[Federal Register Volume 70, Number 57 (Friday, March 25, 2005)]
[Proposed Rules]
[Pages 15520-15539]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-5882]



[[Page 15519]]

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Part IV





Department of Transportation





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Federal Aviation Administration



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14 CFR Part 93



Congestion, Delay Reduction and Operating Limitations at Chicago O'Hare 
International Airport; Proposed Rule and Notice

  Federal Register / Vol. 70, No. 57 / Friday, March 25, 2005 / 
Proposed Rules  

[[Page 15520]]


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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 93

[Docket No. FAA-2005-20704; Notice No. 05-03]
RIN 2120-AI51


Congestion and Delay Reduction at Chicago O'Hare International 
Airport

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of proposed rulemaking (NPRM).

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SUMMARY: The FAA is proposing this rule to address persistent flight 
delays related to over-scheduling at O'Hare International Airport 
(O'Hare). This proposed rule is intended as an interim measure, because 
the FAA anticipates that the rule would yield to longer term solutions 
to traffic congestion at the airport. Such solutions include an 
application by the City of Chicago that, if approved, would modernize 
the airport and reduce levels of delay, both in the medium term and 
long term. For this reason, the proposed rule includes provisions 
allowing for the limits it imposes to be gradually relaxed and in any 
event would sunset in 2008.

DATES: Send your comments on or before May 24, 2005.

ADDRESSES: You may send comments (identified by Docket Number FAA-2005-
20704) using the following method:
     DOT Docket Web site: Go to http://dms.dot.gov and follow 
the instructions for sending your comments electronically.
     Government-wide rulemaking Web site: Go to http://www.regulations.gov and follow the instructions for sending your 
comments electronically.
     Mail: Docket Management Facility; U.S. Department of 
Transportation, 400 Seventh Street, SW., Nassif Building, Room PL-401, 
Washington, DC 20590-001.
     Fax: 1-202-493-2251.
     Hand Delivery: Room PL-401 on the plaza level of the 
Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9 
a.m. and 5 p.m., Monday through Friday, except Federal holidays.
    For more information on the rulemaking process, see the 
SUPPLEMENTARY INFORMATION section of this document.
    Privacy: We will post all comments we receive, without change, to 
http://dms.dot.gov, including any personal information you provide. For 
more information, see the Privacy Act discussion in the SUPPLEMENTARY 
INFORMATION section of this document.
    Docket: To read background documents or comments received, go to 
http://dms.dot.gov at any time or to Room PL-401 on the plaza level of 
the Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9 
a.m. and 5 p.m., Monday through Friday, except Federal holidays.

FOR FURTHER INFORMATION CONTACT: Dr. Jeffrey Wharff, Office of Policy 
and Plans, APO-200, Federal Aviation Administration, 800 Independence 
Avenue SW., Washington, DC 20591; telephone (202) 267-3274.

SUPPLEMENTARY INFORMATION:

Comments Invited

    The FAA invites interested persons to participate in this 
rulemaking by submitting written comments, data, or views. We also 
invite comments relating to the economic, environmental, energy, or 
federalism impacts that might result from adopting the proposals in 
this document. The most helpful comments reference a specific portion 
of the proposal, explain the reason for any recommended change, and 
include supporting data. We ask that you send us two copies of written 
comments.
    We will file in the docket all comments we receive, as well as a 
report summarizing each substantive public contact with FAA personnel 
concerning this proposed rulemaking. The docket is available for public 
inspection before and after the comment closing date. If you wish to 
review the docket in person, go to the address in the ADDRESSES section 
of this preamble between 9 a.m. and 5 p.m., Monday through Friday, 
except Federal holidays. You may also review the docket using the 
Internet at the Web address in the ADDRESSES section.
    Privacy Act: Using the search function of our docket Web site, 
anyone can find and read the comments received into any of our dockets, 
including the name of the individual sending the comment (or signing 
the comment on behalf of an association, business, labor union, etc.). 
You may review DOT's complete Privacy Act Statement in the Federal 
Register published on April 11, 2000 (65 FR 19477-78), or you may visit 
http://dms.dot.gov.
    Before acting on this proposal, we will consider all comments we 
receive on or before the closing date for comments. We will consider 
comments filed late if it is possible to do so without incurring 
expense or delay. We may change this proposal in light of the comments 
we receive.
    If you want the FAA to acknowledge receipt of your comments on this 
proposal, include with your comments a pre-addressed, stamped postcard 
on which the docket number appears. We will stamp the date on the 
postcard and mail it to you.

Availability of Rulemaking Documents

    You can get an electronic copy using the Internet by:
    (1) Searching the Department of Transportation's electronic Docket 
Management System (DMS) Web page (http://dms.dot.gov/search);
    (2) Visiting the Office of Rulemaking's Web page at http://www.faa.gov/avr/arm/index.cfm; or
    (3) Accessing the Government Printing Office's Web page at http://www.gpoaccess.gov/fr/index.html.
    You can also get a copy by submitting a request to the Federal 
Aviation Administration, Office of Rulemaking, ARM-1, 800 Independence 
Avenue, SW., Washington, DC 20591, or by calling (202) 267-9680. Make 
sure to identify the docket number, notice number, or amendment number 
of this rulemaking.

Background

The High Density Traffic Airports Rule at O'Hare

    Until July 2002, the FAA managed congestion and delay at O'Hare by 
means of the High Density Rule (HDR), which was codified in 14 CFR part 
93, subpart K. The FAA's predecessor agency adopted the HDR under its 
broad authority to ensure the efficient use of the nation's navigable 
airspace. 49 U.S.C. 40103. The HDR took effect in 1969, and while it 
originally was a temporary rule, it became permanent in 1973.
    The HDR established limits on the number of all take-offs and 
landings during certain hours at five airports, including O'Hare. In 
order to operate a flight during the restricted hours, an airline 
needed a reservation, commonly known as a slot. Slots were initially 
allocated through scheduling committees, operating under then-
authorized antitrust immunity, where all the airlines would agree to 
the allocation. But after the Airline Deregulation Act in 1978, new 
entrant airlines formed and the pre-existing, or legacy carriers, 
sought to expand. This made it increasingly difficult for airlines to 
reach agreement and the scheduling committees began to deadlock.
    In 1984, the FAA amended the HDR to increase the hours in which 
limitations at O'Hare Airport would apply and to increase the number of 
take-offs and landings permitted at that airport (49 FR 8237, March 6, 
1984). The

[[Page 15521]]

next year, a new subpart S was added to part 93 that established 
allocation procedures for slots including use-or-lose provisions and 
permission to buy and sell slots in a secondary market (50 FR 52195, 
December 20, 1985). These procedures replaced the scheduling 
committees.

Statutory Changes Ending the High Density Rule at O'Hare

    In 2000 Congress relaxed the slot rules at the high density 
airports and phased out the slot rules entirely at three of them 
including O'Hare. 49 U.S.C. 41715, 41717. With respect to O'Hare, 
Congress directed that:
    (1) Beginning July 1, 2001, the slot control restrictions be 
limited to the period between 2:45 p.m. and 8:14 p.m.;
    (2) Beginning May 1, 2000, exemptions be granted to airlines to 
provide air service to small airports with 70-seat or smaller aircraft;
    (3) 30 slot exemptions be granted to new entrant or limited 
incumbent air carriers;
    (4) After May 1, 2000, slots no longer be required to provide 
international air service; and
    (5) Slot restrictions be lifted entirely after July 1, 2002.
    In phasing out the HDR, Congress recognized the possibility that 
there could be an increase in congestion and delays at the affected 
airports. Therefore, in the section that phased out the rule, it made 
clear that ``[n]othing in this section * * * shall be construed * * * 
as affecting the Federal Aviation Administration's authority for safety 
and the movement of air traffic.'' 49 U.S.C. 41715(b).

Resurgence of Unacceptable Levels of Congestion

    As a result of the 2000 legislation, the slot restrictions of the 
HDR ceased to exist at O'Hare as of July 1, 2002. While lifting all 
slot restrictions at O'Hare after July 1, 2002, did not affect air 
safety, it did eventually lead to a dramatic increase in airline 
delays, which reverberated throughout the national air transportation 
system.
    Initially, lifting the HDR had a minimal impact on delays due to 
the lingering effects on airline passenger traffic of the 9/11 
terrorist attacks. But by 2003, the two air carriers operating hubs at 
O'Hare, American Airlines (``American'') and United Airlines 
(``United'') had added a large number of operations and retimed other 
flights, resulting in congestion during peak hours of the day. From 
April 2000 through November 2003, American increased its scheduled 
operations at O'Hare between the hours of 12 p.m. and 7:59 p.m. by 
nearly 10.5 percent. Over the same period, United increased its 
scheduled operations at O'Hare by over 41 percent.
    The increases in operations by American and United did not result 
in a corresponding increase in seat capacity. During the peak period, 
these two carriers added 375 regional jet operations per day. Overall, 
American and United added over 600 regional jet operations per day. At 
the same time as they added regional jet operations, they reduced 
mainline jet operations. The result was a decrease in seat capacity by 
each carrier at O'Hare of more than 5.5 percent from April 2000 to 
November 2003. In November 2003, more than 40 percent of American's and 
United's O'Hare flights were operated with regional jets, many to large 
and medium hubs. The significant increases in scheduled operations 
during this time period resulted in excessive delays and congestion at 
O'Hare.
    By November 2003, O'Hare had the worst on-time performance of any 
major airport. O'Hare arrivals were on time only 57 percent of the 
time, well below the FAA goal of 82 percent. Departures were little 
better. They were on time only 67 percent of the time, well below the 
average of 85 percent at other major airports. These delays averaged 
about an hour in duration. Published schedules for February 2004 
indicated that the problem would be exacerbated by the addition of even 
more flights.
    Recognizing congestion was again becoming a significant issue, 
Congress enacted legislation that included a mechanism to help reduce 
delays and improve the movement of air traffic at congested airports. 
49 U.S.C. 41722. That statutory provision authorized the Secretary of 
Transportation (Secretary) to request that scheduled airlines meet with 
the FAA to discuss flight reductions at severely congested airports to 
reduce over-scheduling and flight delays during hours of peak 
operation, if the FAA determines that it is necessary to convene such a 
meeting and the Secretary determines that the meeting is necessary to 
meet a serious transportation need or achieve an important public 
benefit.
    In early 2004, the Secretary of Transportation and the FAA 
Administrator determined that a schedule reduction meeting was 
necessary to deal with congestion-related delays at O'Hare. Before such 
a meeting could be convened, however, United and American each agreed 
to reduce their scheduled flights voluntarily. Accordingly, the 
schedule reduction meeting was deferred. Instead, the FAA issued an 
order implementing the voluntary agreement of the two air carriers, 
Docket FAA-2004-16944-55; 69 FR 5650 (2004). The FAA order required a 5 
percent reduction in the two carriers' scheduled operations. This 
reduction was to be effective between 1 p.m. and 8 p.m. for six-months, 
beginning no later than March 4, 2004.
    The FAA again reviewed O'Hare's on-time performance in March 2004 
in light of the ordered schedule reductions. That review showed that 
the total delay minutes could have been as much as 30 percent higher 
without the reductions but that delays still remained more than double 
the level of a year earlier and represented more than a third of the 
total delays in the United States.
    In light of the continued problems at O'Hare, the FAA again 
discussed the situation with American and United. As a result, on April 
21, 2004, the FAA issued an amendment to the previous order in Docket 
FAA-2004-16944. This amendment required additional flight reductions. 
Specifically, beginning no later than June 10, 2004, it required (1) an 
additional schedule reduction of 2.5 percent of each carrier's total 
operations in the 1 p.m. through 7:59 p.m. hours including arrival 
reductions during specific times; (2) a reduction in the number of 
scheduled arrivals in the 12 p.m. hour; and (3) reductions to continue 
through October 30, 2004.
    Prior to the implementation of the June flight reductions, delays 
at O'Hare continued. In May, there were a record 14,495 total delays. 
While the numbers in June and July improved, as the last round of 
cutbacks by American and United took effect, the FAA determined that 
the overall trend of delays remained unacceptably high. Meanwhile, some 
airlines that were not party to the agreement involving American and 
United continued to add flights, making it unlikely that the hub 
carriers would extend their voluntary schedule reductions without 
similar commitments by other carriers. Published schedules for November 
indicated that during several times of the day scheduled arrivals would 
approach or exceed the airport's highest possible arrival capacity. 
Accordingly, in July, the Secretary of Transportation and FAA 
Administrator determined that the scheduling reduction meeting that had 
previously been deferred now needed to be held (69 FR 46201, August 2, 
2004).
    The meeting between DOT and the carriers convened on August 4, 
2004, and was followed by meetings between Federal officials and 
individual airlines. As a result, United and American agreed to 
reschedule and reduce scheduled

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arrivals by about 5 percent during peak hours and other airlines agreed 
not to increase the number of their scheduled arrivals. New entrants 
and limited incumbents were permitted to add a small number of 
scheduled flights. Based on the information provided through the 
meetings and submissions filed in the docket, the FAA issued a 
comprehensive order on scheduled arrivals at O'Hare on August 18, 2004, 
limiting arrivals by domestic carriers to 88 during most hours of the 
day and implementing the above agreement (August 2004 Order). The Order 
took effect November 1, 2004, and will expire on April 30, 2005. On 
February 10, 2005, the FAA issued an order proposing to extend the 
August 2004 Order's effect through October 2005. The FAA sought the 
views of interested persons on the advisability of extending the August 
2004 Order in Docket FAA-2004-16944.
    The FAA is reviewing a proposal by the City of Chicago to 
reconfigure O'Hare and expand its capacity to accommodate existing and 
future aviation operating demands. However, such a solution, if 
approved, would yield modest benefits in the near term (2007) and 
require many years (2013) to be fully realized. The FAA also considered 
whether any near-term air traffic procedural changes, airspace 
redesign, or equipage upgrades could provide sufficient capacity or 
efficiency gains to meet the level of airport demand experienced in 
late 2003 and much of 2004. Greater utilization of higher capacity 
runway configurations, some of which are dependent on weather and other 
operating conditions, could increase O'Hare's average arrival rate. The 
FAA will continue to monitor the actual and predicted airport 
operations to ensure that capacity does not routinely go unused. The 
FAA is reviewing the possibility that additional aircraft might be able 
to utilize land and hold short operations under more runway 
configurations, and if approved, this could provide operational arrival 
and departure benefits. New category II and category III instrumental 
landing systems for runways 27L and 27R are expected to be operational 
during fall 2005 and would increase arrival capacity in adverse weather 
conditions. The FAA is also considering airspace redesign as part of 
the Midwest Airspace Capacity Enhancement (MACE) plan, including new 
routes and sectors in the Chicago, Cleveland, and Indianapolis Air 
Route Traffic Control Centers, as well as departure and arrival routes 
in the Chicago airspace area that could increase capacity at O'Hare. 
Environmental review for these proposed changes is expected to be 
complete by late 2005. In addition, on January 20, 2005, the FAA 
implemented reduced vertical separation minima that added six new 
flight levels between 29,000 and 41,000 feet. The new flight levels 
increase overall efficiency in the national airspace system. In the 
future, this may provide alternatives to address the cumulative impact 
of aircraft departing from O'Hare and other Midwest airports.
    The NPRM, as proposed, would allow the FAA to recognize any 
capacity increases realized before the proposed sunset of the rule by 
allocating additional arrival authorizations. However, the short-term 
air traffic control changes will not, in themselves, result in 
sufficient capacity to meet historic demand. Accordingly, the FAA is 
now faced with the question of what to do when the August 2004 Order 
expires. Several courses of action have been considered.
    One possibility is to allow the August 2004 Order to expire and to 
let events run their course without FAA intervention. This would leave 
no administrative mechanism to prevent each individual airline from 
increasing its own flights. Air traffic control procedures and traffic 
management initiatives such as ground delay programs, miles-in-trail 
restrictions, and aircraft re-routing, would ensure that any additional 
flights did not affect air safety. The FAA's recent experience with 
this option is characterized by the congestion-related delays that 
O'Hare experienced in late 2003. Therefore, the likely outcome of this 
approach is a renewed, significant increase in total airline flights at 
O'Hare. Because the cost of the resulting delays is not fully 
internalized by any individual air carrier, both experience and theory 
suggest that without any constraint, each carrier would, at least 
initially, continue adding flights despite an unacceptable level of 
congestion and delay. It was such a situation that caused the FAA to 
intervene at O'Hare in early 2004. It has been argued that air carriers 
could eventually find equilibrium at O'Hare if given enough time. We 
invite comments on the option of allowing the August 2004 Order to 
expire and taking no action with respect to air carrier scheduling at 
O'Hare.
    Alternatively, the FAA could extend the August 2004 Order or 
renegotiate with air carriers for a voluntary schedule over a longer 
term than the August 2004 Order. As previously noted, the FAA on 
February 10, 2005, issued an order to show cause, which invites 
interested parties to comment on the FAA's proposal to extend the 
August 2004 Order until October 31, 2005. Nevertheless, an extension of 
the current order may not be desirable for any period longer than is 
necessary to complete this rulemaking. As the problems faced by air 
carrier scheduling committees in the 1980s demonstrate, a growing 
economy will continue to boost passenger demand. In the face of such 
market pressures, not all carriers may accept the FAA's proposal to 
extend the August 2004 Order or the issuance of a new order supplanting 
the August 2004 Order. Additionally, this NPRM raises issues that are 
not likely to be resolved in the context of a scheduling reduction 
meeting, including limitations on foreign air carriers and the creation 
of a blind buy/sell procedure.
    The FAA and Office of the Secretary of Transportation (OST) are 
also considering various administrative and market-based mechanisms 
that may improve on prior methods of allocating available capacity at 
an airport where capacity is not able to meet aviation demand. The FAA 
and OST have contracted with the National Center of Excellence for 
Aviation Operations Research (NEXTOR) to conduct research on various 
proposals to implement at LaGuardia airport upon the expiration of the 
HDR. The market-based mechanisms being researched for LaGuardia airport 
are among several measures that could be implemented at O'Hare, if 
capacity improvements are inadequate to achieve delay reduction. 
However, the research and FAA and OST policy evaluations will not be 
completed until the latter half of 2005. In addition, while market-
based mechanisms are among those being evaluated, they raise many 
issues, including the most practical implementation of such a regime, 
the effect of any such program on airfares, consideration of applicable 
legal requirements, the consistency of such a program with 
international agreements, the use of any ``surplus'' revenue, as well 
as the impact on new entrants, small airlines, competition, and service 
to small communities. An immediate approach is needed to manage the 
congestion and delays at O'Hare in the interim.
    Accordingly, the FAA is proposing a rule to manage congestion and 
delay at O'Hare until April 6, 2008, by which time one of three 
possibilities will have presented itself: (1) The first phase of an 
FAA-approved O'Hare Modernization Plan (OMP) yields enough capacity to 
obviate the need for government action to address congestion; (2) the 
first phase of an approved OMP does not yield enough capacity in the 
medium-term

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and continued action is necessary until enough long-term capacity comes 
on-line; or (3) the OMP is not approved and further action is needed 
over the medium and long term.

Authority

    The FAA has broad authority under 49 U.S.C. 40103 to regulate the 
use of the navigable airspace of the United States. This section 
authorizes the FAA to develop plans and policy for the use of navigable 
airspace and to assign the use that the FAA deems necessary to its safe 
and efficient utilization. It further directs the FAA to prescribe air 
traffic rules and regulations governing the efficient utilization of 
the navigable airspace. The FAA interprets its broad statutory 
authority to ensure the efficient use of the navigable airspace to 
encompass management of the nationwide system of air commerce and air 
traffic control.
    In addition to FAA's authority and responsibilities with respect to 
the efficient use of airspace, the Secretary of Transportation is 
required to consider several other objectives as being in the public 
interest, including: Keeping available a variety of adequate, economic, 
efficient, and low-priced air services; placing maximum reliance on 
competitive market forces and on actual and potential competition; 
avoiding airline industry conditions that would tend to allow at least 
one air carrier unreasonably to increase prices, reduce services, or 
exclude competition in air transportation; encouraging, developing, and 
maintaining an air transportation system relying on actual and 
potential competition; encouraging entry into air transportation 
markets by new and existing air carriers and the continued 
strengthening of small air carriers to ensure a more effective and 
competitive airline industry; maintaining a complete and convenient 
system of scheduled air transportation for small communities; ensuring 
that consumers in all regions of the United States, including those in 
small communities and rural and remote areas, have access to 
affordable, regularly scheduled air service; and acting consistently 
with obligations of the U.S. Government under international agreements. 
See 49 U.S.C. 40101(a)(4), (6), (10)-(13) and (16), and 40105(b).

The Proposal

Limit on O'Hare Arrivals During Peak Periods

    Under the proposed rule, the FAA would limit the number of 
scheduled flight arrivals at O'Hare from 7 a.m. and 8:59 p.m. local 
time Monday through Friday and from noon to 8:59 p.m. on Sunday. 
Scheduled arrivals would be limited to 88 per hour (and to 50 in any 
half hour) between 7 a.m. and 7:59 p.m.; \1\ however, from 8 p.m. to 
8:59 the limit on scheduled arrivals would increase to 98. Arrival 
times would be assigned according to the procedures described elsewhere 
in this document. Unscheduled flight arrivals (such as, arrivals by 
general aviation, the military, and certain charter services) would be 
restricted to four (4) per hour, under an advance reservation system 
described in proposed Special Federal Aviation Regulation (SFAR) No. 
105 Proposed Reservation System for Unscheduled Arrivals at Chicago's 
O'Hare International Airport, published by the FAA on October 20, 2004 
(69 FR 61708), which after adoption would be replaced by this proposed 
rule. Thus, arrivals in total would be limited to 92 per hour during 
all regulated periods (except for the 8 p.m. to 8:59 p.m. hour).
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    \1\ The Order provides for 89 arrivals during certain hours to 
accommodate planned schedule increases by certain limited incumbent 
carriers. The proposed rule would permit similar exceptions above 88 
arrivals per hour in order to account for existing schedules and 
foreign air carriers.
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    The proposed hourly arrival limits are based on the analysis 
originally done as part of the delay-reduction proceedings that 
resulted in the August 2004 Order, the FAA's confidence in the general 
reliability of its delay-projection models, and the FAA's actual 
experience with operations at O'Hare following the implementation of 
the Order. In establishing a target (as required by 49 U.S.C. 41722) 
for the delay-reduction proceedings, the FAA examined the airport's 
operations over 140 weekdays from November 3, 2003, through May 14, 
2004, and found that it had accommodated an average of 90 arrivals per 
hour in all weather conditions, including an average of 86 scheduled 
and four (4) unscheduled flights, during the peak period of noon 
through 6:59 p.m. Because demand for access to O'Hare is highest at 
these hours, the arrival rate experienced over this period would tend 
to indicate the maximum average capacity of the airport under various 
weather, runway, and operating conditions. The figure also correlated 
closely to the reported average airport acceptance rate for this 
period,\2\ suggesting that there was little or no unused capacity 
during these times.
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    \2\ The airport acceptance rate or airport arrival rate is the 
number of arrivals an airport is capable of accepting each hour. The 
rate changes to reflect the impact of weather or other operating 
conditions on the arrival capacity.
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    In the delay-reduction proceedings the Administrator had initially 
set a rate of 86 scheduled arrivals per hour and 22 arrivals for each 
rolling 15-minute period as a target for industry agreement; this 
assumed that the historical average of four additional unscheduled 
arrivals per hour by general aviation, military, cargo, and charter 
flights would continue. In ultimately deciding to use a somewhat higher 
arrival rate of 88 scheduled operations per hour in the Order, the 
Administrator considered information provided by air carriers during 
the scheduling reduction discussions. These carriers maintained that 
such a limitation would result in unused airport capacity under many 
conditions and that the use of a 15-minute limitation on arrivals was 
overly restrictive and would unnecessarily hamper the carriers' 
scheduling flexibility. The participants proposed that the FAA consider 
allowing a scheduled arrival rate of at least 90 flights per hour and 
constrain operations by no longer than 30-minute periods. The airlines 
also requested that the FAA allow more flights toward the end of the 
service day in order to allow them to complete connections and 
reposition their fleets for the following day.
    After consideration of these arguments and the results forecast by 
the agency's delay-reduction models, the Administrator decided to use a 
scheduled arrival rate of approximately 88 flights for the period 
between 7 a.m. and 7:59 p.m. and 98 arrivals in the 8 p.m. hour (which 
is the end of the ``service day,'' when the effect of any delays on 
later operations is most limited). The Administrator also determined 
that the use of a ``rolling'' constraint over each 30-minute period of 
no more than 50 arrivals (with the exception of the 8 p.m. hour) would 
achieve a desirable level of delay reduction. The proposed rule, if 
adopted, would set similar 30-minute limits as were imposed by the 
Order but would not establish a regulatory process for a ``rolling'' 
limit. Recognizing that schedule peaking within a short time period 
significantly increases delays, the FAA intends to closely monitor 
scheduling practices, and as at other airports, we will encourage 
carriers to schedule realistically within O'Hare's capacity.
    As was the case with the August 2004 Order, the FAA is now 
proposing to restrict arrivals only, rather than both arrivals and 
departures, as had been the case under the High Density Rule. Limiting 
the cap to only arrivals is simpler and lessens the government's 
intervention in airline scheduling. The number and timing of arrivals 
usually

[[Page 15524]]

closely correlates to the number and timing of departures. Moreover, in 
the FAA's experience, arrival delays tend to be more disruptive to the 
system and cause delays in later flights since a late-arriving aircraft 
is not available for an on time departure.
    In setting the hourly arrival caps in the Order, and proposing the 
same caps for use in this rule, the Administrator has also relied on 
analyses performed at the FAA's request by MITRE Corporation,\3\ which 
ran computer modeling to simulate the effect of hypothetical schedule 
reductions on the level of flight delays at O'Hare. In the FAA's 
experience, these models are highly reliable in forecasting the effect 
of various schedules on airport delays. To assess the impact of 
potential reductions, the FAA and MITRE selected several different 
O'Hare schedules for air carriers publishing their flights in the 
Official Airline Guide (OAG) and analyzed them to simulate the 
resulting delays in arrival queues. For each scenario, MITRE assumed a 
total of four (4) unscheduled flights per hour; because the exact times 
these flights arrive are unknown, they were randomly assigned arrival 
times during each hour. Because arrival queuing delays also depend on 
available capacity at ORD (which can change with runway, weather and 
operating conditions), actual hourly arrival capacity was included for 
each weekday in the model.
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    \3\ MITRE is a not-for-profit corporation working with 
government clients. It addresses issues of critical national 
importance, combining systems engineering and information technology 
to develop innovative solutions. MITRE's work is focused within 
three Federally Funded Research and Development Centers, one of 
which performs systems research and development work for the Federal 
Aviation Administration and other civil aviation authorities.
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    The models predicted that constraints used in the August 2004 Order 
(that is, an arrival rate of approximately 88 scheduled and four 
unscheduled operations per hour, together with the 30-minute 
constraints discussed above) would reduce O'Hare delays by 
approximately 20 percent from the levels then attributable to schedules 
in effect at the time of the August 2004 Order. The FAA also simulated 
the results of a completely unconstrained schedule--using the 
industry's then-proposed November 2004 schedules--and calculated that 
delays under the Order would be approximately 43 percent less severe 
than would be experienced if no action were taken and those November 
2004 schedules were allowed to take effect.
    Preliminary results of the Order, as reflected in FAA's calculated 
O'Hare on-time performance statistics for the month of November, 2004, 
confirm that the arrival limitations adopted in the Order have 
materially reduced delays and thus support adopting identical 
limitations in the proposed rule. Although the reduction in delays has 
somewhat exceeded the FAA's forecast, the Administrator believes that 
there is insufficient data to support a relaxation of those limits. 
During this rulemaking proceeding, however, the FAA will continue to 
review the proposed limitations and, if justified by the models and 
actual delay statistics, consider whether the limitations should be 
modified in response to changing conditions at O'Hare. In addition, as 
described below, the proposed rule provides for the FAA periodically to 
reevaluate the available capacity at O'Hare and to make adjustments in 
the arrival limits as warranted.
    As proposed, the rule would maintain the limitations on arrivals 
assignments established in the August 2004 Order. Until a final rule is 
adopted in this rulemaking, the cumulative delay statistics and 
modeling results may demonstrate to the Administrator that increasing 
the number of arrivals above what is proposed in this notice will still 
allow for acceptable operational performance. If so, the arrival cap on 
scheduled operations may be raised in a final rule, if adopted.
    It is also possible that air traffic procedural changes or other 
enhancements will result in a limited increase in arrival capacity over 
the duration of the proposed rule. Therefore, the FAA will periodically 
reexamine the level of available capacity at O'Hare. Under the proposed 
rule, every six months, the FAA would review the level and length of 
delays, operating conditions at the airport and other relevant factors 
to determine whether more arrivals can be allowed. The FAA estimates 
for the purposes of this proposal that such a review would, in no 
event, result in hourly arrivals in excess of O'Hare's current capacity 
under optimal conditions, which is 100 arrivals per hour.
    The FAA also is considering whether the final rule should provide a 
mechanism through which the level of available capacity would be 
adjusted based on considerations other than delays and efficiency 
concerns. Specifically, we seek comment on whether the hourly limits on 
Arrival Authorizations should be adjustable based on broader public 
interest concerns as set forth in 49 U.S.C. 40101 (a) (including 
keeping available low-priced air services, maintaining a system relying 
on actual and potential competition, and encouraging new entry), and if 
so, which concerns. Further, we seek comment on whether the process to 
make such adjustments shall be established in the rule or whether 
standing exemption authority should be relied upon.

Initial Assignment of Arrival Authorizations

    Under the proposal, the FAA would initially assign Arrival 
Authorizations \4\ based on the terms of August 2004 Order, as amended. 
The FAA would first look to the scheduled arrivals for each affected 
domestic carrier in effect from November 1, 2004 through November 7, 
2004.\5\ Thus, if a carrier published a daily scheduled arrival at 1 pm 
in the first week of November, it would retain that arrival time by 
receiving the assignment of an Arrival Authorization for that 
operation. In this manner, the arrivals permitted under the August 2004 
Order would be preserved. The FAA would rely on its records to 
determine when an arrival had been scheduled during the first week of 
November and which carrier held the appropriate authorization. Each 
initial Arrival Authorization would be for the corresponding 30-minute 
period indicated by the FAA's records. In the event that a carrier had 
not published a scheduled arrival during the first week of November to 
which it was entitled under the August 2004 Order, the terms of the 
Order would control.
---------------------------------------------------------------------------

    \4\ An Arrival Authorization is the operational authority 
assigned to an air carrier or foreign air carrier by the FAA to 
conduct one scheduled IFR arrival operation each week on a specific 
day of the week during a specific 30-minute period at O'Hare.
    \5\ We chose the first week of November because that was the 
first seven-day period during which the August 2004 Order was 
effective.
---------------------------------------------------------------------------

    The FAA would publish its proposed initial assignment of scheduled 
Arrival Authorizations 14 days before the effective date of the rule. 
The FAA Vice President, System Operations Services for the Air Traffic 
Organization would be the final decision-maker with respect to the 
initial assignment of scheduled Arrival Authorizations.
    By assigning Arrival Authorizations to each carrier in a manner 
that corresponds with the arrivals actually scheduled by such carrier 
during the first week of November 2004, the FAA intends to minimize any 
operational or economic disruption to the airline industry upon 
implementation of the proposed rule. Assignment of Arrival 
Authorizations to carriers currently holding them would avoid immediate 
disruption of air service to the public.
    Additionally, the schedules flown during that seven-day period 
reflect an

[[Page 15525]]

agreement reached between each domestic and Canadian air carrier and 
the FAA as part of the voluntary schedule reduction discussions that 
occurred in August 2004 under the auspices of section 41722 of Title 
49. Each carrier thus would be able to maintain the schedule it put in 
place when the August 2004 Order was adopted and which it accepted 
after negotiation. The FAA is concerned that other assignment methods--
such as a random lottery of authorizations--would not be consistent 
with the results of the voluntary discussions.
    The proposed assignment method is also consistent with the FAA's 
handling of similar issues in the past, such as the slot allocation and 
transfer methods under the High Density Rule, 50 FR 52180, December 20, 
1985. Concerns were expressed in the context of that rule that 
grandfathering existing slot allocations would confer a financial 
windfall on incumbent carriers and adversely effect new entrants. While 
acknowledging the benefit to incumbent carriers, the Department 
believed there, as here, that this effect was necessary in order to 
minimize disruption of existing service patterns.

Code-Sharing Arrangements

    The FAA proposes that, with a limited exception explained below, 
each Arrival Authorization would be allocated solely to the carrier 
that actually operated the flight, regardless of any code-sharing 
agreements. We acknowledge that in other proceedings, the Department 
has determined whether there is an affiliate relationship by looking to 
the designator code or other code-sharing arrangement.\6\ We are 
concerned that this approach would artificially restrict the growth 
opportunities of limited incumbents at O'Hare. Although code-sharing 
agreements are common in parent-subsidiary type relationships, they are 
also increasingly present in marketing arrangements between carriers 
that are essentially independent and largely control their own sales. 
If the FAA were to deem an affiliate relationship to exist by virtue of 
code-sharing agreements alone, code-share partners like American and 
Alaska would become affiliated carriers for purposes of this rule. This 
would have the effect of denying Alaska the opportunities afforded 
other limited incumbents not involved in code-sharing agreements.
---------------------------------------------------------------------------

    \6\ Cf. 49 U.S.C. 41714(k).
---------------------------------------------------------------------------

    At the same time, in making our initial Arrival Authorization 
determinations, the FAA does not intend to assign Arrival 
Authorizations to a carrier that is essentially operating its service 
as a contractor for another carrier and does not market its services 
independently and in its own name. If we were to treat these contract 
carriers as independent carriers, a carrier with a significant number 
of incumbent Arrival Authorizations could take advantage of preferences 
for new entrants and incumbents by entering into affiliate 
relationships with the sole purpose of increasing their number of 
Arrival Authorizations. Thus, under the proposal, where the operating 
carrier conducts the flight solely under the control of another 
carrier, the carrier controlling the inventory of the flight would 
receive the assignment.

Treatment of Foreign Carriers

    The FAA proposes assigning Arrival Authorizations to foreign 
carriers based on seasonal usage. (Canadian carriers are treated 
differently from other foreign carriers under this rule as discussed in 
detail below.) Because there is more seasonal variation in 
international service some foreign carriers could be excluded from the 
initial assignment or be assigned Arrival Authorizations that do not 
match their scheduled summer operating times if assignments were based 
only on November 2004 schedules. Accordingly, we propose establishing a 
seasonal assignment procedure whereby a foreign carrier's initial 
assignment of Arrival Authorizations would be based on its published 
schedules for the winter season that began October 2004 and for the 
summer season that began April 2004. The FAA Vice President, Systems 
Operations Services for the Air Traffic Organization would be the final 
decision-maker with respect to the initial assignment of scheduled 
Arrival Authorizations.

Categories of Operators

    Upon the initial assignment, all carriers would fall into one of 
three following categories: incumbent, limited incumbent or new 
entrant. A new entrant would be a carrier that does not operate any 
Arrival Authorizations at O'Hare and, has never held an Arrival 
Authorization. A limited incumbent carrier would be a carrier that 
operates eight or fewer Arrival Authorizations at O'Hare and has never 
sold or given up an Arrival Authorization. All other carriers would be 
treated as incumbent carriers.
    We recognize that canceling limited incumbent status for a carrier 
that chooses to sell an Arrival Authorization could discourage 
legitimate business choices. The practical impact, however, is merely 
the loss of a preference for future Arrival Authorization assignments; 
the carrier also retains the ability to obtain Arrival Authorizations 
on the same basis as any other incumbent. We have tentatively 
determined that the approach toward limited incumbents presented here 
represents a fair treatment of carriers that are not new entrants but 
that should be afforded some additional consideration due to their 
limited presence at the airport. The proposed definition here is 
consistent with the August 2004 Order.

Treatment of New Entrants/Limited Incumbents and New Capacity

    The competing policy considerations that the Administrator weighed 
in her August 2004 Order confront the agency again today, because 
demand for access to O'Hare still exceeds capacity.\7\ Although the law 
directs the FAA to manage the safe and efficient use of the navigable 
airspace,\8\ we also look to DOT's mandates, overall Congressional 
policy,\9\ and the public interest for guidance.
---------------------------------------------------------------------------

    \7\ Under the order, the two hubbing carriers at the airport 
were the only carriers that reduced operations and retimed a number 
of flights. These carriers also represent the largest carrier 
investment in operations and infrastructure at the airport. However, 
these carriers correspondingly have added a very large number of 
flights in the last three years. (During peak hours and from April 
2000 to November 2003, American added 56 flights, United added 225 
and the net increase of all other carriers at the airport was six.)
    \8\ 49 U.S.C. 40103(b).
    \9\ See, e.g., Delta Air Lines v. CAB, 674 F.2d 1 (D.C. Cir. 
1982).
---------------------------------------------------------------------------

    Several factors here suggest that it would be appropriate to 
provide a preference to new entrants and limited incumbents at the 
airport. First, as we noted above, the Secretary of Transportation 
considers a number of matters in the public interest when carrying out 
the Department's functions, including ``placing maximum reliance on 
competitive market forces and competition.'' \10\ Second, the Airline 
Deregulation Act of 1978, which reduced the regulation of domestic and 
international air transportation, enunciated pro-competitive policies. 
When addressing airport access issues, Congress has frequently favored 
new entrants over incumbents.\11\ Congress has added provisions to the 
statutes governing airport grants and passenger facility charges to 
encourage airports to adopt policies that will promote competition.\12\ 
Third, past OST and FAA rules and orders relating to flight 
restrictions at the high density airports

[[Page 15526]]

also took into account the need to promote competition through new 
entry and expansion by limited incumbents.\13\
---------------------------------------------------------------------------

    \10\ 49 U.S.C. 40101(a)(6).
    \11\ 49 U.S.C. 41714(c), (h), 41716(b), 41717(c), 41718(b)(1).
    \12\ 49 U.S.C. 40117(k), 47106(f), and 47107(s).
    \13\ See, e.g., 14 CFR 93.225 (lottery of available slots); High 
Density Airports: Notice of Extension of the Lottery Allocation and 
Notice of Lottery for Limited Slot Exemptions at LaGuardia Airport 
66 FR 41294 (Aug. 7, 2001) (expanding the scope of new entrants 
eligible to participate in the lottery to those that did not 
participate in the Dec. 4, 2000, including those that had not 
applied for the AIR-21 slot exemptions by Dec. 4, 2000); High 
Density Airports, 67 FR 65826 (Oct. 28, 2002) (adopting the new 
entrant preference procedure for reallocating withdrawn or returned 
lottery slot exemptions at LaGuardia). In Northwest Airlines v. 
Goldschmidt, the court agreed that an allocation of slots to 
carriers that increased low-fare service would be consistent with 
the pro-competitive policy established by the Airline Deregulation 
Act of 1978. (645 F.2d 1309 (8th Cir. 1980)).
---------------------------------------------------------------------------

    Thus, as capacity becomes available during the duration of the 
rule, the FAA proposes to establish a limited preference for new 
entrants and limited incumbents. If the capacity grows per hour from 88 
up to 90 arrivals, any capacity not needed to accommodate foreign air 
carriers would be assigned by lottery to new entrants and limited 
incumbents. If Arrival Authorizations remain, they would be assigned to 
incumbent carriers on an interim basis until the next lottery, when 
they would again be made available first to new entrants and limited 
incumbents.
    Once the capacity reaches 90 per hour, the preference for new 
entrants and limited incumbents would be suspended until these rules 
terminate. Any new capacity resulting in additional Arrival 
Authorizations would then be assigned by lottery with no preference 
based on carrier identity. At that point all carriers would be placed 
on an equal footing.
    Our proposal to continue to favor new entrants and limited 
incumbents in the lottery process is consistent with the equities of 
the situation at O'Hare. The two largest airlines have added a very 
large number of flights in the last three years. While this build-up 
was lawful, it resulted in congestion at O'Hare, as stated earlier. 
Even under this proposal, American and United will still operate the 
vast majority of flights at O'Hare, with a greater percentage of 
Arrival Authorizations at O'Hare than they had slots under the HDR 
before its phase-out, and thus the two airlines will have a substantial 
ability and greater flexibility than rivals to shift flights in 
response to consumer demand and initiatives taken by competitors. We 
tentatively believe that this proposal represents a reasonable 
compromise between promoting competition and recognizing the 
substantial investments of existing carriers at O'Hare. We invite 
commenters to discuss whether the limited preference for new entrants 
and limited incumbents would promote competition (and if so, what form 
the competitive benefits might take), and whether the service benefits 
potentially obtainable from the hubbing airlines' networks argue 
against the preference in the allocation of arrival rights if the FAA 
determines that the airport's capacity will allow 89 or 90 scheduled 
hourly arrivals.

Blind Buy/Sell

    The proposal does not create property rights in any assignment of 
Arrival Authorizations. However, the purchase and sale of Arrival 
Authorizations would be allowed, in order to advance the goals of 
promoting the most efficient use of the airspace and maximizing 
reliance on market forces. See for example, paragraphs (6) and (12) of 
section 40101(a) of Title 49 of the United States Code. Permitting such 
transactions will promote operating efficiency and minimize the need 
for on-going government intervention in the assignment and distribution 
of O'Hare Arrival Authorizations. There would be no further need for 
the FAA to engage in the lengthy negotiations with airlines, as it had 
to do throughout 2004. Nor will there be any risk that these 
negotiations would fail to bear fruit leaving some airlines 
dissatisfied or all airlines with a serious congestion and delay 
problem. Each airline will enjoy an equal opportunity to adjust its 
schedules though the purchase or sale of Arrival Authorizations.
    Under the High Density Rule the Department received complaints 
about the buy/sell process as it was implemented. The rule permitted 
the buyer and seller to deal directly with each other and therefore the 
identity of the carriers were known to each other. Various parties 
complained to the Department that incumbent carriers would refuse to 
sell to a new entrant or other airline that could pose a competitive 
threat. Some airlines and other entities have complained that they were 
not even aware of opportunities to purchase slots.\14\
---------------------------------------------------------------------------

    \14\ The DOT has docketed three petitions on this subject in 
recent years. Dockets OST-2004-18586, OST-2002-13650, and FAA-2001-
9156. The petitions are available for review on the DOT's Web site.
---------------------------------------------------------------------------

    To prevent airlines from engaging in this sort of collusion or 
purposely not selling to a particular competitor, sales of Arrival 
Authorizations under this proposal would be permitted only through a 
blind market overseen by the FAA. This would ensure that new entrants 
and all other airlines have an equal opportunity to purchase Arrival 
Authorizations. The offer to sell an Arrival Authorization would be 
posted in a manner that would ensure notice to all airlines and give 
all airlines an equal opportunity to bid without disclosing the 
identity of the seller. Similarly, the identity of the bidders would 
not be disclosed until the highest bid is accepted and the transfer of 
the authorization is made.
    The only consideration permitted for transactions in the blind 
market would be money. Use of real property such as gates, non-monetary 
assets or other services in lieu of cash would not be permitted. Also, 
under the proposal, Arrival Authorizations obtained by a carrier in a 
lottery by virtue of the carrier's status as a new entrant or limited 
incumbent could not be sold or leased until they had been used for at 
least twelve months, except that they could be sold or leased within 
that period to another new entrant or limited incumbent. Such a 
restriction is consistent with the approach taken by the agency under 
the HDR, which restricted new entrants and limited incumbents from 
selling or leasing slots obtained in a lottery for two years thereafter 
(unless transferred to another new entrant or limited incumbent). Our 
proposal would help ensure that airlines seeking an allocation of slots 
actually intend to use the slots they acquire while fulfilling an 
important policy objective with respect to competition at O'Hare.
    An airline seeking to sell an Arrival Authorization would have to 
provide 30 days' notice to the FAA with the Arrival Authorization 
number, times, frequencies, and effective date. The FAA would post 
information about the proposed sale and closing date for bids. 
Information identifying the seller would not be posted. Offers to buy 
must be made by the closing date. The FAA would forward the highest bid 
to the seller without any identification of the proposed buyer. The 
seller would have three business days to make a decision. If the seller 
accepts the bid, the FAA would notify the winning bidder and require 
both airlines to submit the necessary information to transfer the 
Arrival Authorization. The buyer may not use the Arrival Authorization 
until the FAA has received written confirmation of the transfer. A 
record of each sale will be kept on file by the FAA and be made 
available to the public upon request. Only airlines would be allowed to 
participate in this market.
    Although sales under the blind buy-sell would be allowed as 
described above, the proposed rule does not currently provide for 
leasing and sub-leasing of these authorizations.

[[Page 15527]]

However, the FAA is considering allowing carriers to lease (and 
sublease) Arrival Authorizations, because leasing would provide 
carriers greater flexibility and promote the more efficient use of 
Arrival Authorizations. Leasing would allow carriers to adjust their 
schedules based on changing seasonal or market conditions, and it would 
make it easier for carriers to enter new markets and determine whether 
market conditions justified the purchase of Arrival Authorizations.
    However, as explained above, we would require a blind market for 
the sale of any Arrival Authorization in order to prevent collusion and 
efforts by an Arrival Authorization holder to sell Arrival 
Authorizations to its weakest competitor rather than the carrier that 
could use the Arrival Authorizations most efficiently and profitably. A 
rule allowing the lease of Arrival Authorizations must similarly 
include conditions that would prevent collusion and deny the lessor 
carrier the ability to choose which competitor could lease its Arrival 
Authorizations. The FAA therefore believes that leases and subleases, 
if allowed, should be negotiated only through a process emulating the 
proposed blind market for the sale of Arrival Authorizations. A lessor 
thus would give the FAA notice of its intent to lease Arrival 
Authorizations, the FAA would invite other carriers to bid for the 
lease, no consideration other than cash could be offered by the lessee, 
the lease would not restrict the lessee's ability to use the Arrival 
Authorizations, and the lessor would determine at most the length of 
the lease (alternatively the rule could set a minimum length for all 
leases of Arrival Authorizations). The FAA invites comments on the 
potential impact of a rule allowing leases and subleases.

One-for-One Trades

    In addition, the proposed rule would permit the one-for-one 
exchange of Arrival Authorizations between airlines so long as no 
additional consideration was provided. Under the proposal, these 
exchanges must be publicly disclosed and could take place outside of 
the blind market because many of these arrangements are for operational 
reasons and could be accomplished only through multi-carrier trades. 
Such exchanges would be an effective way to deal with variations in 
seasonal demand and airline business strategies. The authorizations 
could not be used until written confirmation of the transaction is 
received from the FAA.

Canadian Carriers

    In 1995, the U.S. and Canadian governments entered into a bilateral 
agreement that phased in elements of an open trans border aviation 
regime between the two countries. At the time that the U.S. and Canada 
adopted the bilateral agreement, the HDR was still in effect at O'Hare. 
Annex II of the agreement specifically addressed access to O'Hare.
    Annex II provided Canadian air carriers with a base level of 36 
O'Hare arrival and departure slots during the summer season and 32 
arrival and departure slots during the winter season. Under the 
agreement, the U.S. could not withdraw slots from a Canadian air 
carrier for reallocation to another air carrier for international 
operations or for reallocation to a new entrant air carrier if 
withdrawing the slot would reduce the Canadian air carriers below the 
base level. Nevertheless, all O'Hare slots operated by Canadian air 
carriers were subject to the minimum slot usage requirement in the HDR 
that governed the operations of U.S. air carriers.
    Annex II also allowed Canadian air carriers to obtain slots at 
O'Hare under the same allocation system as U.S. air carriers. However, 
the FAA could withdraw any slots obtained by Canadian air carriers 
above the base level at any time for the FAA's operational need.
    As a result of the 1995 bilateral agreement, the O'Hare slots of 
Canadian air carriers, which previously consisted of international 
slots, in effect converted to domestic slots. The bilateral agreement 
would likewise apply to the assignments of Arrival Authorizations at 
O'Hare under this proposed rule. Accordingly, the FAA proposes to treat 
Canadian air carriers identically to U.S. air carriers in this 
proposal, except that arrivals initially assigned to Canadian carriers 
will not be subject to withdrawal to accommodate other foreign carriers 
or new entrants.

Foreign Carriers

    We propose to apply the rule described in this notice to foreign 
carriers in order to ensure a single regulatory framework governs all 
scheduled operations at O'Hare. While the August 2004 Order did not 
limit the number of foreign carrier flights (foreign air carriers could 
not participate in the scheduling-reduction discussions under 49 U.S.C. 
41722), the Order did include these operations in determining the 
hourly limit of 88 arrivals per hour. The August 2004 Order also stated 
that the FAA planned to list O'Hare as a Schedules Facilitated Airport, 
Level 2, under the International Air Transport Association (IATA) 
guidelines. The FAA has made that designation for the summer 2005 
scheduling season and foreign carriers were requested to submit their 
proposed schedules to the FAA in advance for review. The rule, as 
proposed, would mean that O'Hare is a Fully Coordinated Airport, Level 
3, under IATA guidelines and the FAA would list it accordingly. The FAA 
would generally follow the IATA Worldwide Scheduling Guidelines to the 
extent they do not conflict with adopted rules and procedures.
    The proposal would treat foreign carriers somewhat differently from 
U.S. and Canadian carriers because foreign airline services to the 
United States (and U.S. airline services to foreign countries) are 
subject to intergovernmental air services agreements imposing 
obligations on the United States and the foreign government. In 
addition, there are differences in the manner in which U.S. airlines 
and foreign airlines typically operate at O'Hare.
    Each international air services agreement typically obligates the 
United States and the foreign government party to ensure that the flag 
carriers of each party have a fair and equal opportunity to compete in 
the market. The United States thus has some obligation to provide 
access to O'Hare for foreign airlines. U.S. carriers similarly need 
adequate access to slot-controlled airports overseas. Any rule 
governing Arrival Authorizations at O'Hare must allow the United States 
to comply with its obligations under international agreements and 
preserve reciprocal treatment on access to Arrival Authorizations and 
slots. Furthermore, as we stated in the August 2004 Order imposing 
temporary limits on O'Hare operations agreed upon by U.S. airlines, 
most foreign airlines operate only a few flights at O'Hare. Only three 
of the 22 non-Canadian foreign airlines serving O'Hare as of August 19, 
2004, operated three or more daily roundtrips. Airlines serving a 
number of important international markets cannot, moreover, schedule 
flights throughout the day. Instead, operational and market demands 
require carriers to schedule their flights during a relatively small 
part of the day (the afternoon and evening for arriving transatlantic 
flights, for example). Foreign airlines are also more likely to operate 
seasonal services. Most of the U.S. airlines serving O'Hare, especially 
the two hubbing airlines, would hold a significant number of Arrival 
Authorizations and so would have some ability to shift flights

[[Page 15528]]

between domestic and foreign routes. In contrast, each foreign airline 
has been limited to serving its international routes and in any event 
would have few Arrival Authorizations.
    With respect to the initial assignment of Arrival Authorizations, 
foreign airlines would be treated in a similar fashion to their 
domestic counterparts. However, in recognition of the greater 
seasonality in international operations, each foreign airline would be 
assigned Arrival Authorizations for the winter traffic season based on 
its published schedules for the winter season that began October 2004 
and for the summer season that began April 2004. Moreover, foreign 
carriers, except Canadian carriers, would not be allowed to sell any of 
the Arrival Authorizations initially assigned to them. Also, these 
Arrival Authorizations would not be subject to any of the proposed 
minimum usage provisions described below. Nonetheless, an authorization 
initially assigned to a foreign airline would have to be returned to 
the FAA if not used during any fifteen-day period.
    There are two options being considered with respect to the 
treatment of foreign carriers in the context of providing additional 
access to O'Hare beyond initial assignments or for new entry.
    Under the first option (the administrative option), the FAA would 
accommodate requests by foreign carriers for new or additional access 
administratively. The FAA would provide these Arrival Authorizations 
out of any unused Arrival Authorizations that FAA may have or an 
Arrival Authorization may be withdrawn from a U.S. airline. Foreign air 
carriers would not be able to buy, sell or lease Arrival Authorizations 
or to participate in any lottery; however, they could participate in 
one-for-one trades as described above.
    Under the second option (the elective option), to obtain Arrival 
Authorizations above their initial assignments, if any, foreign 
carriers could elect to request an Arrival Authorization 
administratively, as described above, or to be treated as U.S. and 
Canadian carriers are treated. In other words, a foreign carrier could 
decide that it would rather obtain arrivals for new entry or additional 
access through a lottery or blind market. With respect to arrivals 
obtained through those means, a carrier would be subjected to the same 
rules as U.S. and Canadian carriers, although foreign carriers would 
still not be able to buy, sell or lease their initial assignments
    A foreign carrier pursuing the opportunity to be treated as U.S. 
and Canadian carriers under the elective option would not be allowed at 
a later point to seek access to Arrival Authorizations from the FAA as 
described in the administrative option. Similarly, any carrier that 
obtains an arrival reservation as described in the first option could 
not later decide that it wanted to be treated the same as U.S. and 
Canadian carriers. The election to be treated one way or the other 
would be made the first time a foreign carrier sought an Arrival 
Authorization above its initial assignment after the rule goes into 
effect.
    These options should provide a transparent mechanism for foreign 
airlines to exercise the right to serve Chicago provided for in our 
bilateral air services agreements. Under any of these approaches, of 
course, the Department of Transportation would reserve the right to 
take action with respect to any foreign air carrier whose homeland was 
not providing to U.S. air carriers equivalent rights of access to its 
airports, as determined by the Secretary of Transportation.
    We seek comments on the relative merits of these two options.

Minimum Usage Requirements

    The FAA is considering whether the proposed rule should include a 
minimum usage requirement for Arrival Authorizations held by U.S. or 
Canadian air carriers and if so, what requirement to put in place. (As 
proposed, the rule would not impose any such requirement on foreign air 
carriers but would also limit the transferability of Arrival 
Authorizations held by them.) The FAA requests comments on the relative 
merits of (1) not imposing any minimum usage requirement, (2) requiring 
that each authorization be used at least 90 percent of the time (or be 
withdrawn), or (3) periodically requiring that least utilized Arrival 
Authorizations be withdrawn.
    One alternative is not to impose any minimum usage requirement. 
Under this alternative, each air carrier would be free to use, or not 
use, its authorizations as it sees fit. Allowing each air carrier to 
determine the most efficient use of its Arrival Authorizations is 
arguably consistent with a free marketplace and would remove any 
incentive that may otherwise exist for airlines to operate flights 
solely to preserve their allotment of authorizations from the FAA. 
Because unnecessary flight operations only serve to worsen the problem 
of congestion at O'Hare, a use-or-lose scheme could undermine the 
effectiveness of the proposed rule. At the same time, however, in the 
absence of a minimum use requirement, air carriers who hold the largest 
positions at O'Hare and hence the most authorizations could hoard 
existing authorizations to increase the value of their holdings or 
simply to deprive competitors of greater access to the airport.
    The second alternative is to adopt a ``use-or-lose'' provision that 
would require air carriers to utilize each authorization they hold at 
least 90 percent of the time over a two-month reporting period. Any 
Arrival Authorization used less frequently would be withdrawn after 
notice to the holder; we anticipate, however, that each carrier 
receiving such notice would first sell the affected authorizations on 
the secondary market. Under this alternative, the 90 percent usage 
requirement would apply only during the restricted hours (that is, 
Saturdays and Sunday mornings, as well as other non-regulated hours 
would be excluded from the usage requirement). The Thanksgiving, 
Christmas, and New Year's holiday periods would also be excluded. The 
use or lose requirement would also be waived initially for newly 
acquired authorizations, during a strike, or in other circumstances as 
determined by the FAA. In order to implement this provision, a periodic 
reporting requirement would be imposed.
    Under the High Density Rule the FAA imposed a minimum usage 
requirement of 80 percent; the standard was criticized as too lax. 
Adopting a 90 percent use-or-lose requirement would ensure that a 
scarce public resource, arrival times at O'Hare, is exploited to the 
greatest possible extent. Requiring a utilization rate of 90 percent 
over a 2-month period also makes it more difficult for carriers holding 
authorizations to allocate cancellations among their base of holdings. 
In comments concerning the High Density Rule, the staff of the Bureau 
of Economics of the Federal Trade Commission (FTC) submitted a 
comprehensive analysis showing that most airlines slot usage met or 
exceeded the proposed 90 percent minimum for weekday slots in any 
event. Nevertheless, the FAA invites comments on whether a 90 percent 
threshold is so high that it may cause airlines to lose authorizations 
due to unforeseen scheduling conflicts that they could have used 
productively at a lower threshold.\15\
---------------------------------------------------------------------------

    \15\ The proposed use-or-lose requirement would include similar 
waivers that existed under the HDR's use-or-lose rule that would 
provide exceptions for exigencies such as bad weather or mechanical 
problems.
---------------------------------------------------------------------------

    The third alternative is to periodically identify the least 
utilized Arrival Authorizations and require that they be

[[Page 15529]]

withdrawn for reassignment. Under this option, Arrival Authorizations 
ranking in the bottom one (1) percent in frequency of usage would be 
identified by the FAA, and each holder would be given notice that the 
authorizations would be withdrawn by a certain date. This option would 
provide a strong incentive to use this scarce resource to the maximum 
extent possible but would leave airlines unsure as to how much use is 
required in order to avoid losing the authorization. Since, the 
airlines generally would not have access to the usage statistics of 
their competitors, this option could leave authorization holders 
uncertain as to how much use is required in order to avoid losing the 
authorization.
    The FAA is considering two methods for reassigning authorizations 
withdrawn as a result of usage requirements described above. Under 
either method the agency would consider foreign carrier needs before 
making a reassignment. Under the first method, the FAA would conduct a 
lottery, consisting of two rounds. In the first round, only new 
entrants and limited incumbents would be permitted to participate. In 
the second round any remaining Arrival Authorizations would be assigned 
by lottery to incumbent carriers at O'Hare.
    Under the second method, carriers losing Arrival Authorizations 
would be required to sell them in the FAA's blind market. A carrier 
would be notified that it has failed to meet the usage requirement 45 
days before the Arrival Authorization is to be withdrawn. It would then 
be posted for sale in the blind auction; however, new entrant and 
limited incumbent carriers would have preference in purchasing these 
withdrawn Arrival Authorizations. Incumbent carriers would have the 
chance to buy any Arrival Authorizations that were not purchased by new 
entrant or limited incumbent carriers, except that a carrier could not 
bid on an Arrival Authorization that had been withdrawn from it. 
Proceeds of a sale would go to the airline that lost the authorization 
and any unsold authorizations would be returned to the airline that 
lost them.
    The FAA requests comments on the relative merits of these two 
reassignment methodologies for withdrawn Arrival Authorizations.

Reversion of Arrival Authorizations

    As discussed above, Arrival Authorizations are not property rights 
but are temporary operating privileges. As such, they remain subject to 
FAA control. We propose allowing them to be bought and sold, subject to 
FAA restrictions, in order to promote their most efficient use. 
However, they may be withdrawn at any time to fulfill operational needs 
such as accommodating new entry by foreign carriers or to eliminate 
Arrival Authorizations due to reduced capacity. Arrival Authorizations 
would be withdrawn in accordance with the priority number originally 
assigned to each individual Arrival Authorization. A limited incumbent 
carrier would be protected from reversion of Arrival Authorizations. If 
the FAA determines that capacity must be reduced for a specified period 
of time, for example if a runway were temporarily closed, Arrival 
Authorizations would be withdrawn. Once the capacity is resumed, the 
withdrawn Arrival Authorizations would be returned to the carriers from 
which they were withdrawn.
    The proposal also provides that all of the Arrival Authorizations 
held by any carrier would revert to the FAA if that carrier ceases all 
operations at O'Hare for any reason other than a strike or labor 
dispute.
    The FAA proposes that for 12 months following a new entrant and 
limited incumbent lottery, an Arrival Authorization acquired by a new 
entrant or limited incumbent would be withdrawn by the FAA upon the 
sale, merger, or acquisition of more than 50 percent ownership or 
control of the carrier using the Arrival Authorization or one acquired 
by trade of that Arrival Authorization, if the resulting total of 
Arrival Authorizations assigned to the surviving entity would exceed 
eight.

Sunset Date

    Although arrival caps are being proposed in this rule, imposing 
caps on the use of airport capacity does not meet aviation demand; 
rather, such caps artificially limit operations during certain hours to 
achieve the benefit of delay reduction. The FAA's preferred approach to 
reducing delay and congestion is to increase airport infrastructure so 
that capacity meets demand. Because a timely increase to airport 
capacity is not always feasible, alternative measures may be necessary 
to address congestion that adversely affects the efficiency of the 
national airspace system.
    In light of the adverse impact that significant congestion-related 
delays at O'Hare have on airlines and passengers using that airport, 
and the collateral effect of such delays on the national airspace 
system, the FAA proposes in this notice to cap by regulation the number 
of arrivals at O'Hare during peak hours. The proposed rule includes a 
sunset date of April 6, 2008. If additional O'Hare capacity that is 
sufficient to abate the airport's significant delays does not become 
available within the period of this rule, the FAA may consider other 
congestion management techniques, such as market-based mechanisms. We 
would consider replacing this rule with such an alternative if doing so 
would be practical and otherwise comport with applicable policies and 
legal requirements.
    The FAA proposed an April 2008 sunset date for a number of reasons. 
As previously noted, the City of Chicago has produced an O'Hare 
Modernization Program that the City of Chicago represents will 
adequately increase airport capacity and reduce levels of delay. A 
final FAA decision on the City's application is expected in September 
2005. The first phase of the O'Hare Modernization Program, if approved, 
is expected to come on line in 2007. In addition, work is ongoing to 
improve the Instrument Landing Systems for runways 27L and 27R, which 
will improve their performance in adverse weather conditions. The 
proposed April 2008 sunset date for the FAA's proposed rule would 
address the present conditions at O'Hare until the benefits of any 
interim capacity enhancements are realized.
    If the FAA does not approve the City of Chicago's O'Hare 
Modernization Program in 2005, the FAA would need to devise an 
alternative mechanism for limiting congestion and delay at O'Hare. Some 
of the market-based mechanisms under consideration require legislation 
and/or regulatory changes before they could be put into practice. An 
April 2008 sunset date for this proposed rule would provide the FAA 
with the time to develop and an alternate mechanism for use at O'Hare.
    Despite the FAA's proposed sunset of this rule in April 2008, it is 
possible that an earlier sunset provision could be appropriate. If an 
alternative method to allocate capacity were identified, it might be 
possible to implement that method prior to 2008. It is also possible 
that changes in the airline industry could obviate the need for a 
congestion management rule at O'Hare before April 2008. In such an 
event, an earlier sunset would cause the FAA to revisit sooner the need 
to manage congestion at O'Hare. The FAA is specifically soliciting 
comments on whether this proposed rule should sunset before April 2008.

Small Community Air Service

    In ``grandfathering'' the air carriers' existing schedules, the 
proposed rule

[[Page 15530]]

would enable airlines to continue operating all existing air service to 
small communities. Although the rule could provide for the withdrawal 
of Arrival Authorizations from air carriers in order to augment service 
to small communities, it does not do so. Nevertheless, the impact of 
this proposed rule on the quality of service to small communities will 
be monitored. If the quality of service to small communities is 
adversely affected, remedial action may be taken.

General Aviation and Other Unscheduled Operations

    On October 20, 2004, the FAA published in the Federal Register 
proposed Special Federal Aviation Regulation No. 105 to address 
unscheduled operations at O'Hare (69 FR 61708). The proposal provided 
for a minimum of four arrivals per hour for unscheduled operators, 
including general aviation, military, cargo, and certain charter 
operations. The comment period for this proposal closed on November 1, 
2004. The FAA intends to issue a final rule with respect to these 
operations. This final SFAR would subsequently be incorporated into 
this rule so that all operational limits on aircraft arrivals at O'Hare 
are in the same subpart.

Paperwork Reduction Act

    This proposal contains the following new information collection 
requirements. As required by the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507(d)), the FAA has submitted the information requirements 
associated with this proposal to the Office of Management and Budget 
for its review.
    Title: Congestion and Delay Reduction at Chicago O'Hare 
International Airport.
    Summary: The purpose of this rulemaking project is to adopt 
operational limits on the number of scheduled peak hour operations at 
O'Hare International Airport as an interim measure to manage congestion 
and delays. The rule would grant carriers at O'Hare the right to 
utilize the Arrival Authorizations until the rule sunsets on April 6, 
2008. For the purpose of ensuring operational efficiency, the rule 
would permit one-for-one trades amongst the carriers, but the sale and 
lease of Arrival Authorizations would be conducted in a blind secondary 
market. In addition, the proposed rule incorporates provisions to 
modify the hourly operational limits if capacity at O'Hare expands.
    Use of: Under this proposal, air carriers would be permitted to 
buy, sell and lease Arrival Authorizations in the blind secondary 
market. An airline seeking to sell an Arrival Authorization would have 
to provide 30 days' notice to the FAA with the Arrival Authorization 
number, times, frequencies, and effective date. The FAA will post 
information about the proposed sale and closing date for bids. Air 
carriers that participate in the blind market transaction would be 
required to submit their bid to the FAA. The only consideration 
permitted for transactions in the blind market would be money. Use of 
real property such as gates, non-monetary assets or other services in 
lieu of cash would not be permitted.
    The proposed rule also permits the FAA to hold lotteries to 
allocate Arrival Authorizations to new entrants and existing air 
carriers at O'Hare. The FAA would publish a notice in the Federal 
Register announcing the lottery dates and any special procedures for 
the lotteries. Any air carrier, or foreign air carrier seeking to 
participate in any lottery must notify the FAA in writing, and such 
notification must be received by the FAA 15 days prior to the lottery 
date. The carrier must also disclose in its notification whether it has 
Common Ownership, as defined in this proposal, with any other carrier 
and, if so, identify such carrier.
    Should a minimum usage requirement be adopted in this proposed 
rule, every scheduled U.S. air carrier and Canadian air carrier holding 
Arrival Authorizations would have to forward in writing to the FAA Slot 
Administration Office a list of all Arrival Authorizations held by the 
carrier along with a listing of the Arrival Authorizations actually 
operated for each day of the 2-month reporting period within 14 days 
after the last day of the 2-month reporting period beginning January 1 
and every 2 months thereafter. The report shall identify the aircraft 
identifier and flight number for which the Arrival Authorization was 
used and the scheduled arrival time. The report shall identify any 
Common Ownership or control of, by, or with any other carrier. A senior 
official of the carrier shall sign the report.
    Respondents (including number of): The respondents to this proposed 
information requirement are operators of scheduled service at O'Hare, 
as well as any new entrant airline that intends to operate at O'Hare. 
FAA analysis indicates there may be as many as 50 operators 
participating in the blind secondary market transactions.
    Frequency: The FAA anticipates conducting blind secondary market 
transactions whenever appropriate, depending upon whether any carriers 
indicate a desire to sell their Arrival Authorizations. The FAA would 
conduct lottery allocations as needed to allocate Arrival 
Authorizations as they become available. Under a Minimum Usage 
Requirement, U.S. and Canadian air carriers would be required to submit 
usage reports (as described above) every two months.
    Annual Burden Estimate: This proposal would result in an annual 
recordkeeping and reporting burden as follows:
    The FAA blind market is expected to operate at least twice a year, 
depending upon the desire of carriers' to sell Arrival Authorizations. 
For purposes of estimating the time burden of participation in the 
blind market, we assumed transactions would be conducted 
electronically. Since participants in the blind market could submit 
bids using an Internet web interface using electronic information 
technology, FAA does not expect the submission of bids to require new 
capital equipment. FAA would conduct lotteries as necessary to allocate 
available capacity. Similar to the blind market, lotteries could be 
conducted electronically. FAA analysis indicates there may be as many 
as 50 operators participating in each lottery and bi-annual blind 
market.
    A proposed Minimum Usage reporting requirement would require U.S. 
and Canadian air carriers to submit reports on usage of their Arrival 
Authorizations every two months. If a minimum usage requirement is 
adopted, there are currently 12 domestic and Canadian air carriers that 
would be subject to the reporting requirement. Each reporting air 
carrier would be required to submit 6 annual reports; resulting in less 
than 20 reports over the term of the proposed rule.
    The agency is soliciting comments to--
    (1) Evaluate whether the proposed information requirement is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
    (2) Evaluate the accuracy of the agency's estimate of the burden;
    (3) Enhance the quality, utility, and clarity of the information to 
be collected; and
    (4) Minimize the burden of providing required information on those 
who are to respond, including through the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques or 
other forms of information technology.
    Individuals and organizations may submit comments on the 
information collection requirement by May 24, 2005, and should direct 
them to the address listed in the ADDRESSES section of this

[[Page 15531]]

document. Comments also should be submitted to the Office of 
Information and Regulatory Affairs, OMB, New Executive Building, Room 
10202, 725 17th Street, NW., Washington, DC 20053, Attention: Desk 
Officer for FAA.
    According to the 1995 amendments to the Paperwork Reduction Act (5 
CFR 1320.8(b)(2)(vi)), an agency may not collect or sponsor the 
collection of information, nor may it impose an information collection 
requirement unless it displays a currently valid OMB control number. 
The OMB control number for this information collection will be 
published in the Federal Register, after the Office of Management and 
Budget approves it.

International Compatibility

    In keeping with U.S. obligations under the Convention on 
International Civil Aviation, it is FAA policy to comply with 
International Civil Aviation Organization (ICAO) Standards and 
Recommended Practices to the maximum extent practicable. The FAA has 
determined that there are no ICAO Standards and Recommended Practices 
that correspond to these proposed regulations.

Regulatory Evaluation, Regulatory Flexibility Determination, 
International Trade Impact Assessment, And Unfunded Mandates Assessment

    This section of the regulatory analysis provides a summary of the 
preliminary regulatory evaluation results, the initial regulatory 
flexibility determination, the trade impact assessment and the unfunded 
mandates impact assessment.

Introduction

    Changes to Federal regulations must undergo several regulatory 
impact analyses. First, Executive Order 12866 directs that each Federal 
agency shall propose or adopt a regulation only upon a reasoned 
determination that the benefits of the intended regulation justify its 
costs. Second, the Regulatory Flexibility Act of 1980 requires agencies 
to analyze the economic impact of regulatory changes on small entities. 
Third, the Trade Agreements Act (19 U.S.C. 4 Sec. Sec.  2531-2533) 
prohibits agencies from setting standards that create unnecessary 
obstacles to the foreign commerce of the United States. In developing 
U.S. standards, this Trade Act requires agencies to consider 
international standards and, where appropriate, to be the basis of U.S. 
standards. Fourth, the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-4) requires agencies to prepare a written assessment of the costs, 
benefits, and other effects of proposed or final rules that include a 
Federal mandate likely to result in the expenditure by State, local, or 
tribal governments, in the aggregate, or by the private sector, of $100 
million or more annually (adjusted for inflation).
    In conducting these analyses, FAA has determined this proposed rule 
(1) has benefits that justify its costs, is a major, economically 
``significant regulatory action'' as defined in section 3(f) of 
Executive Order 12866, and is ``significant'' as defined in DOT's 
Regulatory Policies and Procedures; (2) would not have a significant 
economic impact on a substantial number of small entities; (3) would 
not adversely affect international trade; and (4) would not impose an 
unfunded mandate on State, local, or tribal governments, or on the 
private sector. These analyses, set forth in this document, are 
summarized below.

Total Costs and Benefits of This Rulemaking

     FAA estimates that this proposed rule would result in a 42 
percent reduction in delay at O'Hare, generating present value benefits 
of $741 million relative to November 2003 delays.
     The total cost of this proposed rule includes air carrier 
costs associated with a loss in schedule flexibility and reduction in 
flights, passenger inconvenience as a result of fewer choices and 
potentially higher fares, and direct administrative costs of $1.13 
million.

Who is Potentially Affected by This Rulemaking

     Operators of scheduled flights at O'Hare.
     Commercial airlines (incumbents--more than 8 arrivals; 
limited incumbents--8 or fewer arrivals; new entrants--do not yet 
operate at O'Hare; foreign operators).
     All communities, including small communities with air 
service to O'Hare.
     Passengers of scheduled flights to O'Hare.
     Chicago, Department of Aviation--municipality of O'Hare.

Key Assumptions

Principal Key Assumptions

     Baseline Flight Operations and Delay--OAG Schedule 
November 20, 2003 (1,454 daily arrival flights).
     Constrained Flight Operations and Delay--OAG Schedule--
November 18, 2004 (1,430 gross daily arrival flights/1387 net daily 
flights adjusted for 3 percent cancellation rate); constrained to 88 
scheduled arrivals per hour plus 4 unscheduled arrivals per hour.
     Daily Flight Completion Factor: 97 percent Daily Flight 
Cancellation Factor: 3 percent.
     Unscheduled arrivals are constrained to 4 arrivals per 
hour.
     No lost revenue due to cancelled flights--All passengers 
are rebooked or rerouted to their destination.
     Delay improvement over the baseline schedule is 12 minutes 
per flight (17,887 total minutes per day)--equivalent to a 42 percent 
improvement in delay--This delay improvement estimate was derived from 
MITRE's Queuing Delay Model, which measures delays of 1-minute or more 
against the OAG flight schedule.
     Annual estimates are adjusted to reflect the 1.5 days per 
week when the limits are not in effect (all day Saturday and until noon 
on Sunday).

Other Important Assumptions

     Discount Rate--7 percent.
     Period of Analysis--November 1, 2005 through April 6, 
2008.
     Assumes 2005 Current Year Dollars.
     Rule Sunsets April 6, 2008.
     Operator Delay Cost Savings.
     Aircraft average variable costs per block hour--$1,935 per 
hour.
     Passenger Delay Cost Savings.
     Passenger Value of Time--$28.60 per hour.

Alternatives We Have Considered

     FAA considered four major alternatives to manage 
congestion and delays at O'Hare.
     Alternative 1--Let the August 18, 2004 order 
expire on April 30, 2005. Based on history, operators would likely 
continue to expand operations, further worsening airport delays.
     Alternative 2--Extend the August 18, 2004 order 
by issuing a show cause order as a bridge between the August 18th order 
and the proposals of this rulemaking action. It is difficult to obtain 
voluntary agreement and the operators would be unable to extend 
operations beyond the 88 arrivals per hour set by the order.
     Alternative 3--Implement a market-based solution 
such as an auction or congestion pricing. The FAA is exploring the 
feasibility of these solutions under a research project for LaGuardia 
airport. The results are not expected until later in 2005.
     Alternative 4--Implement this proposed rule, 
which would provide an interim solution.
     FAA is seeking comment on three options concerning minimum 
usage of Arrival Authorizations. The three options are:
     Option 1--No minimum usage requirements.

[[Page 15532]]

     Option 2-90 percent minimum usage required over a two-
month period.
     Option 3--Bottom 1 percent utilized Arrival Authorizations 
over a six-month period could be withdrawn and reassigned through the 
blind market or lottery.
     FAA is seeking comments on two options concerning how 
foreign carriers might gain access to O'Hare, beyond the initial 
assignment of Arrival Authorizations. These two options are as follows:
     Administrative option--FAA could assign Arrival 
Authorizations out of any unused Arrival Authorizations or withdrawal 
an authorization from a U.S. carrier.
     Elective Option--Foreign carriers can elect to be treated 
the same as U.S. and Canadian operators and participate in assignment 
through lottery and blind market to gain additional access to O'Hare.

Benefits of This Rulemaking

     The primary benefits of this rule are derived from airline 
delay cost savings and passenger delay cost savings. Table 1 shows the 
annual benefits in present value dollars, which reflect the proration 
for the 5.5 days per week the operational caps are in effect, and the 
flight completion factor of 97 percent. The total benefits in present 
value dollars are $741 million.

                                 Table 1.--Total Annual Benefits of the ORD NPRM
                                             [present value dollars]
----------------------------------------------------------------------------------------------------------------
                                                           Airline delay     Passenger delay
                                                            cost savings       cost savings      Total benefits
----------------------------------------------------------------------------------------------------------------
2005...................................................        $28,265,932        $28,316,101        $56,582,032
2006...................................................        154,726,729        156,263,982        310,990,711
2007...................................................        144,604,420        148,069,608        292,674,028
2008...................................................         39,789,877         41,304,825         81,094,702
                                                        --------------------
    Total:.............................................        367,386,958        373,954,516        741,341,474
----------------------------------------------------------------------------------------------------------------

     The major factors used to develop an estimate of annual 
airline delay cost savings are presented in Table 2 below. Given the 
total delay improvement of 17,887 minutes, and the average variable 
costs per block hour $1,935, airlines would save more than $367 million 
dollars (present value dollars), cumulatively over the life of the 
proposed rule.

                                       Table 2.--Airline Delay Cost Saving
----------------------------------------------------------------------------------------------------------------
                                              Average     Average     Average    Annual airline
                                   Total       total       total     variable      delay cost     Present value
                                   daily       delay       delay     operating      savings       airline delay
                                 arrivals    (minutes)    (hours)    costs per      (nominal       cost savings
                                              per day     per day      hour         dollars)
----------------------------------------------------------------------------------------------------------------
2005..........................       1,387      17,887         298      $1,935      $28,265,932      $28,265,932
2006..........................       1,387      17,887         298       1,935      165,557,600      154,726,729
2007..........................       1,387      17,887         298       1,935      165,557,600      144,604,420
2008..........................       1,387      17,887         298       1,935       48,744,311       39,789,877
                               -------------
    Total.....................  ..........  ..........  ..........  ..........      408,125,443      367,386,958
----------------------------------------------------------------------------------------------------------------

     Table 3 below gives a breakdown of the factors used to 
compute the passenger delay benefits of this proposed rule. The right-
hand column of the table contains the annual dollar amounts of the 
benefits. To estimate benefit, the hours of delay improvement are 
prorated for the days of the year the flight limits are in effect. The 
total passenger delay costs savings are $374 million in present value 
dollars.

                                                                             Table 3.--Passenger Delay Cost Savings
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                      Annual
                                                                                                                             Passengers'                             passenger     Present value
                                                                       Total     Average     Load    Passengers  Passengers    average      Annual     Passenger    delay cost     of passenger
                                                                       daily      seats     factor   per flight    per day    delay per      delay     value of       savings       delay cost
                                                                     arrivals                                                  arrival       hours       time        (nominal         savings
                                                                                                                                                                     dollars)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2005..............................................................        1387      103.9     0.701         73     101,028           12      990,073      $28.60     $28,316,101     $28,316,101
2006..............................................................        1387      104.3     0.704         73     101,851           12    5,846,240       28.60     167,202,461     156,263,982
2007..............................................................        1387      105.3     0.707         74     103,266           12    5,927,444       28.60     169,524,894     148,069,608
2008..............................................................        1387      106.3     0.705         75     104,689           12    1,675,018       28.60      50,600,187      41,304,825
                                                                   -------------
    Total:........................................................  ..........  .........  ........  ..........  ..........  ...........  ..........  ..........     415,643,643     373,954,516
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

     The FAA expects additional benefits from the use of the 
blind market and lottery mechanisms. These provisions would allow 
airlines to efficiently allocate Arrival Authorizations to where they 
are valued the most. In making their scheduling choices, the market 
mechanism proposed in this rule should allow

[[Page 15533]]

airlines to more efficiently allocate resources in an effort to avoid 
higher than average delay costs or to serve passengers that have a 
higher than average value of their time, therefore improving the 
overall efficiency of the national airspace and leading to greater 
benefits than those estimated in this analysis using average cost. This 
provision also minimizes the need for on-going government intervention 
in the allocation and distribution of O'Hare Arrival Authorizations and 
ensures that new entrants and all other airlines have an equal 
opportunity to purchase authorizations.
     Additional delay cost savings are derived from national 
airspace system-wide delay improvements, which result from the delay 
improvements at O'Hare, as well as delay improvements from reduced 
departure delays at other airports impacted by delay from O'Hare. We 
have not included these delay benefits in the quantitative analysis.

Costs of This Rulemaking

     The total cost of this proposed rule includes air carrier 
costs associated with a loss in schedule flexibility and reduction in 
flights, passenger inconvenience as a result of fewer choices and 
possibly higher fares, and direct administrative costs.
     The direct administrative costs of this proposed rule 
cover the blind market costs incurred by buyers and sellers of the 
Arrivals Authorizations, the public costs of developing and managing 
the blind market, and other administrative and compliance costs.
     The direct administrative costs of this proposed rule are 
an estimated $1.134 million in present value dollars, as shown in the 
last column of Table 4. The largest costs are the E-Bid administration 
costs of $194,184, which covers FAA's costs for the semi-annual blind 
market operations, and the other administration costs of $601,894, 
which covers the costs for operating the lottery, and general 
compliance and reporting requirements of the rule.
     The costs associated with a loss in air carrier schedule 
flexibility and reduction in the number of flights are difficult to 
quantify. However, the FAA believes this impact is minimal since 
passenger demand could likely be accommodated through alternative 
routings and access to Chicago. We invite comments on this impact.
     FAA acknowledges that the proposed rule would limit 
arrivals at O'Hare and thus could reduce the number of airline 
operations below the number that would be operated if no cap were 
imposed on O'Hare arrivals. This effect has the possibility of limiting 
competition and allowing carriers to raise fares; however, FAA believes 
the impact on competition would not be significant given the 
competitive market pressures internal and external to O'Hare, and the 
short duration of this proposed rule.

                              Table 4.--Present Value of Annual Administrative Costs
----------------------------------------------------------------------------------------------------------------
                                                         E-bid
                                          FAA E-bid     system     FAA E-bid     Other     Reporting     Total
                                         development   operating     admin       admin       costs       costs
                                            costs        costs       costs       costs
----------------------------------------------------------------------------------------------------------------
2005...................................     $150,000      $8,333     $53,578     $44,649     $28,760    $285,320
2006...................................  ...........      46,729      50,073     250,366      21,156     368,324
2007...................................  ...........      43,672      46,797     233,987      19,772     344,228
2008...................................  ...........      13,605      43,736      72,893       6,789     137,023
                                        --------------
    Total:.............................      150,000     112,339     194,184     601,895      76,477   1,134,895
----------------------------------------------------------------------------------------------------------------

Regulatory Flexibility Determination

    The Regulatory Flexibility Act of 1980 (RFA) establishes ``as a 
principle of regulatory issuance that agencies shall endeavor, 
consistent with the objective of the rule and of applicable statutes, 
to fit regulatory and informational requirements to the scale of the 
business, organizations, and governmental jurisdictions subject to 
regulation''. To achieve that principle, the RFA requires agencies to 
solicit and consider flexible regulatory proposals and to explain the 
rationale for their actions. The RFA covers a wide-range of small 
entities, including small businesses, not-for-profit organizations, and 
small governmental jurisdictions.
    Agencies must perform a review to determine whether a proposed or 
final rule will have a significant economic impact on a substantial 
number of small entities. If the agency determines that it will, the 
agency must prepare a regulatory flexibility analysis as described in 
the Act.
    However, if an agency determines that a proposed or final rule is 
not expected to have a significant economic impact on a substantial 
number of small entities, section 605(b) of the 1980 RFA provides that 
the head of the agency may so certify and a regulatory flexibility 
analysis is not required. The certification must include a statement 
providing the factual basis for this determination, and the reasoning 
should be clear.
    While there would be more than just a few small entities affected 
by this proposed rule, the FAA determined that it would not impose a 
significant economic impact on small entities. The FAA considered the 
economic impact on scheduled operators and small communities.
    The proposed rule affects all scheduled operators at O'Hare, more 
than just a few of which are small entities (where ``small entities'' 
are firms with 1,500 or fewer employees). The arrivals of all carriers 
currently providing service at O'Hare would be grandfathered, thereby 
minimizing the impact on their schedules. For their given schedules, 
this proposed rule would lower their fuel burn costs substantially by 
reducing the delays experienced prior to the August 2004 order.
    As capacity becomes available during the duration of the rule, the 
FAA proposes to establish a limited preference for new entrants and 
limited incumbents, many of which are likely to be small entities. If 
the capacity grows per hour from 88 to 89 or 90 arrivals, any capacity 
not needed to accommodate foreign carriers would be assigned by lottery 
to new entrants and limited incumbents. Therefore, this proposal favors 
small entity operators.
    In ``grandfathering'' the air carriers'' existing schedules, the 
proposed rule would enable airlines to continue operating all existing 
air service to airports of communities with populations less than 
50,000. Consequently, we do not expect this proposed rule to negatively 
impact airports in small communities.
    Therefore, the FAA Administrator certifies that this proposed rule 
would not have a significant economic impact on a substantial number of 
small entities.

[[Page 15534]]

International Trade Impact Assessment

    The Trade Agreement Act of 1979 prohibits Federal agencies from 
establishing any standards or engaging in related activities that 
create unnecessary obstacles to the foreign commerce of the United 
States. Legitimate domestic objectives, such as safety, are not 
considered unnecessary obstacles. The statute also requires 
consideration of international standards and, where appropriate, that 
they be the basis for U.S. standards. The FAA is proposing to apply the 
rule to foreign operators to create a rule governing all scheduled and 
non-scheduled operations at O'Hare.
    The FAA has assessed the potential effect of this proposed rule and 
determined that it would not adversely affect any trade-sensitive 
activity as discussed below. Thus, this proposed rule would not create 
unnecessary obstacles to the foreign commerce of the United States.
    Under this proposed rule, foreign operators would be given an 
initial assignment of Arrival Authorizations based on past usage. 
Further, they may have some discretion in terms of gaining additional 
access to O'Hare beyond being accommodated administratively. One option 
for foreign carriers would include permitting the foreign carriers to 
be treated the same as U.S. operators in the allocation of additional 
arrivals at O'Hare and should provide a transparent mechanism for 
foreign airlines to exercise the right to serve O'Hare provided for in 
our bilateral air service agreements.

Unfunded Mandates Assessment

    The Unfunded Mandates Reform Act of 1995 (the Act) is intended, 
among other things, to curb the practice of imposing unfunded Federal 
mandates on State, local, and tribal governments. Title II of the Act 
requires each Federal agency to prepare a written statement assessing 
the effects of any Federal mandate in a proposed or final agency rule 
that may result in an expenditure of $100 million or more (adjusted 
annually for inflation) in any one year by State, local, and tribal 
governments, in the aggregate, or by the private sector; such a mandate 
is deemed to be a ``significant regulatory action.'' The FAA currently 
uses an inflation-adjusted value of $120.7 million in lieu of $100 
million.
    This proposed rule does not contain such a mandate. Therefore, the-
requirements of Title II of the Unfunded Mandates Reform Act of 1995 do 
not apply.

Executive Order 13132, Federalism

    The FAA has analyzed this proposed rule under the principles and 
criteria of Executive Order 13132, Federalism. We determined that this 
action would not have a substantial direct effect on the States, on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government, and therefore would not have federalism implications.

Environmental Analysis

    This NPRM is subject to an environmental review under the National 
Environmental Policy Act (NEPA) as described in FAA Order 1050.1E, 
Environmental Impacts: Policies and Procedures. It has been determined 
that the NPRM falls within a group of actions that the FAA has found, 
based on past experience with similar actions, do not normally require 
an Environmental Assessment (EA) or Environmental Impact Statement 
(EIS) because they do not individually or cumulatively have a 
significant effect on the human environment. This NPRM falls under 
Categorical Exclusion 312F. Regulations, standards, and exemptions 
(excluding those which if implemented may cause a significant impact on 
the human environment). The NPRM proposes an interim solution to manage 
the immediate problem of congestion and delay at O'Hare by limiting the 
number of flight arrivals during certain hours. It has been determined 
that no extraordinary circumstances exist that may cause a significant 
impact and therefore no further environmental review is required.

Regulations That Significantly Affect Energy Supply, Distribution, or 
Use

    The FAA has analyzed this NPRM under Executive Order 13211, Actions 
Concerning Regulations That Significantly Affect Energy Supply, 
Distribution, or Use (May 18, 2001). We have determined that it is not 
a ``significant energy action'' under the executive order because it is 
not a ``significant regulatory action'' under Executive Order 12866, 
and it is not likely to have a significant adverse effect on the 
supply, distribution, or use of energy.

List of Subjects in 14 CFR Part 93

    Air traffic control, Airports, Alaska, Navigation (air), Reporting 
and recordkeeping requirements.

The Proposed Amendment

    In consideration of the foregoing, the Federal Aviation 
Administration proposes to add subpart B to part 93 of chapter I of 
title 14, Code of Federal Regulations, as follows:

    1. The authority citation for this amendment continues to read as 
follows:

    Authority: 49 U.S.C. 106(g), 40103, 40106, 40109, 40113, 44502, 
44514, 44701, 44719, 46301.

PART 93--[AMENDED]

    2. Subpart B is added to read as follows:

Subpart B--Congestion and Delay Reduction at Chicago O'Hare 
International Airport

Sec.
Sec.  93.21 Applicability.
Sec.  93.22 Definitions.
Sec.  93.23 Arrival Authorizations.
Sec.  93.24 [Reserved]
Sec.  93.25 Initial assignment of Arrival Authorizations to U.S. and 
Canadian air carriers.
Sec.  93.26 Withdrawal and reversion of Arrival Authorizations.
Sec.  93.27 Sale of Arrival Authorizations.
Sec.  93.28 One-for-one trade of Arrival Authorizations.
Sec.  93.29 Foreign air carriers.
Sec.  93.30 Lottery provisions.
Sec.  93.31 Minimum usage requirement.
Sec.  93.32 Administrative Provisions.
Sec.  93.33 New capacity.
Sec.  93.34 Sunset provision.

Subpart B--Congestion and Delay Reduction at Chicago O'Hare 
International Airport


Sec.  93.21  Applicability.

    (a) This subpart prescribes the air traffic rules for the arrival 
of aircraft, other than helicopters, at Chicago's O'Hare International 
Airport (O'Hare).
    (b) [Reserved]
    (c) This subpart also prescribes procedures for the assignment, 
transfer, sale and withdrawal of Arrival Authorizations issued by the 
FAA for scheduled operations by air carriers, foreign air carriers and 
other operators at O'Hare.
    (d) The provisions of this subpart apply to O'Hare during the hours 
of 7 a.m. through 8:59 p.m. central time, Monday through Friday, and 12 
p.m. through 8:59 p.m. Central Time on Sunday. No person shall operate 
any scheduled arrival IFR arrival into O'Hare during such hours without 
first obtaining an Arrival Authorization.
    (e) No Arrival Authorization issued or assigned under this subpart 
shall constitute the property of any person regardless of any purchase, 
sale, or transfer thereof or any contract or agreement entered into by 
any person concerning an Arrival Reservation or Arrival Authorization.

[[Page 15535]]

    (f) Carriers that have Common Ownership shall be considered to be a 
single air carrier or foreign air carrier for purposes of this rule.


Sec.  93.22  Definitions.

    Arrival Authorization is the operational authority assigned to an 
air carrier or foreign air carrier by the FAA to conduct one scheduled 
IFR arrival operation each week on a specific day of the week during a 
specific 30-minute period at O'Hare.
    Arrival Reservation is the operational authority to conduct one 
unscheduled IFR arrival on a specific day of week during a specific 30-
minute period at O'Hare.
    Common Ownership with respect to two or more air carriers or 
foreign air carriers means having in common at least 50 percent 
beneficial ownership or effective control by the same entity or 
entities.
    Incumbent means any air carrier or foreign air carrier that is not 
a New Entrant or Limited Incumbent.
    Limited Incumbent means any air carrier or foreign air carrier that 
has received 8 or fewer Arrival Authorizations from the FAA, none of 
which it has sold or otherwise transferred, other than one-for-one 
transfers permitted in this part. Any limited incumbent that sells or 
otherwise transfers an Arrival Authorization shall thereafter be 
treated as an Incumbent for purposes of this rule.
    New Entrant means any air carrier and foreign air carrier that does 
not operate any Arrival Authorizations at O'Hare and has never held an 
Arrival Authorization.
    Preferred Lottery means a lottery conducted by the FAA to assign 
Arrival Authorizations, with initial preference for new entrants and 
limited incumbents.
    Scheduled Arrival is the arrival segment of any operation regularly 
conducted by a carrier between O'Hare and another point regularly 
served by that carrier.
    Summer Scheduling Season is the period of time from the first 
Sunday in April until the last Sunday in October.
    Winter Scheduling Season is the period of time from the last Sunday 
in October until the first Sunday in April.


Sec.  93.23  Arrival Authorizations.

    (a) Except as otherwise established by the FAA Vice President, 
System Operations Services under Sec.  93.33 of this subpart, the 
number of Arrival Authorizations shall be limited to:
    (1) 88 per hour between the hours of 7 a.m. and 7:59 p.m. Monday 
through Friday and 12 p.m. and 7:59 p.m. Sunday, and
    (i) Not to exceed 50 during each half-hour beginning at 7 a.m. and 
ending at 7:59 p.m.
    (ii) Not to exceed 88 within any two consecutive 30-minute periods.
    (2) 98 between 8 p.m. and 8:59 p.m. Monday through Friday, and 
Sunday, not to exceed 67 between 8 p.m. and 8:30 p.m.
    (b) An Arrival Authorization is not a property right but rather a 
temporary operating privilege subject to absolute FAA control. Only 
certificated air carriers and foreign air carriers may hold Arrival 
Authorizations. Arrival Authorizations may not be used as collateral, 
pledged, assigned, transferred or hypothecated to another person, 
except as provided in the Sec. Sec.  93.27 and 93.28 of this subpart.
    (c) On January 1, 2006, and on each six-month anniversary 
thereafter, the FAA shall conduct a review of existing capacity at 
O'Hare, to determine whether to increase the number of Arrival 
Authorizations or Arrival Reservations. The FAA will consider the 
following factors:
    (1) The number of delays;
    (2) The length of delays;
    (3) Weather conditions;
    (4) On-time arrivals, and
    (5) Other factors relating to the efficient management of the 
national air space system.
    (d) The Administrator may increase the number of Arrival 
Authorizations based on the review conducted in paragraph (c) of this 
section.


Sec.  93.24  [Reserved]


Sec.  93.25  Initial assignment of Arrival Authorizations to U.S. and 
Canadian air carriers.

    (a) The FAA shall assign to each U.S. and Canadian air carrier that 
published a scheduled arrival for any day during the 7-day period of 
November 1 through 7, 2004, as evidenced by the FAA's records, a 
corresponding Arrival Authorization for each scheduled arrival.
    (b) If a U.S. or Canadian air carrier did not publish a scheduled 
arrival during the period of time referenced in paragraph (a) of this 
section, but was entitled to do so under the August 18, 2004, ``Order 
Limiting Scheduled Operations at O'Hare International Airport'' a 
corresponding Arrival Authorization shall be assigned for that arrival.
    (c) Arrival Authorizations will be assigned to the carrier that 
actually operated the flight regardless of any codeshare or marketing 
arrangement unless such carrier did not market the flight under its own 
code and the inventory of the flight was, by contract, under the 
control of another air carrier. If inventory of the flight was under 
the control of another air carrier, the FAA shall assign the Arrival 
Authorization to that air carrier.
    (d) The FAA Vice President, System Operations Services, shall be 
the final decision-maker for determinations under this section.


Sec.  93.26  Withdrawal and reversion of Arrival Authorizations.

    (a) The FAA may withdraw or temporarily suspend Arrival 
Authorizations at any time to fulfill operational needs, such as to 
accommodate arrivals by foreign air carriers, or due to reduced airport 
capacity.
    (b) An air carrier's Arrival Authorizations revert automatically to 
the FAA 30 days after the air carrier has ceased all operations at 
O'Hare for any reasons other than a strike or labor dispute.
    (c) Any Arrival Authorization that is temporarily withdrawn under 
paragraph (a) will, if reassigned, be reassigned to the carrier from 
which it was withdrawn, provided that the carrier continues to conduct 
scheduled operations at O'Hare.
    (d) The FAA shall not withdraw any Arrival Authorizations if the 
result would be to reduce an air carrier's total number of Arrival 
Authorizations below eight.
    (e) Except as otherwise provided in paragraph (b) of this section, 
Arrival Authorizations will be withdrawn in accordance with the 
priority list established under Sec.  93.32(a) of this subpart.
    (f) Except as otherwise provided in paragraph (b) of this section, 
the FAA will notify the affected air carrier before withdrawing any 
Arrival Authorization and specify the date by which operations under 
the authorizations must cease. Except as otherwise required by 
operational needs, the FAA will provide at least 45 days' notice.
    (g) If a New Entrant or Limited Incumbent carrier is assigned an 
Arrival Authorization in a Preferred Lottery conducted under Sec.  
93.30 of this subpart and within 12 months thereafter enters into a 
definitive agreement providing for the sale, merger, or acquisition by 
another person of more than 50 percent ownership or control of the 
carrier, the Arrival Authorizations assigned in the lottery shall 
revert to the FAA to the extent that the total number of Arrival 
Authorizations assigned to the surviving entity would exceed eight.

[[Page 15536]]

    (h) No Arrival Authorizations may be withdrawn from a Canadian 
carrier to accommodate arrivals by other foreign air carriers or New 
Entrants if such withdrawal would reduce the number of Arrival 
Authorizations held by that Canadian carrier below the number assigned 
that carrier under Sec.  93.25.


Sec.  93.27  Sale of Arrival Authorizations.

    (a) No carrier may sell its Arrival Authorizations at O'Hare other 
than in accordance with the procedures in this section and in the 
manner prescribed by the Administrator.
    (b) Only monetary consideration may be provided in any transaction 
conducted under this section.
    (c) New Entrants and Limited Incumbents may not sell any Arrival 
Authorizations assigned through a Preferred Lottery within 12 months of 
such assignment, except to another new entrant or limited incumbent.
    (d) A carrier seeking to sell an Arrival Authorization must provide 
the following information in writing to the FAA at least 30 days before 
the planned sale date:
    (1) Arrival Authorization number and time,
    (2) Frequencies available; and
    (3) Planned effective date of transfer.
    (e) The FAA will post a notice of the available Arrival 
Authorization and specific information concerning the transaction on 
the FAA Web site (insert address). The notice will provide a closing 
date and time by which bids must be received. Information identifying 
the carrier providing the Arrival Authorization for sale will not be 
posted or released by the FAA.
    (f) The FAA must receive all bids by the closing date and time, and 
no extensions of time will be granted. Late bids will not be 
considered. All bids will be held confidential, with each bidder 
certifying in a form acceptable to the FAA that its bid has not been 
disclosed to any person not its agent.
    (g) The FAA will forward the highest bid to the selling air carrier 
without identifying the bidder. The selling air carrier will have up to 
three business days to accept or reject the bid. The selling air 
carrier must notify the FAA of its acceptance no later than 5 p.m. 
eastern time on the third business day.
    (h) Upon acceptance, the FAA will notify the winning carrier and 
request that the buyer and the seller submit to the FAA the written 
information (Arrival Authorization number, frequencies and effective 
date of transfer) required to transfer the Arrival Authorization.
    (i) Written evidence of each carrier's consent to the transfer must 
be provided to the FAA in a form acceptable to the FAA, and each 
carrier must certify that only monetary consideration will be 
exchanged.
    (j) The recipient carrier of the transfer may not use the Arrival 
Authorization until the conditions in paragraph (i) of this section 
have been met and FAA has approved the transfer.
    (k) The FAA will keep a record of all bids received and of each 
Arrival Authorization transfer, including the identity of both air 
carriers' and the winning bid price, all of which will be made 
available to the public upon request.


Sec.  93.28  One-for-one trade of Arrival Authorizations.

    (a) Any air carrier or foreign air carrier may exchange an Arrival 
Authorization it has been assigned with another carrier on a one-for-
one basis for the purpose of conducting that operation in a different 
half-hour time period.
    (b) Written evidence of each carrier's consent to the transfer must 
be provided to the FAA.
    (c) The recipient of the transfer may not use the Arrival 
Authorization until written confirmation has been received from the 
FAA.
    (d) A record of each Arrival Authorization exchange will be kept on 
file by the FAA and made available to the public upon request.
    (e) Carriers participating in a one-for-one transfer must certify 
in a form acceptable to the Administrator that no other consideration 
will be or has been provided for the exchange.


Sec.  93.29  Foreign air carriers.

    (a) This section applies to all foreign air carriers other than 
Canadian air carriers. The Department of Transportation reserves the 
right to withhold the assignment of any Arrival Authorization to any 
foreign air carrier of a country that does not provide equivalent 
rights of access to its airports for U.S. air carriers, as determined 
by the Secretary of Transportation.
    (b) The FAA shall initially assign Arrival Authorizations to 
foreign air carriers for winter and summer scheduling seasons as 
follows:
    (1) Winter Scheduling Season. The FAA shall assign to each foreign 
air carrier that published a scheduled arrival during the Winter 
Scheduling Season that began October 2004, as evidenced by the FAA's 
records, a corresponding Arrival Authorization for each arrival.
    (2) Summer Scheduling Season. The FAA shall assign to each foreign 
air carrier that published a scheduled arrival during the Summer 
Scheduling Season that began April 2004, as evidenced by the FAA's 
records, a corresponding Arrival Authorization for each arrival.
    (3) Arrival Authorizations will be assigned to the carrier that 
actually operated the flight regardless of any codeshare or marketing 
arrangement unless such carrier did not market the flight under its own 
code and the inventory of the flight was, by contract, under the 
control of another carrier. If inventory of the flight was under the 
control of another carrier, the FAA shall assign the Arrival 
Authorization to that carrier.
    (4) The FAA Vice President, System Operations Services shall be the 
final decision-maker for determinations under this subsection.

[Option 1--Administrative Option]

    (c) A foreign air carrier may request new or additional Arrival 
Authorizations for a Summer Scheduling Season or a Winter Scheduling 
Season pursuant to this section. Such requests shall be made at a time 
and in a manner prescribed by the Administrator. If the request is 
granted, the FAA shall withdraw Arrival Authorizations from air 
carriers under Sec.  93.26 of this subpart if an Authorization Arrival 
is not otherwise available within one hour of the requested time.
    (d) Each request for Arrival Authorizations under this section 
shall specify the days of the week and time of day of the preferred 
Arrival Authorization and the length of time the Arrival Authorizations 
are to be used. The request must be accompanied by a certified 
statement by an officer of the foreign air carrier stating that it 
possesses or has contracted for possession of an aircraft capable of 
being utilized in the Arrival Authorizations requested and that it has 
bona fide plans to use the requested Arrival Authorizations for 
operation. The FAA Vice President, System Operations Services shall be 
the final decision-maker for determinations under this subsection.
    (e) Arrival Authorizations assigned under this section cannot be 
bought or sold under Sec.  93.27, but may be traded on a one-for-one 
basis under Sec.  93.28 of this subsection.
    (f) Arrival Authorizations assigned under this section are not 
subject to minimum usage requirements under Sec.  93.31 of this subpart 
but will revert to the FAA if not used for 15 consecutive days.

[[Page 15537]]

[Option 2--Elective Option]

    (c) After the date of the initial assignments in subsection (b) of 
this section, a foreign air carrier may request new or additional 
Arrival Authorizations for a Summer Scheduling Season or a Winter 
Scheduling Season. Such requests shall be made at a time and in a 
manner prescribed by the Administrator. A foreign air carrier seeking 
new or additional Arrival Authorizations must elect to receive 
additional Arrival Authorizations under the assignment procedures of 
either paragraph(c)(1) or (c)(2) of this section:
    (1) If a foreign air carrier requests a new or additional Arrival 
Authorization and an Arrival Authorization is not available within one 
hour of the requested time, and if the request is granted, an Arrival 
Authorization shall be withdrawn from an air carrier under Sec.  93.26 
of this subpart to accommodate the request if an Arrival Authorization 
is not otherwise available;
    (i) Arrival Authorizations assigned under subsections (b) or (c)(1) 
cannot be bought or sold under Sec.  93.27, but may be traded on a one-
for-one basis under Sec.  93.28 of this subpart, to meet the carriers' 
operational needs
    (ii) Arrival Authorizations assigned under subsections (b) or 
(c)(1) are not subject to usage requirements under Sec.  93.31 of this 
subpart but will revert to the FAA if not used for 15 consecutive days.
    (2) Foreign air carriers seeking new or additional Arrival 
Authorizations may participate in any lotteries or transactions 
permitted under Sec.  93.27 and shall be eligible to receive additional 
assignments of Arrival Authorizations under Sec.  93.33 of this 
subpart.
    (3) A foreign air carrier making an election between Sec. Sec.  
93.29(c)(1) and 93.29(c)(2) above must notify the FAA Slot 
Administration Office in writing of its election before first 
requesting Arrival Assignments in addition to those assigned in 
subsection (b) of this section.


Sec.  93.30  Lottery provisions.

    (a) Whenever the FAA has determined that sufficient Arrival 
Authorizations have become available for reassignment, they will be 
assigned in accordance with this section.
    (b) Any lottery of Arrival Authorizations that revert under Sec.  
93.26(b), or are withdrawn under Sec.  93.31, shall be conducted as a 
Preferred Lottery as described in paragraph (i) of this section.
    (c) Any lottery of Arrival Authorizations that become available as 
the result of an increase in the hourly limits under Sec.  93.23(a) of 
this part from 88 Arrival Authorizations to 89 or 90 shall be conducted 
as a Preferred Lottery as described in paragraph (i) of this section. 
Arrival Authorizations remaining after all New Entrants and Limited 
Incumbents have been accommodated may be assigned to any other air 
carrier participating in the lottery on an interim basis until the next 
lottery, when such Arrival Authorizations would again be available on a 
preferred basis to New Entrants and Limited Incumbents.
    (d) Any lottery of Arrival Authorizations that become available as 
the result of an increase above 90 in the hourly limits under Sec.  
93.33(b) of this subpart shall be open to all carriers otherwise 
eligible to participate in the lottery.
    (e) The FAA will publish a notice in the Federal Register 
announcing the lottery dates and any special procedures for the 
lotteries.
    (f) Any air carrier, or foreign air carrier seeking to participate 
in any lottery must notify the FAA in writing, and such notification 
must be received by the FAA 15 days prior to the lottery date. The 
carrier must also disclose in its notification whether it has Common 
Ownership with any other carrier and, if so, identify such carrier.
    (g) Except as otherwise provided in paragraph (h) of this section, 
a random lottery shall be held to determine the order in which 
participating carriers shall select an Arrival Authorization.
    (h) In any Preferred Lottery, each New Entrant and Limited 
Incumbent will have the opportunity to select Arrival Authorizations, 
if available, until it holds a total of eight Arrival Authorizations. 
Arrival Authorizations remaining after all New Entrants and Limited 
Incumbents have been accommodated may be assigned to any other carrier 
participating in the lottery.
    (i) At the lottery, each carrier must make its selection within 5 
minutes after being called or it shall lose its turn. If capacity still 
remains after each carrier has had an opportunity to select Arrival 
Authorizations, the assignment sequence will be repeated in the same 
order. A carrier may select one Arrival Authorization during each 
sequence, except that New Entrants may select two Arrival 
Authorizations, if available, in the first sequence.
    (j) To select Arrival Authorizations during a lottery session, a 
carrier must have appropriate economic authority for scheduled 
passenger service under Title 49 of the U.S.C. and must hold FAA 
operating authority under parts 121, 129 (if appropriate) or 135 of 
this chapter.


Sec.  93.31  Minimum usage requirement.

[Option 1--90 Percent Usage]

[Sub-option A--Withdrawal]

    (a) Except as provided in paragraphs (b) and (c) of this section, 
any Arrival Authorizations not used at least 90 percent of the time 
over a two-month period shall be withdrawn by the FAA upon 45 days' 
notice to the affected carrier by the FAA Slot Administration Office 
and held for reassignment by the FAA.
    (b) Paragraph (a) of this section does not apply to Arrival 
Authorizations obtained under Sec.  93.30 during:
    (1) The first 90 days after they are allotted to a New Entrant; or
    (2) The first 60 days after they are allotted to a Limited 
Incumbent or Incumbent carrier.
    (c) Paragraph (a) of this section does not apply to Arrival 
Authorizations of an air carrier forced by a strike to cease operations 
using those Arrival Authorizations.
    (d) Every air carrier and Canadian air carrier holding Arrival 
Authorizations shall forward in writing to the FAA Slot Administration 
Office a list of all Arrival Authorizations held by the carrier along 
with a listing of the Arrival Authorizations actually operated for each 
day of the 2-month reporting period within 14 days after the last day 
of the 2-month reporting period beginning January 1 and every 2 months 
thereafter. The report shall identify the flight number for which the 
Arrival Authorization was used and the equipment used. The report shall 
identify any Common Ownership or control of, by, or with any other 
carrier. A senior official of the carrier shall sign the report.
    (e) The Administrator may waive the requirements of paragraph (a) 
of this section in the event of a highly unusual and unpredictable 
condition which is beyond the control of the carrier and which exists 
for a period of 9 or more days. Examples of conditions which could 
justify waiver under this paragraph are weather conditions that result 
in the restricted operation of an airport for an extended period of 
time or the grounding of any aircraft type.
    (f) The FAA will treat as used any Arrival Authorization held by a 
carrier on Thanksgiving Day, the Friday following Thanksgiving Day, and 
the period from December 24 through the first Sunday in January.

[Sub-option B--Sale]

    (a) Except as provided in paragraphs (b) and (c) of this section, 
any Arrival Authorizations not used at least 90 percent of the time 
over a 2-month

[[Page 15538]]

period shall be posted for sale, upon 45 days' notice to the affected 
carrier by the FAA Slot Administration Office, under Sec.  93.27 of 
this subpart, except that each New Entrant and Limited Incumbent will 
have the opportunity to bid on Arrival Authorizations until it holds a 
total of eight Arrival Authorizations. Arrival Authorizations remaining 
after all New Entrants and Limited Incumbents have had an opportunity 
to bid may be auctioned to any other carriers otherwise eligible to 
bid.
    (b) Paragraph (a) of this section does not apply to Arrival 
Authorizations obtained under Sec.  93.30 of this subpart during:
    (1) The first 90 days after they are allotted to a New Entrant; or
    (2) The first 60 days after they are allotted to a Limited 
Incumbent or Incumbent carrier.
    (c) Paragraph (a) of this section does not apply to Arrival 
Authorizations of a carrier forced by a strike to suspend the 
operations that use those Arrival Authorizations.
    (d) Every air carrier and Canadian air carrier holding Arrival 
Authorizations shall forward in writing to the FAA Slot Administration 
Office a list of all Arrival Authorizations held by the carrier along 
with a listing of the Arrival Authorizations actually operated for each 
day of the 2-month reporting period within 14 days after the last day 
of the 2-month reporting period beginning January 1 and every 2 months 
thereafter. The report shall identify the flight number for which the 
Arrival Authorization was used and the equipment used. The report shall 
identify any Common Ownership or control of, by, or with any other 
carrier. A senior official of the carrier shall sign the report.
    (e) The Administrator may waive the requirements of paragraph (a) 
of this section in the event of a highly unusual and unpredictable 
condition which is beyond the control of the carrier and which exists 
for a period of 9 or more days. Examples of conditions which could 
justify waiver under this paragraph are weather conditions which result 
in the restricted operation of an airport for an extended period of 
time or the grounding of any aircraft type.
    (f) The FAA will treat as used any Arrival Authorization held by a 
carrier on Thanksgiving Day, the Friday following Thanksgiving Day, and 
the period from December 24 through the first Sunday in January.
    (g) The affected carrier may not bid on any Arrival Authorization 
required to be posted for auction under this section and must accept 
the highest bid notwithstanding Sec.  93.27(g) of this subpart. In the 
event no carrier offers to purchase an Arrival Authorization required 
to be posted for auction, the Arrival Authorization may continue to be 
used by the affected carrier.

[Option 2--Minimum Usage]

[Sub-option A--Withdrawal]

    (a) Except as provided in paragraphs (b) and (c) of this section, 
over a six-month period, Arrival Authorizations ranking in the bottom 
one percent in their frequency of usage will be withdrawn upon 45 days' 
notice by the FAA Slot Administration Office to the affected carrier 
and held for reassignment by the FAA.
    (b) Paragraph (a) of this section does not apply to Arrival 
Authorization obtained under Sec.  93.30 during:
    (1) The first 90 days after they are allotted to a New Entrant; or
    (2) The first 60 days after they are allotted to a Limited 
Incumbent or Incumbent carrier.
    (c) Paragraph (a) of this section does not apply to Arrival 
Authorizations of a carrier forced by a strike to suspend the 
operations that use those Arrival Authorizations.
    (d) Every air carrier and Canadian air carrier holding Arrival 
Authorizations shall forward in writing, to the FAA Slot Administration 
Office a list of all Arrival Authorizations held by the carrier along 
with a listing of the Arrival Authorizations actually operated for each 
day of the 6-month reporting period within 14 days after the last day 
of the 6-month reporting period beginning January 1, 2006. The report 
shall identify the aircraft identifier and flight number for which the 
Arrival Authorization was used and the scheduled arrival time. A senior 
official of the carrier shall sign the report.
    (e) The Administrator may waive the requirements of paragraph (a) 
of this section in the event of a highly unusual and unpredictable 
condition which is beyond the control of the carrier and which exists 
for a period of 9 or more days. Examples of conditions which could 
justify waiver under this paragraph are weather conditions which result 
in the restricted operation of an airport for an extended period of 
time or the grounding of any aircraft type.
    (f) The FAA will treat as used any Arrival Authorization held by a 
carrier on Thanksgiving Day, the Friday following Thanksgiving Day, and 
the period from December 24 through the first Sunday in January.

[Sub-option B--Sale]

    (a) Except as provided in paragraphs (b) and (c) of this section, 
over a six-month period, Arrival Authorizations ranking in the bottom 
one percent in their frequency of usage shall be posted for sale, upon 
45 days' notice by the FAA Slot Administration Office to the affected 
carrier, under Sec.  93.27 of this subpart, except that each New 
Entrant and Limited Incumbent will have the opportunity to bid on 
Arrival Authorizations until it holds a total of eight Arrival 
Authorizations. Arrival Authorizations remaining after all New Entrants 
and Limited Incumbents have had an opportunity to bid may be auctioned 
to any other carriers otherwise eligible to bid.
    (b) Paragraph (a) of this section does not apply to Arrival 
Authorizations obtained under Sec.  93.30 of this subpart during:
    (1) The first 90 days after they are allotted to a New Entrant; or
    (2) The first 60 days after they are allotted to a Limited 
Incumbent or Incumbent carrier.
    (c) Paragraph (a) of this section does not apply to Arrival 
Authorizations of an air carrier forced by a strike to cease operations 
using those Arrival Authorizations.
    (d) Every air carrier and Canadian air carrier holding Arrival 
Authorizations shall forward in writing to the FAA Slot Administration 
Office a list of all Arrival Authorizations held by the carrier along 
with a listing of the Arrival Authorizations actually operated for each 
day of the 2-month reporting period within 14 days after the last day 
of the 2-month reporting period beginning January 1, 2006 and every 2 
months thereafter. The report shall identify the aircraft identifier 
and flight number for which the Arrival Authorization was used and the 
scheduled arrival time. A senior official of the carrier shall sign the 
report.
    (e) The FAA will treat as used any Arrival Authorization held by a 
carrier on Thanksgiving Day, the Friday following Thanksgiving Day, and 
the period from December 24 through the first Sunday in January.
    (f) The affected carrier may not bid on any Arrival Authorization 
required to be placed up for auction under this section and must accept 
the highest bid notwithstanding Sec.  93.27(g) of this subpart. In the 
event no air carriers offer to purchase an Arrival Authorization 
required to be placed up for auction, the Arrival Authorization may 
continue to be used by the affected carrier.


Sec.  93.32  Administrative provisions.

    (a) The FAA will assign, by random lottery, withdrawal priority 
numbers for the recall priority of Arrival Authorizations at O'Hare. 
The lowest

[[Page 15539]]

numbered Arrival Authorization will be the last withdrawn. Newly 
created Arrival Authorizations will be assigned a priority withdrawal 
number and that number will be higher than any other Arrival 
Authorization withdrawal number previously assigned. Each Arrival 
Authorization will be assigned a designation consisting of the 
applicable withdrawal priority number, and the 30-minute time period 
for the Arrival Authorization. The designation will also indicate, as 
appropriate, if the Arrival Authorization is daily or for certain days 
of the week only; and is a summer or winter Arrival Authorization.
    (b) Whenever Arrival Authorizations must be withdrawn, they will be 
withdrawn in accordance with the priority list established under 
paragraph (a) of this section.
    (c) Whenever an Arrival Authorization is to be returned under this 
subpart, or is voluntarily returned by an air carrier, the air carrier 
must notify the FAA Slot Administration Office in writing.


Sec.  93.33  New capacity.

    (a) If the hourly limit on Arrival Authorizations as specified in 
Sec.  93.23(a) of this subpart increases to 89 or 90 per hour, new 
Arrival Authorizations will be assigned by lottery under Sec.  93.30(c) 
of this subpart.
    (b) If the hourly limit on Arrival Authorizations as specified in 
Sec.  93.23(a) of this subpart should be increased to more than 90 per 
hour, new Arrival Authorizations will be assigned by lottery under 
Sec.  93.30(d) of this subpart.


Sec.  93.34  Sunset provision.

    This subpart terminates on April 6, 2008.

    Issued in Washington, DC, on March 18, 2005.
Sharon L. Pinkerton,
Assistant Administrator for Aviation Policy, Planning, and Environment.
[FR Doc. 05-5882 Filed 3-22-05; 10:04 am]
BILLING CODE 4910-13-P