[Federal Register Volume 66, Number 162 (Tuesday, August 21, 2001)]
[Notices]
[Pages 43947-43950]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-20998]


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DEPARTMENT OF TRANSPORTATION

Office of the Secretary of Transportation

Federal Aviation Administration

[Docket No. OST-2001-9849]


Notice of Market-based Actions to Relieve Airport Congestion and 
Delay

AGENCY: Department of Transportation (DOT), Federal Aviation 
Administration (FAA).

ACTION: Request for public comment on possible market-based actions to 
relieve airport congestion and delay.

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SUMMARY: The Department of Transportation (DOT) is gathering 
information on the possible role, feasibility, and effectiveness of 
using market-based approaches to relieve airline flight delays and 
congestion at busy airports. It is the Department's intention to use 
this and other requests for comment along with the 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. 
Market-based approaches are broadly defined to include all market-
pricing regimes that could encourage air carriers to use limited 
capacity in a more efficient manner. We intend to meet with 
representatives from airports, airlines, professional associations, and

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other interested participants, to analyze and model available data, to 
review comments filed in this docket, and to use other means as 
appropriate to evaluate the possible use of market-based approaches at 
airports from a public policy perspective. DOT will use the information 
and data provided by interested parties, as well as our analysis, to 
develop appropriate policy on issues associated with the design, 
implementation, and impacts of the possible adoption of various market-
based pricing regimes at airports. Parties filing comments are 
requested to discuss how market-based approaches would affect such 
public policy objectives as airline competition, general aviation, and 
small community access to important air travel markets. Delay problems 
at LaGuardia Airport are the subject of a separate notice and comment 
procedure.

DATES: Comments should be received by November 19, 2001.

ADDRESSES: Comments should be sent to: Docket Clerk, Docket No. OST-
2001-9849, Room PL-401, United States Department of Transportation, 400 
7th Street, SW., 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: Larry Phillips, Senior Economic Policy 
Advisor, 202-366-4868 or Nancy Kessler, Senior Attorney-Advisor, 202-
366-9301. Comments placed in the docket will be available for viewing 
on the Internet.

SUPPLEMENTARY INFORMATION: Air traffic and airport delays impose 
substantial costs on air carriers, airports, and the traveling public. 
Nevertheless, despite the actions taken by airports to operate more 
efficiently, by airline managers to adjust their flight schedules in 
the face of growing delay, and by the Federal Aviation Administration 
(FAA) to introduce new technologies and streamline air traffic control 
procedures and processes, the number of flight delays reached 
unprecedented levels in 2000. Indeed, airline delays reported by the 
FAA in 2000 were 20 percent higher than they were in 1999, and 
substantially higher than they were during the previous record year 
(1990). While of varying significance, severe weather, air traffic 
volume and scheduling, air traffic equipment problems and runway 
construction (primarily runway and taxiway construction and repair 
work) all directly impact delay.
    While efforts are underway to increase air traffic and airport 
capacity, it is conceivable, even likely, that delays will increase at 
some airports especially those that lack space to expand runways and 
terminals or where environmental concerns limit or foreclose capacity 
expansion.
    Many airports already are experiencing unprecedented levels of 
flight delays. Last year, for example, almost 16 percent of flight 
operations (takeoffs and landings) at New York La Guardia Airport were 
delayed. At Newark International, the second most congested airport 
based on delayed flight statistics, over eight percent of all flights 
were delayed. While the magnitude of the delay problem is obvious in 
the Northeast, especially in Metropolitan New York City, and while 
delays recently have improved overall, delays remain a significant 
factor impacting operations at other busy airports. Delays can be worse 
when flights are ``bunched'' during certain times of the day rather 
than being spaced more evenly throughout the day. Today, airports do 
not set landing, takeoff, or terminal fees based on the time of day or 
the impact of an additional flight on congestion and delay.
    Given the magnitude of the flight delay problem, DOT intends to 
explore all reasonable options, including the full range of market-
based approaches and incentives/disincentives to allocate scarce 
airport capacity, that have the potential to bring into balance current 
supply (airport capacity) and demand (number of flight operations) 
while longer-term capacity expansion is pursued.
    By the term ``market-based approaches'' we mean the development and 
imposition of airport fees that are designed specifically to encourage 
air carriers to use limited airport capacity in a more efficient 
manner. Such market-based approaches could include auctions (various 
forms), which would allocate a fixed number of operations for some 
particular period of time; congestion pricing, which contemplates 
charging air carriers not only for the costs they impose on an airport 
but also the delay costs they impose on other airport users;\1\ peak-
period pricing, which contemplates imposing fees based on the higher 
costs an airport incurs to accommodate demand during peak hours or the 
cost an airport does not incur because flights are shifted from busy 
periods of the day to less busy periods; and ``flat fees,'' which would 
restructure existing weight-based landing fees so that total airfield 
costs are recovered through a higher average fee, thereby affecting the 
mix of aircraft that operate at an airport.
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    \1\ An airline's scheduling decisions are based in large part on 
the direct costs it expects to incur at an airport, not the costs 
its actions impose on competitors or competitors' customers, 
including the value of lost time for travelers who experience flight 
delays. As a result, the benefits an air carrier receives from 
scheduling an additional flight are not balanced against the full 
costs (private and external) imposed on all the parties using an 
airport, which can result in too many scheduled flights and thus 
congestion.
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    The adoption of market-based approaches to improve the use of 
scarce resources is an established economic principle. Market-based 
approaches have been adopted in other industries to achieve a better 
balance between supply and demand--that is, the facility/service is 
used more than it otherwise would during off-peak periods and less than 
it otherwise would during peak periods. Peak-period surcharges and off-
peak discounts might provide economic incentives to induce those air 
carriers that place a lower value on access to an airport facility/
service during peak hours to shift to non-peak periods or to use less 
congested facilities or alternate services.
    The adoption of market-based approaches may also be influenced by 
or possibly influence the current economic/competitive structure of the 
airline industry as well as existing regulatory imposed limitations on 
airports such as the High Density Rule. Comments are requested on how 
market-based approaches might be structured to achieve equitable 
airport access for all competing airlines.
    Market-based approaches conceivably could reduce the need for 
airport proprietors to make investments to accommodate flights that, if 
assessed an appropriate market fee, would be uneconomic to operate 
during peak periods. By their willingness to pay higher peak-period 
fees, airport users would have demonstrated the value of capacity-
enhancing investments and airport proprietors would know that such 
investments are economically justified.
    Certain types of market-based fees could result in airports 
receiving revenues in excess of their operating and capital costs. DOT 
is interested in comments on whether such ``surplus revenues,'' if any, 
should be used to encourage capacity enhancement either at the 
capacity-constrained airport, at another airport that is part of a 
proprietor's system, or elsewhere in the aviation system. We request 
comment on these and other issues, including options for the use of 
these revenues if a proprietor cannot expand capacity. Comments are 
also requested on

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whether the imposition of market-based fees would reduce total air 
travel costs by reducing delay (and the time costs imposed on 
travelers) and/or by allowing aircraft operators to better schedule 
their flights and to use their equipment and personnel more 
efficiently, as well as the expected effects on airline competition, 
airfares, and the resulting impact on the supply and demand for air 
transport services.
    In sum, market-based landing and take-off fees at congested 
airports could result in (1) more efficient use of airport facilities, 
(2) the recovery of costs from those parties that impose them on other 
airport users, (3) maximum customer access given limited capacity, and 
(4) a clear market-based justification for future airport investment 
decisions. Economists and transportation analysts have often called for 
the adoption of market-based approaches to allocate scarce air space 
and airport facilities more efficiently.\2\
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    \2\ For example, Transportation Research Board Special Report 
255, Entry and Competition in the U.S. Airline Industry: Issues and 
Opportunities, 1999, pp. 130-131.
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    Adopting airport market-based pricing policies that would allocate 
scarce airport facilities more efficiently--that is, to those air 
carriers that value use of the facility most highly at a specific 
time--could disrupt established airport and airline business practices. 
Moreover, using a market-based fee methodology to manage airport 
congestion and delays raises 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 alternate fee 
structures that airports may adopt, especially if higher/lower fees 
deviate significantly from traditional cost accounting and cost-
allocation methodologies. Further, 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 are seeking all suggestions on effective, comprehensive 
market-based solutions to controlling airport congestion even if some 
may fall outside the current legal framework. 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.
    The purpose of this request for comment is to solicit the views of 
interested parties on whether there is an appropriate role for and on 
the potential effectiveness of market-based approaches for reducing 
flight delays and congestion. While we have identified a number of 
specific questions that we would like parties to address, we encourage 
respondents to identify and comment on other issues that they believe 
are relevant. For example, those commenters who believe that the 
adoption of one or more remedial administrative actions (e.g., a 
lottery) would allocate airport capacity in a more efficient and 
equitable manner than would the imposition of market-based approaches, 
are requested to identify and discuss administrative actions that could 
be considered and under what conditions, how they differ from market-
based approaches, why they are better suited to address congestion than 
market-based approaches, and what would be the effect of such actions 
on air carriers and airport operations, general aviation, air traffic 
congestion, and airline competition.
    Just as the nature and magnitude of the delay problem varies by 
airport, so do the abilities of airports to address congestion. There 
is ``no-one-size-fits-all'' solution to the airport congestion problem. 
For this reason, DOT is interested in understanding how market-based 
approaches, as well as administrative actions, could work today to 
relieve congestion at busy airports, including their design, 
implementation, and impacts.

Specific Questions for Comment

    The following questions are illustrative of the types of 
considerations the Department is seeking to evaluate. We request 
comments, information, and/or data that would help answer the following 
questions, or related questions identified by respondents. Respondents 
need not address all questions and may combine responses to selected 
questions where appropriate:
    (1) Should market-based mechanisms be considered to address the 
allocation of scarce aviation-access resources and thereby minimize 
delays resulting from congestion while maximizing customer service? If 
so, which specific mechanisms are most promising? Why?
    (2) How should policymakers decide which airports might benefit 
from imposition of market-based approaches, such as congestion pricing 
or auctioning of landing and take-off rights for allocating airport 
capacity? What specific variables are relevant when making such 
decisions, e.g., available capacity, current flight volume, runway 
expansion initiatives, etc.?
    (3) Will market-based pricing policies at airports help alleviate 
delay and congestion? Will they increase customer access to the airport 
or other nearby airports? If so, how?
    (4) Will market-based approaches provide information on where, how 
much, and what type of new airport capacity is needed?
    (5) Will market-based approaches for airport access improve the use 
of less-congested secondary airports? Are additional financial 
incentives and/or infrastructure investments needed to increase the use 
of secondary airports? Please comment on incentives that use revenues 
from a congested airport to steer users to secondary airports. Will 
greater use of secondary airports have a positive or negative impact on 
airline competition? Should airports in the same region that are not 
under the same ownership have the ability to promote the use of 
underused airports?
    (6) If market-based approaches are not revenue neutral, how should 
``surplus'' revenues be used? Should these revenues only be used to 
expand capacity at the airport where they are generated? Or should such 
revenues be used to meet regional or national capacity needs? If so, 
how?
    (7) In what ways would the adoption of market-based approaches at 
airports affect new entry, airfares, air carrier competition, service 
to small communities, general aviation, and international air services? 
Could any adverse effects of market-based approaches be mitigated if 
used in conjunction with exemptions/differential pricing categories for 
new entrants, service to small communities, general aviation, and 
international air service?
    (8) Would it be appropriate to extend certain aspects of market-
based approaches solely to domestic operations or otherwise limit the 
applicability to international operations of market-based alternatives? 
What lessons can be learned from attempts by other countries to impose 
market-based pricing at their congested airports?
    (9) What lessons can be learned from the use of peak- and off-peak 
pricing policies in other domestic industries (e.g., 
telecommunications, electric utility)?
    (10) What will be the economic effects of market-based approaches 
on various

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categories of airport users? The airport? The economy of the 
surrounding communities?
    (11) Will hub operations by large network air carriers be affected 
if market-based approaches are adopted? If so, how?
    (12) What benefits and/or cost savings can be achieved by airlines 
if airports adopt market-based approaches? What costs will airports 
save if such policies are adopted? What new costs will be imposed and/
or travel options reduced?
    (13) Should the elimination of all delays at an airport be the 
objective of any market-based policy adopted? If so, will that result 
in less than optimum use of scarce capacity? If not, how much delay is 
appropriate?
    (14) How would any market-based approach take into account certain 
random factors (weather, runway repairs, etc.) that affect airport 
efficiency and delay?
    (15) How would an airport calculate such market-based approaches as 
peak-and off-peak period fees or congestion pricing? (e.g., solely the 
congestion-related costs an airport incurs? The cost an airport forgoes 
from not having to build capacity to meet peak demand? The costs 
congestion imposes on all airport users, including air travelers? Some 
combination?)
    (16) Under what conditions would alternate approaches, such as 
administrative options (e.g., lotteries, minimum aircraft size), reduce 
congestion and delay?
    (17) In order to reduce delays to ``acceptable'' levels, how much 
would user charges have to be increased to shift or reduce demand?
    (18) Will market-based approaches encourage/discourage the 
operation of certain types of aircraft?
    (19) How should market-based approaches be designed to accommodate 
unexpected demand shifts?
    (20) What data inputs/methodology will be needed to develop and 
sustain market-based approaches?
    (21) Should market-based approaches be crafted to encourage 
airlines to operate large aircraft, maximizing the number of seats per 
turn?
    (22) Should the use of market-based approaches be linked to 
airports and airlines vigorously pursuing ways to expand airport 
capacity?

    Issued in Washington, DC, on August 15, 2001.
Susan McDermott,
Deputy Assistant Secretary for Aviation and International Affairs, 
Department of Transportation
Louise Maillett,
Acting Assistant Administrator for Policy, Planning, and International 
Aviation, Federal Aviation Administration.
[FR Doc. 01-20998 Filed 8-20-01; 8:45 am]
BILLING CODE 4910-62-P