity, price setting is uncertain, and there is 
a goal of fostering increased competition. Properly structured 
auctions can result in significantly increased competition among 
service providers and lower costs to consumers.
    The PANYNJ explored the possibility of allocating all available 
capacity at LGA through a single auction. Although a pure auction 
might achieve a higher degree of economic efficiency than the mixed 
allocation and auction approaches set forth in Section 3 below, it 
may not perform as well in achieving the AIR-21 goals of access to 
new entrant airlines and service to small communities. Additionally, 
a pure auction of all available capacity at LGA has the potential to 
be unduly disruptive to the air services currently provided to the 
traveling public and to services by airlines with lesser financial 
capacity. The PANYNJ has also been concerned that an auction of all 
available capacity at LGA might add unduly to airline costs and 
potentially could translate into increased average air fares to and 
from the New York and New Jersey areas, especially given the absence 
of experience with auctions among airport users and the resultant 
uncertainty about the prices that might be paid at auction.
    The PANYNJ therefore explored a wide variety of ways to smooth 
the transition from the current system of inflexible administrative 
controls to a new market-based auction approach. The results of this 
analysis are reflected in the two auction options set forth below 
for comment.

1.3.4  Use of Congestion Fee or Auction Proceeds

    From the start, the PANYNJ recognized that the primary purpose 
of implementing an economic demand management tool such as a 
congestion fee or an auction is to allocate the scarce resources 
available at LGA efficiently, not to generate additional revenue to 
the PANYNJ. The PANYNJ also concluded that it is appropriate to 
maintain the existing weight-based landing fee, as the time-tested 
way to recover current LGA airfield operating and capital costs.
    The PANYNJ has considered a variety of possible uses for 
proceeds from a congestion fee or an auction. The options considered 
include using the additional revenues:
    (i) To pay for projects that increase airport capacity in the 
local airport system or at other regional airports, including new 
physical infrastructure and technological improvements that could 
increase airfield capacity as well as facilities and technologies 
that might more efficiently guide aircraft to and from an airport;
    (ii) To pay for expenses incurred for AIP-eligible (but not AIP-
funded) noise mitigation projects, in order to reduce the burden of 
airport activity on nearby communities;
    (iii) To lease HDR slots at LGA from airlines, and to hold them 
in abeyance, in order to reduce the level of demand;
    (iv) To advance the goals of AIR-21 of increased airline 
competition and small community air service; or
    (v) Periodically to rebate remaining proceeds to airlines 
operating at LGA based on the number of passenger enplanements at 
LGA during a defined period of time, in order to provide an 
incentive for airlines to increase the volume of passengers they 
carry without increasing the number of flights they

[[Page 31744]]

operate from LGA (by up-gauging their fleet of aircraft and 
improving their load factors).
    These possible uses of demand management revenues remain under 
consideration by the PANYNJ.

2. Congestion Pricing

    Introduction and Overview. Reflecting its concern that an 
immediate abolition of the operational limits imposed by the FAA 
under the HDR and AIR-21 would be ill-advised, the PANYNJ has been 
exploring how congestion pricing could be combined with phased 
increases in the number of legally authorized operations to improve 
the efficiency of use of the airfield at LGA without reintroducing 
higher levels of delay.
    The logic of this approach is, over time, to have the FAA reduce 
its administrative constraints by increasing the number of 
operations that would be legally permissible under the HDR, AIR-21, 
or both, and to substitute market forces by charging a Congestion 
Fee (in addition to the existing landing fee) for all aircraft 
operations during a defined Congested Period. The Congestion Fee 
would be designed to align the level of demand with limited airfield 
capacity, and the intended overall impact would be to shift toward 
more productive use of the airfield while maintaining approximately 
the same overall level of operational activity that has been 
observed since the AIR-21 lottery took effect.
    The Congestion Fee alternative is described below in two 
possible forms, Option A and Option B.
    Option A contemplates that the restrictions imposed by the HDR 
would remain in effect until 2007 and that the FAA would only 
increase the number of slot exemptions under AIR-21 that could be 
used. Under this Option, the PANYNJ anticipates that before it would 
implement the Congestion Fee, the FAA would conduct a lottery (in 
the same manner as it conducted the initial AIR-21 slot exemption 
lottery in December 2000) to allocate three additional AIR-21 slot 
exemptions per hour for use for qualified AIR-21 operations. Each 
year thereafter, the FAA would conduct another lottery to allocate 
additional slot exemptions for qualified AIR-21 operations. The 
PANYNJ would levy the same Congestion Fee on all aircraft operations 
(both landings and take-offs), including operations conducted under 
HDR authority, that occur during the Congested Period at LGA, except 
for a limited number of AIR-21 flights that might be exempted from 
the Fee.
    Option B differs from Option A in two principal ways.
    The first difference is that under Option B the PANYNJ 
contemplates that the FAA would gradually reduce the constraints 
imposed under both the HDR and the AIR-21 slot exemption lottery in 
conjunction with the introduction of the Congestion Fee and in 
anticipation of the elimination of the HDR by 2007 as required by 
AIR-21. In addition to increasing the number of AIR-21 slot 
exemptions that could be used, as in Option A, the FAA would (i) 
annually increase the number of allowable HDR operations in each 
hour by a maximum of 5 percent using the rules established in the 
FAA's HDR regulations to allocate among the airlines the authority 
to conduct these additional operations, and (ii) revise the HDR to 
reduce or eliminate the current restrictions that limit the use of 
14 ``commuter slots'' each hour to small aircraft, to improve the 
operating efficiency of LGA. Effective in 2007, when the HDR is 
eliminated, there would no longer be any administrative constraints 
on the permissible number of operations at LGA, but the Congestion 
Fee would remain in place and would continue to maintain a balance 
between demand and capacity at LGA.
    The second difference between Option A and Option B is that 
under Option B, the PANYNJ would levy two different Congestion Fees: 
one Congestion Fee would be charged for all flights operating 
between LGA and any small hub or non-hub airport qualifying for AIR-
21 service, as well as general aviation flights, and another, much 
higher Congestion Fee would be charged for all other aircraft 
operations.

Provisions Common to Both Option A and Option B

2.1  Effective Date

    The new Congestion Fee would take effect on September 16, 2001 
or whenever the limits resulting from the FAA's AIR-21 slot 
exemption lottery expire if they are extended by the FAA.

2.2  General Rules

2.2.1  Nature of the Congestion Fee

    The Congestion Fee would be designed to align the level of 
demand with the limited capacity of the airfield at LGA. The amount 
of the Congestion Fee would not be dependent upon the historical 
costs of the airfield at LGA or otherwise dependent upon accounting 
costs incurred by the PANYNJ. Initially, the Congestion Fee would 
not vary during the Congested Period, but in the future the PANYNJ 
might vary the level of the Congestion Fee during the Congested 
Period to manage hour-by-hour demand for use of the airfield at LGA.

2.2.2  Operations Subject to the Congestion Fee

    All aircraft arriving at or departing from LGA during the 
``Congested Period'' would be assessed a Congestion Fee, except 
potentially for a limited number of daily flights between small hub 
and non-hub airports and LGA that might be exempted, as described in 
Section 2.5 below. Operations at other times would not be subject to 
the Congestion Fee.

2.2.3  Definition of Congested Period

    The Congested Period would consist of all hours during which the 
demand for use of the airfield at LGA exceeds its capacity, as well 
as any hour immediately preceding or immediately following that 
period. Based on current conditions, the Congested Period would run 
from 06:00 to 22:00 on weekdays, from 06:00 to 14:00 on Saturday, 
and from 09:00 to 22:00 on Sunday.

2.2.4  Existing Landing Fee To Remain in Effect

    All aircraft operations at LGA would continue to be subject to 
and would be required to pay any landing fee established by PANYNJ, 
in addition to any Congestion Fee. The PANYNJ expects that the 
existing weight-based landing fee and the minimum landing fee would 
remain in effect. (The ``additional surcharge'' of $100 currently 
levied upon general aviation operations during certain congested 
hours would be eliminated and, in effect, replaced by the new 
Congestion Fee.)

2.3  Operations Target

2.3.1  Initial Target

    A target level of operations during the Congested Period would 
be established before the PANYNJ sets the Congestion Fee. The PANYNJ 
would set the initial Congestion Fee, and adjust it as necessary, 
with the intent that there be no more than the target level of 
operations. The PANYNJ has been considering the desirability and 
implications of a target level of 78 total operations per hour at 
LGA for each hour during the Congested Period. This equates to 1248 
scheduled and unscheduled operations between the hours of 06:00 and 
22:00 each weekday. In monitoring success in reaching such an hourly 
target, reasonable hourly variations would be deemed acceptable so 
long as the cumulative number of operations during any three-hour 
period during any portion of the Congested Period did not exceed 
three times the hourly target.

2.3.2  Revision of Operations Target or Congested Period

    The FAA, DOT and PANYNJ would continue to monitor the actual 
level of delay experienced at LGA, and the operations target or the 
definition of the Congested Period, or both, could be revised if 
actual delays and flight cancellations are significantly higher or 
lower than anticipated.

2.4  Revisions to Congestion Fee

    The PANYNJ would periodically review operational results under 
the Congestion Fee and would adjust the amount of the Fee if actual 
operations were significantly higher or lower than the operations 
target. The PANYNJ could also use the proceeds from the Congestion 
Fee to purchase or lease HDR or AIR-21 operating authority from any 
airline, and hold the authority in abeyance to reduce the level of 
demand for use of the airfield.

2.5  Exemption for Small Hub and Non-Hub Service

    The PANYNJ is considering the desirability of exemptions from 
the Congestion Fee for certain operations that serve airports that 
qualify for AIR-21 small hub or non-hub service under 49 U.S.C. 
Sec. 41716(a) and DOT Order 2000-4-11. Three potential approaches 
under consideration are exemptions for (i) 80 operations (or a lower 
number that would increase the overall operating efficiency of LGA) 
qualified under AIR-21 for small hub or non-hub service; (ii) all 
AIR-21 qualified operations serving small hub or non-hub airports 
within 300 miles of LGA, for example, given that passengers in 
markets within this distance have few connecting flight options; or 
(iii) a combination of these two approaches. The PANYNJ has also 
considered whether it would be desirable to exempt new entrant

[[Page 31745]]

airlines from the Congestion Fee, but presently believes that such 
an exemption might be anti-competitive.
    Any small hub and non-hub operations exempted from the 
Congestion Fee would be allocated by a lottery among the airlines 
providing or seeking to provide service to small hub or non-hub 
airports. The selection sequence among airlines that seek Congestion 
Fee exemptions for small hub and non-hub operations would be 
established using a lottery. Participating airlines would be able to 
obtain two exemptions from the Congestion Fee in each of successive 
rounds of the allocation, until the entire number of exempt 
operations has been assigned. The small hub and non-hub operations 
exempted from the Congestion Fee would be reallocated among airlines 
every two years, in the same manner. A new lottery would be 
conducted each time that this allocation takes place. The lottery 
would only be used to determine the sequence of selections. It is 
presently contemplated that the exemptions allocated by the lottery 
could not be traded and would be subject to a ``use or lose'' 
restriction to ensure that desired service is provided to smaller 
airports. Any unused exemption authority that is returned to the 
PANYNJ would be redistributed by picking up the selection sequence 
from where the lottery last ended.

Provisions That Differ Between Option A and Option B

2.6 Structure and Initial Amount of the Congestion Fee

    Option A (no change in HDR): Under Option A, all aircraft 
operators would pay the same Congestion Fee during the Congested 
Period except for a certain number of daily flights between small 
hub and non-hub airports and LGA. It is currently anticipated that 
the initial level of the Congestion Fee under Option A would be in 
the range of $350-$700 for each arriving and departing aircraft.
    Option B (gradual reduction of HDR constraints): Under Option B, 
there would be two separate Congestion Fees. The first would be 
charged for operations during the Congested Period that serve any 
airport that qualifies for AIR-21 small hub or non-hub service under 
49 U.S.C. Sec. 41716(a) and DOT Order 2000-4-11, except for a 
certain number of daily flights between small hub and non-hub 
airports and LGA, as well as for general aviation operations. The 
second would be charged for all other operations. It is currently 
anticipated that the initial level of the Congestion Fee under 
Option B would be in the range of $350-$700 for each arriving and 
departing aircraft serving AIR-21 qualified destinations (and 
general aviation), and in the range of $700-$2000 for all other 
arriving or departing aircraft.

2.7  Revenue Estimates

    Both Congestion Pricing options would be expected to produce 
significant streams of revenue that would be dedicated to beneficial 
aviation uses (see Section 1.3.4. above).
    Option A (no change in HDR): A Congestion Fee of $350-$700 per 
operation is estimated to yield additional annual revenues to the 
PANYNJ of approximately $130-$260 million per year.
    Option B (gradual reduction of HDR constraints): A general 
Congestion Fee of $700-$2000 for each operation during the Congested 
Period, combined with a Small Hub/Non-Hub Congestion Fee of $350-
$700 per operation, is estimated to yield additional annual revenues 
to the PANYNJ of approximately $240-$550 million.

3. Allocation and Auction of Reservations

    Introduction. This alternative would replace the current system 
of HDR slots and AIR-21 slot exemptions. Airlines would instead be 
required to have a ``Reservation'' in order to conduct an operation 
at LGA during the Congested Period. Reservations would be limited in 
number, to ensure that the level of operations at the airport is 
aligned with the limited capacity of its airfield. Reservations 
would be available to new market entrants and smaller market 
participants, and mechanisms would be established to permit the 
regular reallocation of Reservations over time. This method would 
allocate the total number of available Reservations during each hour 
in the Congested Period in four distinct tranches or groups.
    First, each airline would be permitted a Baseline Allocation of 
at least 20 Reservations each day. This is intended to ensure that 
new entrants will have an opportunity to provide service at LGA. 
Second, a total of 80 Reservations would be reserved each day for 
flights to or from small hub or non-hub airports qualifying for 
service under AIR-21; these Reservations would be allocated among 
the airlines seeking to provide these services using a lottery 
similar to the FAA's December 2000 AIR-21 slot exemption lottery, an 
auction, or a combination of these methods. This set aside for 
service to small hub and non-hub airports is intended to ensure that 
there will remain a reasonable level of service between smaller 
airports and LGA, and to encourage the efficient use of the capacity 
reserved for this purpose. (No airline would be prevented from using 
other Reservations as well to serve small hub or non-hub airports 
from LGA.) Third, 70 percent, or a lesser share, of the remaining 
Reservations each day would be allocated in proportion to each 
airline's share of total passenger volumes at LGA. This Performance-
Based Allocation is intended to provide a reasonable degree of 
stability in the market while creating an incentive for airlines to 
use Reservations productively by carrying more passengers on each 
flight. Fourth, the remaining Reservations would be auctioned, 
without restriction as to use. This is intended to encourage 
efficient use of the remaining capacity at LGA and to promote 
competition.*
---------------------------------------------------------------------------

    * A hypothetical illustration of how the total number of 
Reservations in the congested Period would be divided among these 
four tranches in option A is attached at the back of this document. 
The division of Reservations in Option B would take a similar form, 
although during the phase-in period the total number of Reservations 
in the Baseline Allocation would be expected to be higher.
---------------------------------------------------------------------------

    This Reservations alternative is described in two potential 
forms, Option A and Option B, which are currently under 
consideration by the PANYNJ.
    Option A contemplates immediate replacement of all HDR slots and 
AIR-21 slot exemptions authorized by the lottery with a new system 
of Reservations, which would be reallocated every two years.
    Option B differs from Option A is one principal respect: Option 
B contemplates, in effect, a four-year phase out, rather than 
immediate replacement, of operating authority under the existing 
High Density Rule. This phase out would be accomplished through 
adjustments to the Baseline Allocation. Although all HDR slots would 
formally be withdrawn immediately, each airline would be guaranteed 
to receive in its Baseline Allocation for the first year a number of 
Reservations representing at least 75 percent of the number of HDR 
slots and AIR-21 slot exemptions it is currently using. As the new 
program is phased in, this guarantee would decline to 50 percent for 
the second year and 25 percent for the third year. The phase out of 
the current HDR slot system would not be complete until the fourth 
year. During the first four years Reservations would be assigned for 
only one year, but thereafter Reservations would be reallocated 
every two years, as in Option A.

3.1  Effective Date

    The new system of Reservations would take effect on September 
16, 2001 or whenever the limits resulting from the FAA's AIR-21 slot 
exemption lottery expire if they are extended by the FAA.

3.2  Reservations

3.2.1  Need for an LGA Reservation

    A Reservation would authorize an aircraft operation at LGA, 
either for an arrival or a departure, during a specified hour on a 
specified day of the week. Reservations for scheduled flights would 
be allocated through the mechanisms described in Section 3.3 below. 
Unscheduled operations would not be permitted unless there is an 
available Reservation in accord with Section 3.2.3.2 below. It would 
be a violation of the PANYNJ's Rules and Regulations governing LGA 
for any aircraft to arrive at or depart from LGA during the 
``Congested Period'' without a Reservation.

3.2.2  Definition of Congested Period

    The ``Congested Period'' would be the same for the system of 
Reservations as it would be for Congestion Pricing (see Section 
2.2.3 above).

3.2.3  Number of Reservations

    The total number of operations to be permitted during each hour 
of the Congested Period would be established before the new system 
of Reservations is implemented. The PANYNJ has been reviewing the 
desirability and implications of using 81 as the total number of 
Reservations for operations at LGA would be permitted for each hour 
during the Congested Period. The allowance for 81 hourly 
Reservations would produce approximately the same results as the 
target of 78 actual hourly operations envisioned under the 
Congestion Fee alternatives. If 81 hourly Reservations are allowed, 
the frequent cancellation of a few scheduled flights for non-LGA 
operational reasons (e.g., weather effects elsewhere, aircraft 
mechanical

[[Page 31746]]

problems) and the lack of use of Reservations by general aviation 
are typically expected to produce about 78 actual hourly operations. 
The allowed number of Reservations would be allocated between 
scheduled and unscheduled operations as follows:

3.2.3.1  Scheduled Operations

    A total of 75 Reservations would be available each hour for 
scheduled operations during the Congested Period. This equates to a 
total of 1200 Reservations available from 06:00 to 22:00 on weekdays 
at LGA for scheduled operations.

3.2.3.2  General Aviation and Military Flights

    A total of six Reservations would be available each hour for 
general aviation or military operations during the Congested Period. 
The FAA would manage the assignment of these Reservations for 
general aviation and military flights in the same manner as it 
currently does under the HDR.

3.3  Periodic Reallocation of Reservations for Scheduled Operations

    Option A (no phase in): Reservations to conduct a scheduled 
operation at LGA would be allocated every two years. The first 
allocation would be scheduled so that the results would take effect 
on the Effective Date.
    Option B (four-year phase in): Reservations to conduct a 
scheduled operation at LGA would be allocated for a one-year period 
for each of four years, during which allocations based on existing 
HDR slot allocations would be phased out. The first allocation would 
be scheduled so that the results would take effect on the Effective 
Date. At the end of the first four years, the phase-out would be 
completed, and thereafter the reallocation of Reservations would 
take place every two years.

3.3.1  Baseline Allocation

    In order to ensure that new airlines may enter the LGA market 
and that limited incumbents may expand the scope of their 
operations, and to provide an appropriate incentive for the 
provision of service to small hub or non-hub airports that is 
consistent with the limited capacity at LGA, all airlines would be 
eligible for a Baseline Allocation of Reservations for each day of 
the week.
    Each request for a Baseline Allocation would require a 
refundable financial deposit provided to the PANYNJ for each 
requested Reservation. If the requesting airline obtains a 
Reservation and complies with the use-or-lose requirement set forth 
in Section 3.5.2 below for one full calendar year, the financial 
deposit would be returned; otherwise, it would be forfeited to the 
PANYNJ.

3.3.1.1  Initial Baseline Allocation

    Option A (no phase in): Each airline would be permitted to 
obtain a Baseline Allocation of up to 20 Reservations for each day 
of the week to use for service between LGA and any other destination 
permitted under the LGA Perimeter Rule. (AIR-21 uses 20 operations 
as the measure of an incumbent airline.) In no event, however, would 
the total number of Reservations assigned to all airlines in any 
Baseline Allocation exceed 300. In the event that the total number 
of Reservations properly requested in the Baseline Allocation 
exceeds 300, each airline's requests would be reduced 
proportionately so that the total number of Reservations in the 
Baseline Allocation equals 300.
    Option B (four-year phase in): Each airline would be permitted 
to obtain an initial Baseline Allocation of a number of Reservations 
for each day of the week to use for service between LGA and any 
other destination permitted under the LGA Perimeter Rule.
    For the first year, this number would be equal to the greater of 
(i) 20 Reservations, or (ii) 75 percent of the total number of HDR 
slots that were assigned to the airline as of June 30, 2001 and used 
at least 80 percent of the time during the preceding two months. For 
the second year, this number would be equal to the greater of (i) 20 
Reservations, or (ii) 50 percent of the total number of HDR slots 
that were assigned to the airline as of June 30, 2001 and used at 
least 80 percent of the time during the preceding two months. For 
the third year, this number would be equal to the greater of (i) 20 
Reservations, or (ii) 25 percent of the total number of HDR slots 
that were assigned to the airline as of June 30, 2001 and used at 
least 80 percent of the time during the preceding two months.
    For the fourth year, and in every biennial reallocation 
thereafter, each airline would be permitted to obtain up to 20 
Reservations each day of the week to use for service between LGA and 
any other destination in the same manner, and subject to the same 
rules, as under Option A.

3.3.1.2  Assignment Mechanism

    Each airline could determine the hours during which the 
Reservations would be used. However, during the Congested Period, no 
airline could use Reservations acquired in the Baseline Allocation 
to schedule during any 60-minute period more than the greater of (i) 
two operations, or (ii) 6.5 percent of the airline's daily 
Reservations (i.e. one-sixteenth, reflecting the 16 hour Congested 
Period on weekdays).

3.3.1.3  Subsequent Requests for Baseline Allocation

    A new entrant airline or other airline that chose not to obtain 
its full Baseline Allocation could request additional Baseline 
Reservations at any time, up to the maximum number of permitted 
Baseline Reservations, by making a ``subsequent request'' for a 
further Baseline Allocation. The PANYNJ could allocate additional 
Reservations up to such airline's full Baseline Allocation, either 
by (1) issuing unassigned Reservations, including Reservations that 
have been voluntarily returned or forfeited under the use-or-lose 
requirement set forth in Section 3.7.2 below, or (2) making 
reasonable efforts to lease a Reservation from another airline, 
using proceeds from the auction of Reservations under Section 3.3.4 
below. If a sufficient number of unassigned Reservations were not 
available, and the PANYNJ were not able to lease a sufficient number 
of assigned Reservations from another airline, the requesting 
airline would be required to await the next regular reallocation to 
obtain additional Baseline Allocations.

3.3.2  Small Hub and Non-Hub Allocation

    Number of Small Hub and Non-Hub Reservations to be Allocated. A 
total of five Reservations during each hour of the Congested Period 
would be reserved for service between LGA and any airport that 
qualifies for AIR-21 small hub or non-hub service under 49 U.S.C. 
Sec. 41716(a) and DOT Order 2000-4-11. This equates to 80 
Reservations between the hours of 06:00 and 22:00 each weekday. This 
is approximately the current number of AIR-21 slot exemptions for 
service to small hub or non-hub airports.

3.3.2.2  Assignment Mechanism

    For Reservations assigned through the Small Hub and Non-hub 
Allocation, airlines would select the specific Reservation hours for 
arriving and departing flight pairs in a sequence as determined by a 
lottery similar to the lottery used by the FAA in December 2000 to 
allocate AIR-21 slot exemptions. The selection sequence would be 
repeated until all of the Reservations made available for the Small 
Hub and Non-hub Allocation have been assigned specific times. A new 
lottery would be conducted each time a Performance-Based Allocation 
is made. The PANYNJ is also considering the desirability of (i) 
using an auction to assign these Reservations among airlines 
conducting operations between AIR-21 qualified small hub or non-hub 
airports and LGA, since this approach may produce a more efficient 
result; (ii) assigning these Reservations among airlines conducting 
operations between AIR-21 qualified small hub or non-hub airports 
that are within 300 miles of LGA, for example, given that passengers 
in markets within this distance have few connecting flight options; 
or (iii) a combination of these approaches.

3.3.3  Performance-Based Allocation

    After the Baseline Allocation and the Small Hub and Non-Hub 
Allocation have been completed, 70 percent (or a lesser share that 
would increase the overall operating efficiency of LGA) of all 
remaining Reservations for scheduled operations would be allocated 
among airlines based on their market share of total revenue 
passengers at LGA. Presently, the core connecting hub and shuttle 
businesses of the incumbent airlines at LGA in aggregate account for 
approximately 70 percent of the total passenger volume at the 
airport.

3.3.3.1  Determination of Reservations Subject to Performance-Based 
Allocation

    For each hour of the Congested Period of each day of the week, 
the number of Reservations that are to be allocated by the 
Performance-Based Allocation would be calculated as 70 percent, or a 
lesser share, of the difference between (a) the total number of 
Reservations available for use by scheduled airlines in that hour, 
and (b) the sum of (i) all Reservations claimed for that hour under 
the Baseline Allocation and (ii) all Reservations claimed for that 
hour for use as one of the 80 Reservations reserved for the Small 
Hub and Non-Hub Allocation.

3.3.3.2  Calculation of Market Share

    Each airline's share of the LGA market would be determined on 
the basis of

[[Page 31747]]

passenger enplanements on all flights at LGA as reported to the 
United States Department of Transportation for the most recently 
available 12-month period.

3.3.3.3  Calculation of Each Airline's Performance-Based Allocation

    The Performance-Based share of Reservations for each airline 
would be determined by multiplying each airline's market share by 
the sum of (i) the total number of Reservations that are to be 
assigned by the Performance-Based Allocation (determined under 
Section 3.3.3.1 above) and (ii) the total number of Reservations 
assigned under the Baseline Allocation, and then subtracting from 
that product the total number of Reservations assigned to the 
airline in the Baseline Allocation. If the total number of 
Reservations assigned to the airline in the Baseline Allocation 
exceeds its Performance-Based share of Reservations, the airline 
would receive no additional Reservations through the Performance-
Based Allocation.**
---------------------------------------------------------------------------

    ** The PANYNJ acknowledges that especially if Option A were 
implemented, the initial Performance-Based Allocations could cause 
abrupt changes in the total number of flights certain airlines might 
be permitted to operate at LGA because the current mix of 
assignments of HDR slots and slot exemptions and AIR-21 slot 
exemptions does not always correspond to airline market shares 
(measured by passenger volumes). As a result, the PANYNJ is 
considering the desirability of some kind of ``hold harmless'' rule 
that would temper the impact of the Performance-Based Allocations by 
ensuring that no airline would lose more than a specified percentage 
of the operating authority it was assigned and actually used during 
the preceding allocation period.
---------------------------------------------------------------------------

3.3.3.4  Assignment Mechanism

    For Reservations assigned through the Performance-Based 
Allocation, airlines would select the specific Reservation hours for 
arriving and departing flight pairs in a sequence as determined by a 
lottery similar to the lottery used by the FAA in December 2000 to 
allocate AIR-21 slot exemptions. Once an airline has acquired its 
total number of allocated Performance-Based Reservations, it would 
be passed over in the lottery sequence. The selection sequence would 
be repeated until all of the Reservations made available for the 
Performance-Based Allocation have been assigned specific times. A 
new lottery would be conducted each time a Performance-Based 
Allocation is made.

3.3.4  Auction of Remaining Reservations

3.3.4.1  Number of Remaining Reservations To Be Auctioned

    All LGA Reservations for scheduled operations that remain after 
the Baseline Allocation, the Small Hub and Non-hub Allocation and 
the Performance-Based Allocation would be subject to auction.

3.3.4.2  Revenue Estimate

    In both of the Allocation and Auction options, the Auction of 
Remaining Reservations would be expected to produce significant 
streams of revenue that would be dedicated to beneficial aviation 
uses (see Section 1.3.4. above). The Auction of Remaining 
Reservations is estimated to yield additional annual revenues to the 
PANYNJ of approximately $60 million to $90 million for Option A and 
for Option B once it is fully implemented. Option B is estimated to 
yield additional revenues of approximately $18-$26 million in the 
first year, $35-$53 million in the second year, and $53-$79 million 
in the third year. These estimates assume auction prices in the 
range of $20,000 to $30,000 per Reservation per month.

3.4  Auction Rules

    The specific rules for participating in and conducting Auctions 
of Remaining Reservations would be promulgated in advance of the 
initial Auction.

3.5  General Rules Governing Reservations

3.5.1  Treatment of Commuter Affiliates

    All airlines sharing a common designator code would be 
considered a single airline for the purpose of allocating 
Reservations.

3.5.2  Use-or-Lose Requirement

    All Reservations would be subject to a use-or-lose requirement, 
under which an airline would forfeit any Reservation that is not 
used for operations at least 80 percent of the time over any two-
month period. Any airline that forfeits a Reservation under this 
use-or-lose rule could not acquire any additional Reservation for a 
two-year period, except through the next scheduled auction. Airlines 
could avoid any use-or-lose penalty by returning a Reservation to 
the PANYNJ for reallocation. The PANYNJ could use Reservations that 
are returned voluntarily or that are forfeited under the use-or-lose 
requirement to satisfy additional requests for Baseline Allocations 
in between the scheduled reallocations of Reservations.

3.5.3  Exchange, Sale, or Lease of Reservations

3.5.3.1  Baseline Allocation Reservations

    Reservations acquired through a Baseline Allocation could be 
exchanged between airlines, so long as the trade was made only for 
operational reasons and on a one-for-one basis at LGA. Airlines that 
trade Reservations from their Baseline Allocation would be required 
to certify that no other consideration is involved. Reservations 
acquired through a Baseline Allocation could not be sold or leased 
to another airline (except, under Option B, to the extent that any 
airline receives at any time during the four-year phase in a total 
Baseline Allocation of more than 20 Reservations for any given day), 
but these Reservations could be sold or leased to the PANYNJ.

3.5.3.2  Other Reservations

    Reservations acquired through the Small Hub and Non-hub 
Allocation, the Performance-Based Allocation or the Auction of 
Remaining Reservations could be exchanged between or among airlines, 
or could be sold or leased to another airline or to the PANYNJ, but 
any Reservations acquired through the Small Hub and Non-Hub 
Allocation could only be used for service between LGA and AIR-21 
qualified small hub and non-hub airports.

3.5.4  Airfield Fees

    All aircraft operations at LGA, including those for which an 
auction price is paid, would remain subject to any landing or take-
off fees established by the PANYNJ. The PANYNJ currently anticipates 
that the existing weight-based landing fee would remain in effect, 
and that the current minimum fees for general aviation might be 
increased to the range of $350-$700 for each arriving and departing 
aircraft.

    Illustration of Allocation and Auction of Reservations--Option A
------------------------------------------------------------------------
                                                             Number of
                                              Inputs       Reservations
------------------------------------------------------------------------
Hours in the Congested Period...........              16
Reservations per hour...................              81
Total Number of Reservations in the                                 1296
 Congested Period.......................
GA set-aside per hour...................               6
Total GA set-aside in the Congested                                   96
 Period.................................
Net Reservations for scheduled services.                            1200
Number of airlines......................              15
Baseline Allocation/airline.............              20
Total Baseline Allocation (if fully                                  300
 subscribed)............................
Remaining Reservations..................                             900
Small hub/non-hub set-aside per hour....               5
Small hub and Non-hub Allocation........                              80
Remaining Reservations..................                             820
Performance-Based share of remaining                 70%
 reservations...........................
Number of Reservations for Performance-                              574
 Based Allocation.......................

[[Page 31748]]

 
Remaining Reservations for Auction......                             246
------------------------------------------------------------------------

[FR Doc. 01-14739 Filed 6-7-01; 2:43 pm]
BILLING CODE 4910-13-P