[Federal Register Volume 71, Number 167 (Tuesday, August 29, 2006)]
[Rules and Regulations]
[Pages 51382-51404]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-7138]



[[Page 51381]]

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Part IV





Department of Transportation





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Federal Aviation Administration



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14 CFR Part 93



Congestion and Delay Reduction at Chicago O'Hare International Airport; 
Final Rule

  Federal Register / Vol. 71, No. 167 / Tuesday, August 29, 2006 / 
Rules and Regulations  

[[Page 51382]]


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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 93

[Docket No.: FAA-2005-20704; Amendment No. 93-85]
RIN 2120-AI51


Congestion and Delay Reduction at Chicago O'Hare International 
Airport

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule.

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SUMMARY: The FAA is adopting regulations to address persistent flight 
delays from overscheduling at O'Hare International Airport (O'Hare). 
This final rule is intended to be an interim measure only, and the FAA 
anticipates that the rule will yield to longer term solutions to 
traffic congestion at the airport. Such solutions include plans by the 
City of Chicago to modernize the airport and reduce levels of delay, 
both in the medium term and long term. For this reason, the final rule 
includes provisions allowing for the limits it imposes to be gradually 
relaxed, and in any event the regulation will sunset in 2008.

DATES: This amendment becomes effective October 29, 2006. Affected 
parties, however, do not have to comply with the information collection 
requirements in Sec. Sec.  93.23, 93.25, 93.27, 93.28, 93.29, 93.30, 
93.31, and 93.32 until the FAA publishes in the Federal Register the 
control number assigned by the Office of Management and Budget (OMB) 
for this information collection requirement. Publication of the control 
number notifies the public that OMB has approved this information 
collection requirement under the Paperwork Reduction Act of 1995.

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

SUPPLEMENTARY INFORMATION:

Availability of Rulemaking Documents

    You can get an electronic copy using the Internet by:
    (1) Searching the Department of Transportation's electronic Docket 
Management System (DMS) Web page (http://dms.dot.gov/search);
    Visiting the Office of Rulemaking's Web page at http://www.faa.gov/avr/arm/index.cfm; or
    Accessing the Government Printing Office's Web page at http://www.gpoaccess.gov/fr/index.html.
    You can also get a copy by sending a request to the Federal 
Aviation Administration, Office of Rulemaking, ARM-1, 800 Independence 
Avenue, SW., Washington, DC 20591, or by calling (202) 267-9680. Make 
sure to identify the amendment number or docket number of this 
rulemaking.
    Anyone is able to search the electronic form of all comments 
received into any of our dockets by the name of the individual 
submitting the comment (or signing the comment, if submitted on behalf 
of an association, business, labor union, etc.). You may review DOT's 
complete Privacy Act statement in the Federal Register published on 
April 11, 2000 (Volume 65, Number 70; Pages 19477-78) or you may visit 
http://dms.dot.gov.

Small Business Regulatory Enforcement Fairness Act

    The Small Business Regulatory Enforcement Fairness Act (SBREFA) of 
1996 requires FAA to comply with small entity requests for information 
or advice about compliance with statutes and regulations within its 
jurisdiction. If you are a small entity and you have a question 
regarding this document, you may contact your local FAA official, or 
the person listed under FOR FURTHER INFORMATION CONTACT. You can find 
out more about SBREFA on the Internet at http://www.faa.gov/avr/arm/sbrefa.cfm.

Authority for This Rulemaking

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

Background

    On March 25, 2005, the FAA published a notice of proposed 
rulemaking (NPRM) (70 FR 15521) which would limit the number of 
scheduled arrivals at O'Hare during peak operating hours and establish 
an allocation system, including transfer and usage requirements.
    Since publishing the NPRM in March 2005, the FAA twice has extended 
the Order published in August 2004 that set operation limits on 
domestic and Canadian scheduled arrivals into O'Hare International 
Airport. The Order most recently was extended to October 29, 2006, 
which coincides with the effective date of this rule (71 FR 16405; 
March 31, 2006).

History

The High Density Traffic Airports Rule at O'Hare
    Until July 2002, the FAA managed congestion and delay at O'Hare by 
means of the High Density Rule (HDR), which was codified in 14 CFR part 
93, subpart K. The FAA adopted the HDR under its broad authority to 
ensure the efficient use of the nation's navigable airspace (49 U.S.C. 
40103). The HDR took effect in 1969, and while it originally was a 
temporary rule, it became permanent in 1973.
    The HDR established limits on the number of all take-offs and 
landings during certain hours at five airports, including O'Hare. In 
order to operate a flight during the restricted hours, an airline 
needed a reservation, commonly known as a slot. Slots were initially 
allocated through scheduling committees, operating under then-
authorized antitrust immunity, where all the airlines would agree to 
the allocation. After the Airline Deregulation Act in 1978, new entrant

[[Page 51383]]

airlines formed and the pre-existing, or legacy carriers, sought to 
expand. This increased competition made it increasingly difficult for 
airlines to reach agreement, and the scheduling committees began to 
deadlock.
    In 1984, the FAA amended the HDR to increase the hours in which 
limitations at O'Hare would apply and to increase the number of take-
offs and landings permitted at that airport (49 FR 8237, March 6, 
1984). The next year, a new Subpart S was added to Part 93 that 
established allocation procedures for slots including use-or-lose 
provisions and permission to buy and sell slots in a secondary market 
(50 FR 52195, December 20, 1985). These procedures replaced the 
scheduling committees.
Statutory Changes Ending the High Density Rule at O'Hare
    In 2000 Congress relaxed the slot rules at the high density 
airports and phased out the specific regulations then in place at three 
of them, including O'Hare (49 U.S.C. 41715, 41717). With respect to 
O'Hare, Congress directed that:
    (1) Beginning May 1, 2000, exemptions be granted to airlines to 
provide air service to small airports with 70-seat or smaller aircraft;
    (2) 30 slot exemptions be granted to new entrant or limited 
incumbent air carriers;
    (3) After May 1, 2000, slots no longer be required to provide 
international air service;
    (4) Beginning July 1, 2001, the slot control restrictions be 
limited to the period between 2:45 p.m. and 8:14 p.m.; and
    (5) Slot restrictions be lifted entirely after July 1, 2002.
    In phasing out the HDR, however, Congress recognized the 
possibility that there could be an increase in congestion and delays at 
the affected airports. Therefore, in the section that phased out the 
rule, it made clear that ``[n]othing in this section * * * shall be 
construed * * * as affecting the Federal Aviation Administration's 
authority for safety and the movement of air traffic.'' (49 U.S.C. 
41715(b).)
Resurgence of Unacceptable Levels of Congestion
    As a result of the 2000 legislation, the slot restrictions of the 
HDR lapsed at O'Hare as of July 1, 2002. The absence of these 
restrictions allowed airlines operating at the airport to add flights, 
which over time led to a dramatic increase in airline delays. These 
delays reverberated throughout the national air transportation system.
    Initially, lifting the HDR had a minimal impact on delays due to 
the lingering effects of the 9/11 terrorist attacks on airline 
passenger traffic. But by 2003, the two air carriers operating hubs at 
O'Hare, American Airlines (``American'') and United Airlines 
(``United''), had added a large number of operations and retimed other 
flights, resulting in congestion during peak hours of the day. From 
April 2000 through November 2003, American increased its scheduled 
operations at O'Hare between the hours of 12 p.m. and 7:59 p.m. by 
nearly 10.5 percent. Over the same period, United increased its 
scheduled operations at O'Hare by over 41 percent.
    The increases in operations by American and United did not result 
in a corresponding increase in seat capacity. During the peak period, 
these two carriers added 375 regional jet operations per day. Overall, 
American and United added over 600 regional jet operations per day. At 
the same time as they added regional jet operations, they reduced 
mainline jet operations. The result was actually a decrease in seat 
capacity by each carrier at O'Hare of more than 5.5 percent from April 
2000 to November 2003 while flights increased by an average of 150 per 
day. In November 2003, more than 40 percent of American's and United's 
O'Hare flights were operated with regional jets, many to large and 
medium hubs. The significant increases in scheduled operations during 
this time period resulted in excessive delays and congestion at O'Hare.
    By November 2003, O'Hare had the worst on-time performance of any 
major airport. O'Hare arrivals were on time only 57 percent of the 
time, well below the FAA goal of 82 percent. Departures were little 
better. They were on time only 67 percent of the time, well below the 
average of 85 percent at other major airports. These delays averaged 
about an hour in duration. Published schedules for February 2004 
indicated that the problem would be exacerbated by the addition of even 
more flights.
    Recognizing congestion was again becoming a significant issue, 
Congress enacted legislation that included a mechanism to help reduce 
delays and improve the movement of air traffic at congested airports 
(49 U.S.C. 41722). That statutory provision authorized the Secretary of 
Transportation (Secretary) to request that scheduled air carriers meet 
with the FAA to discuss flight reductions at severely congested 
airports to reduce over-scheduling and flight delays during hours of 
peak operation, if the Administrator determines that it is necessary to 
convene such a meeting and the Secretary determines that the meeting is 
necessary to meet a serious transportation need or achieve an important 
public benefit.
    In early 2004, the Secretary and the FAA Administrator determined 
that a schedule reduction meeting was necessary to deal with 
congestion-related delays at O'Hare. Before such a meeting could be 
convened, however, United and American each agreed in separate 
discussions with agency officials to reduce their scheduled flights 
voluntarily. Accordingly, the schedule reduction meeting was deferred. 
Instead, the FAA issued an order implementing the voluntary agreement 
of the two air carriers, Docket FAA-2004-16944-55; 69 FR 5650 (2004). 
The FAA order required a 5 percent reduction in the two carriers' 
scheduled operations. This reduction was to be effective between 1 p.m. 
and 8 p.m. for six-months, beginning no later than March 4, 2004.
    The FAA again reviewed O'Hare's on-time performance in March 2004 
in light of the ordered schedule reductions. That review showed that 
the total delay minutes would have been as much as 30 percent higher 
without the reductions but that delays still remained more than double 
the level of a year earlier and represented more than a third of the 
total delays in the national airspace system.
    In light of the continued problems at O'Hare, the agency officials 
again discussed the situation with American and United to consider 
additional flight reductions to improve on-time performance at the 
airport. As a result, on April 21, 2004, the FAA issued an amendment to 
the previous order in Docket FAA-2004-16944. This amendment required 
additional flight reductions. Specifically, beginning no later than 
June 10, 2004, it required (1) An additional schedule reduction of 2.5 
percent of each carrier's total operations in the 1 p.m. through 7:59 
p.m. hours including arrival reductions during specific times; (2) a 
reduction in the number of scheduled arrivals in the 12 p.m. hour; and 
(3) reductions to continue through October 30, 2004.
    Prior to the implementation of the June flight reductions, delays 
at O'Hare continued. In May, there were a record 14,495 total delays. 
While the numbers in June and July improved, as the last round of 
cutbacks by American and United took effect, the FAA determined that 
the overall trend of delays remained unacceptably high.
    Meanwhile, some airlines that were not party to the agreement 
involving American and United continued to add

[[Page 51384]]

flights, making it unlikely that those two carriers would extend their 
voluntary schedule reductions without similar commitments by other 
carriers. Published schedules for November indicated that during 
several times of the day scheduled arrivals would approach or exceed 
the airport's highest arrival capacity. Accordingly, in July, the 
Secretary and FAA Administrator determined that the scheduling 
reduction meeting that had previously been deferred now needed to be 
held (69 FR 46201, August 2, 2004).
    The meeting between DOT and the carriers convened on August 4, 
2004, and was followed by meetings between Federal officials and 
individual airlines. As a result, United and American agreed to 
reschedule and further reduce scheduled arrivals by about 5 percent 
during peak hours and other airlines agreed to some flight re-timings 
and not to increase the number of their scheduled arrivals. New 
entrants and limited incumbents were permitted to add a small number of 
scheduled flights. Based on the information provided through the 
meetings and submissions filed in the docket, the FAA issued a 
comprehensive order on scheduled arrivals at O'Hare on August 18, 2004, 
limiting scheduled arrivals by U.S. and Canadian air carriers to 88 
during most hours of the day and implementing the above agreement 
(August 2004 Order). The Order took effect November 1, 2004, and was to 
expire on April 30, 2005. The FAA extended this Order on three separate 
occasions to permit full consideration of the issues and comment on the 
NPRM.\1\ On each occasion the agency sought the views of interested 
persons on the advisability of extending the August 2004 Order in 
Docket FAA-2004-16944. As indicated in the October 2, 2005, extension 
of the Order, significant operational benefit has been achieved since 
the voluntary schedule reductions took effect on November 1, 2004. The 
subsequent extensions of the Order were necessary to maintain the 
scheduling limits set in August 2004 and achieve delay--reduction and 
operational benefits pending completion of this rulemaking.
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    \1\ See 71 FR 16405, March 31, 2006; 70 FR 59798, October 13, 
2005; and 70 FR 15540, March 25, 2005.
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Related Activity
    On July 8, 2005, the FAA published in the Federal Register Special 
Federal Aviation Regulation (SFAR) 105, ``Reservation System for 
Unscheduled Operations at Chicago's O'Hare International Airport,'' (70 
FR 39610). This SFAR limits unscheduled arrivals at the airport to four 
per hour and provides an allocation mechanism for operators to obtain 
reservations for those operations. SFAR 105 was extended through March 
31, 2006 (70 FR 66253).
    On September 30, 2005, the FAA issued the Record of Decision for 
O'Hare Modernization providing final agency determinations and 
unconditional approval of the revised Airport Layout Plan and other 
certain Federal actions by the FAA necessary for the proposed 
improvement of O'Hare, as provided in Alternative C presented to the 
agency (the O'Hare Modernization Plan and other components of the 
City's Airport Master Plan.). The O'Hare Modernization Plan (OMP) 
provides for certain capacity enhancement actions to result in new 
capacity by 2008.
    Phased implementation of the OMP will provide incrementally 
increasing operational benefits. The FAA's analysis projects that the 
addition of the first new OMP runway will, by 2008, allow the airfield 
to accommodate over 50,000 additional forecast operations with an 
average annual delay per aircraft no higher than exists today. With the 
completion of Phase 1 of the OMP, the FAA's analysis projects that the 
airfield will accommodate, by the 2010 time frame, approximately 90,000 
additional forecast operations (over today's activity level) with a 
decrease in average annual delay per aircraft of approximately 33% 
below today's delay per aircraft at O'Hare. Finally, with the 
completion of OMP Phase 2 in 2013, the FAA's analysis projects that the 
airfield will accommodate approximately 1.12 million annual forecast 
operations (an increase of more than 140,000 annual operation over 
today's activity level) with an average annual delay per aircraft 
nearly 70% below today's delay per aircraft.

Summary of Comments

    The FAA published the NPRM, ``Congestion and Delay Reduction at 
Chicago O'Hare International Airport,'' on March 25, 2005. The comment 
period closed on May 24, 2005. During that period, we received 22 
comments from interested parties including airlines, industry 
organizations, individuals, members of Congress and the City of Chicago 
(City). We also received five additional comments after the close of 
the comment period.
    In the NPRM, we requested comment on several specific aspects of 
the proposed rule, as well as any general comments. Comments to the 
NPRM are addressed below by topic. Only one commenter supported the 
proposal entirely; he is a student and pilot.
    Overall, most commenters agreed that before the recent schedule 
reductions at O'Hare, congestion and delays had become intolerable. 
Some clearly disliked the proposal and questioned whether less 
intrusive methods were available to address short-term congestion and 
delay. Nearly all commenters agreed that governmental limits on flights 
are not the preferred approach and increasing air traffic capacity at 
O'Hare is the best way to solve the problem of congestion and delays. 
Some commenters suggested that the Order only accomplished what market 
forces ultimately would have dictated carriers to do if given 
appropriate time.
    Comments expressing concern that the NPRM amounted to a 
reimposition of the HDR were received from Senators Richard Durbin and 
Barack Obama, and Representatives Dennis Hastert, Jesse Jackson, Jr., 
Jerry Costello, John Shimkus, Jerry Weller, Melissa Bean, Danny K. 
Davis, Henry Hyde, Judy Biggert, Timothy Johnson, Daniel Lipinski, Luis 
V. Gutierrez, Lane Evans, Bobby L. Rush, Rahm Emanuel, Mark Kirk, and 
Donald A. Manzullo (Members of Congress). The Members did not oppose a 
short-term limit on flights, with certain modifications, provided that 
the rule sunset (as proposed) no later than April 2008.
Expiration of the August 2004 Order (No Further Governmental Action)
    We questioned in the NPRM whether the limitations established in 
the August 2004 Order should be allowed to expire of their own accord 
with no governmental intervention to address the operational 
environment at the airport. Under this approach, carriers would be free 
to determine the number and timing of flights at O'Hare.
    The Department of Justice (DOJ) and the Air Carrier Association of 
America (ACAA) objected to allowing the Order to expire with no 
mechanism in place to manage demand at O'Hare. DOJ argued that allowing 
the Order to expire with no plan in place to deal with the airport's 
limited capacity would lead to more congestion and significant delays 
for passengers throughout the country. ACAA contended that both 
American and United would add flights to block competition at any cost 
and that smaller carriers have fewer options to cancel flights or re-
route passengers through other airports and consequently suffer 
disproportionate delays.
    The City argued the opposite. The City requested that the FAA 
accelerate the OMP approval process, allow the Order to expire, and let 
free market forces manage flight levels. The City

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also countered that the airlines have learned their lesson from past 
overscheduling and are not likely to repeat that practice. However, if 
delays were to reach unacceptable levels again, the City suggested that 
the FAA negotiate a new temporary scheduling agreement like the one 
that resulted in the August 2004 Order. The Airports Council 
International-North America (ACI-NA) supported the comments filed by 
the City.
    The FAA has determined that a rule limiting arrivals at O'Hare is 
necessary. After the phase-out of the HDR at O'Hare, carriers had the 
opportunity to add flights and adjust schedules as they saw 
appropriate, which resulted in extensive delays for all operators at 
O'Hare and wide-ranging effects on the NAS. In contrast, since the 
limits on scheduled and unscheduled arrivals took effect on November 1, 
2004, air traffic delays have decreased and on-time arrival performance 
has increased. Through October 2005, the average minutes of arrival 
delay at O'Hare decreased by approximately 24 percent when compared to 
the same 12-month period the year before. The longest arrival delays 
lasting more than one hour have decreased by 28 percent. Overall, the 
on-time arrival performance at O'Hare has increased by almost 7 
percentage points. As a result, O'Hare is now performing near the 
average of the rest of the major airports in the NAS, a dramatic 
improvement from the airport's bottom-tier performance during much of 
2004.
    The FAA could permit the current scheduling limits to expire and 
allow carriers to individually determine the number and timing of their 
flights at O'Hare as advocated by some of the commenters. Safety would 
be maintained through air traffic control (ATC) procedures and 
congestion would be managed as needed through various traffic 
management initiatives. However, based on the history of scheduled 
demand, we forecast that flights would increase and that delays, 
cancellations, and disruptions at O'Hare and other airports are likely 
and would be unacceptable to the industry and the flying public. As 
indicated by the previous statistics, the limits imposed by the August 
2004 Order have resulted in measurable reductions in delay. We are 
mindful that other factors have contributed to the decrease in delay, 
including additional flight reductions by some carriers beyond those 
specified in the Order, and increased operational capacity in some 
periods due to improved weather and other system efficiency gains.
    We are not persuaded by the City's argument that the carriers at 
O'Hare will be able to resist the short-term marketplace incentives to 
add flights during peak hours, particularly if one or more of the hub 
carriers significantly changes its schedule or the other carriers 
introduce new service to O'Hare. Carriers typically respond to 
competition by matching frequency and/or fares. At O'Hare, the hubbing 
carriers have reduced flights significantly since November 2003, and if 
the Order expired, might resume previous flight frequencies or enter 
new markets to respond to other carriers' schedules.
    In the event that flights were added and delays increased 
significantly, we could initiate schedule discussion meetings similar 
to the August 2004 discussions while continuing to manage delays on a 
daily basis. This process, however, would be counterproductive to our 
mandate to manage the use of the navigable airspace efficiently, 
particularly since it is very likely that carriers would launch new 
operations once the August 2004 Order expired. Furthermore, our ability 
to secure a new voluntary schedule reduction agreement is at best 
uncertain in view of the comments submitted in this rulemaking. 
Consequently, we dismissed this option as a feasible solution.
    American noted that other airports experience more delay than 
O'Hare and that the FAA has not intervened there. American questions 
why O'Hare was singled out for such action. United commented that the 
operational limits at O'Hare, which is its primary hub, limit its 
ability to increase operations for new market opportunities or high 
passenger load factors.
    The agency is addressing congestion at other delay prone airports. 
A single approach to manage congestion and delay at all airports cannot 
be realistically achieved at present. As articulated previously and 
elsewhere in the document, the deteriorating situation at O'Hare had 
impacts far beyond that airport. Delays at other airports on the other 
hand, generally do not lead to delays throughout the nation's air 
transportation system. Given the competitive stance of the major 
carriers, we believe that it was unlikely to be solved without 
government intervention. Our preference is to use whichever methods for 
addressing congestion are best suited for a particular airport. These 
methods may include increasing airport capacity and system 
efficiencies, or in the case at O'Hare, addressing through regulatory 
limits the impact of schedule adjustments by the largest operators at 
the airport.
Extend the August 2004 Order
    No commenter specifically recommended that we simply extend the 
August 2004 Order until 2008. The City did suggest this action as an 
alternative if the current Order were allowed to expire and operations 
grew causing the airport to return to a critical state. DOJ stated that 
this option would be better than doing nothing; but it would lead to 
inefficient use of the airport's limited capacity and is not likely to 
result in any significant new entry or expansion by smaller carriers.
    After considering this option, we concluded that it would be 
difficult to maintain the current agreement or negotiate yet another 
voluntary schedule reduction agreement that would limit operations 
until new airport capacity is in place. We agree with DOJ that while 
the continuation of the Order would achieve the objective of limiting 
overall operations at the airport, it would not necessarily result in 
any new entry by smaller carriers for the duration of the proposal. 
Also, this option would not necessarily promote the most efficient use 
of the operating authorities at O'Hare, given that the existing Order 
does not include provisions for usage, allocation, or market-based 
transfer mechanisms.
    Any future scheduling discussions would start with current 
operational levels and the FAA's scheduling targets proposed for those 
discussions would apply.\2\ As indicated in the comments, carriers of 
all sizes have expressed a desire to expand their operations at O'Hare, 
or at least preserve their option to grow. A scheduling meeting would 
confront us with complex and controversial determinations as to which 
carriers would have access to new capacity as it became available and 
how any new capacity would therefore be allocated. This is a 
complicated obstacle to overcome in the context of attempting to obtain 
a voluntary agreement from competing air carriers.
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    \2\ The City comments that each carrier could be returned to 
November 2004 flight levels to ensure that there are not incentives 
for carriers to overschedule. However, if the August 2004 Order 
expires, we expect the target and the base schedules would be issues 
during the negotiations.
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    The FAA and the Office of the Secretary of Transportation are 
continuing the evaluation of market-based mechanisms, such as auctions 
or congestion pricing that may improve on prior methods of allocating 
available capacity at constrained airports. This evaluation includes an 
assessment of the research conducted by the

[[Page 51386]]

Department's contractor, National Center of Excellence for Aviation 
Operations Research (NEXTOR),\3\ in conjunction with various air 
carriers and the Port Authority of New York and New Jersey, on options 
to manage demand at LaGuardia upon the expiration of the HDR at that 
airport. A market-based approach represents a much longer-term option 
that is not needed at this point in time at O'Hare, given the 
expectation of capacity improvement through the OMP.
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    \3\ NEXTOR is a consortium of universities contracted by the FAA 
to research various aviation issues.
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    As it would be unwise to let the limits simply expire, we find it 
necessary to invoke our authority to manage the efficient use of the 
navigable airspace and to impose peak hour scheduling limits at O'Hare 
so as to prevent overscheduling given the airport's current capacity. 
Even with the FAA approval of the OMP, there are no viable capacity 
enhancement efforts (procedural or technological) expected during the 
effective period of this rule that will result in sufficient capacity 
gains to completely meet the airport demand experienced during 2003 and 
2004. Moreover, the uniqueness of O'Hare (as a major, dual hub airport) 
and its critical role in the National Airspace System (NAS) warrant 
special attention and careful measures to manage operations at that 
airport until new capacity comes on-line.
    We stress that as a policy matter the Department promotes the 
efficient utilization of existing system capacity and the development 
of new capacity to meet aviation demand. We also prefer to address 
operational and airport congestion issues on a local level with airport 
operators and customers to the greatest extent practicable. This rule 
provides a temporary regulatory solution necessary to maintain an 
acceptable level of operations at O'Hare without congestion and delay 
impacting the entire NAS.
Authority To Cap Arrivals at the Airport
    America West and Continental opposed all government-imposed 
restrictions on airport access. These carriers, along with others, 
argued that the NPRM is contrary to Congressional intent in the Wendell 
H. Ford Aviation Investment and Reform Act for the 21st Century (AIR-
21), which phased out the slot regulations at O'Hare. They also argue 
that as the HDR has been eliminated at O'Hare, the FAA may not 
implement a rule that is substantially similar to the HDR.
    In carrying out our plenary authority to manage the safe and 
efficient use of the navigable airspace,\4\ we properly may impose 
limits on flights at O'Hare to reduce delays and congestion. The HDR, 
which was also promulgated under this authority, addressed delays and 
congestion at five main airports.\5\ While AIR-21 provided for the 
termination of the HDR at O'Hare and the New York airports, it also 
included a proviso that the FAA's ``authority for safety and the 
movement of air traffic'' was not to be affected by the phase out and 
termination of the HDR at O'Hare \6\ or other HDR airports. There is no 
indication that Congress intended to narrow the FAA's authority to 
manage the use of the navigable airspace or to prohibit its use of this 
authority at O'Hare. AIR-21 by its terms only terminated the HDR then 
in place and did not restrict the FAA's authority to regulate the use 
of the airspace. The legislative history to the House version of AIR-21 
(H.R. 1000), 106th Cong., Rpt. 106-167 indicates Congress' intent 
simply to place O'Hare on the same ``playing field'' as other airports.
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    \4\ 49 U.S.C. 40103.
    \5\ 33 FR 17896; December 3, 1968.
    \6\ 49 U.S.C. 41715(b)(1).
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    Since AIR-21 the FAA has exercised its authority to manage the 
efficient use of the navigable airspace by capping the flood of AIR-21 
slot exemptions filed for LaGuardia Airport (in November 2000), and by 
ordering schedule reductions in August 2004 at O'Hare.\7\ In Vision 
100--Century of Aviation Reauthorization Act (Pub. L. 108-176), 
Congress gave the Secretary and Administrator new authority to convene 
industry-wide scheduling meetings at O'Hare and elsewhere; these 
meetings, however, can only result in effective action if implemented 
through orders limiting flight operations. This basis for this new 
authority would not make sense if Congress had intended to take away 
the Administrator's authority to restrict operations at O'Hare. In all 
of these matters, as with the HDR in 1969, the agency was faced with 
delays at certain key airports that transcended those airports and 
disrupted the efficiency of the NAS. We conclude that the FAA retains 
its full authority to adopt this rule limiting flights at O'Hare.
---------------------------------------------------------------------------

    \7\ The schedule reduction meeting was convened under 49 U.S.C. 
41722.
---------------------------------------------------------------------------

Operational Cap
    The FAA proposed to limit the number of scheduled arrivals at 
O'Hare to 88 per hour, between the hours of 7 a.m. and 7:59 p.m. Monday 
through Friday and 12 p.m. and 7:59 p.m. Sunday.\8\ The limit on 
scheduled arrivals would increase to 98 arrivals per hour in the 8 p.m. 
hour, Monday through Friday. These are the same hourly quotas imposed 
by the August 2004 Order. In setting the hourly arrival cap under the 
Order and proposing the same for the NPRM, the FAA relied on analyses 
of actual, weekday, hourly arrivals and departures at O'Hare in late 
2003 and in 2004. (This is when scheduled demand at O'Hare was at its 
peak and pressure on the ATC system to accommodate that demand is 
reflected in actual airport hourly traffic counts.) We also relied on 
analyses preformed by MITRE Corporation's Center for Advanced Aviation 
System Development (CAASD), which ran computer modelling on behalf of 
the FAA to simulate the effect of hypothetical schedule reductions on 
the level of flight delays at O'Hare given the established air traffic 
control procedures and airport capacity.\9\
---------------------------------------------------------------------------

    \8\ During this period, scheduled arrivals are not to exceed 50 
during each half-hour beginning at 7 a.m. and ending at 7:59 p.m. 
Scheduled arrivals are not to exceed 88 within any two consecutive 
30-minute periods.
    \9\ There were 89 arrivals modeled during the 1 p.m., 3 p.m., 
and 6 p.m. hours and 98 arrivals in the 8 p.m. hour. Four arrivals 
per hour were added for unscheduled flights. The modeled results 
also included the impact of schedule agreements based on a 15-minute 
distribution. While that limitation was not incorporated as a 
condition in the August 2004 Order, it largely has been maintained 
by air carriers through on-going consultation with FAA on proposals 
to move arrivals between 15 minute periods.
---------------------------------------------------------------------------

    The models predicted that constraints used in the August 2004 Order 
and the NPRM would reduce delays at the airport by approximately 20 
percent from the levels attributed to schedules in effect at the time 
the August 2004 Order was imposed. MITRE/CAASD also simulated the 
results of a completely unconstrained schedule, using the industry's 
proposed November 2004 schedules and calculated that delays under the 
Order would be approximately 43 percent less than would be experienced 
if no action were taken and schedules similar to the November 2003 
schedules were allowed to take effect.
    The City commented that the proposed hourly limits do not take 
advantage of present available capacity at the airport. The City 
contended that the airport could accommodate 92 scheduled arrivals per 
hour and accommodate international and unscheduled arrivals above that 
level. ACI-NA supports the City's comments.
    We have reviewed the operational performance of O'Hare, including 
the percentage of flights arriving and

[[Page 51387]]

departing the gate within 15 minutes of scheduled time, the percentage 
of flights delayed for more than one hour, recent actual arrival and 
departure rates, and have considered whether there have been any 
material capacity enhancements that would provide a basis for a higher 
hourly cap on scheduled arrivals. Our review indicated there have been 
variations in delay levels, airport acceptance rates, and weather 
patterns since the Order took effect in November 2004 but no 
significant capacity enhancement measures have been realized.
    As stated, the City proposed a new cap of 92 scheduled domestic 
(and Canadian arrivals) per hour and no limits on international 
arrivals of either domestic or foreign air carriers.\10\ The combined 
arrival demand under such a scenario could be accommodated only under 
optimal weather conditions and then, with some delays. Such a proposal 
would significantly increase delays over current levels in non-optimal 
conditions.
---------------------------------------------------------------------------

    \10\ We note that there would also be an average of four 
unscheduled arrivals per hour.
---------------------------------------------------------------------------

    We noted in the NPRM that if during the pendency of this 
rulemaking, the actual performance of O'Hare--as indicated in the 
cumulative delay statistics and modeling results--demonstrated that an 
increase in the cap on operations would still allow for acceptable 
operational performance, then the arrival cap might be raised in the 
final rule. The final rule, however, adopts the proposed limits of 88 
scheduled arrivals per hour and no more than 50 scheduled arrivals in 
each half-hour period beginning at 7 a.m. The final rule also adopts 
the higher limit of 98 arrivals during the 8 p.m. hour but amends the 
half-hour limit in that hour to be the same as in the other half-
hours.\11\ Accordingly, in the 8 p.m. hour, each half-hour cannot 
exceed 50 scheduled arrivals.
---------------------------------------------------------------------------

    \11\ The NPRM proposed no more than 67 Arrival Authorizations 
between 8 and 8:30 p.m.
---------------------------------------------------------------------------

    The limits proposed in the NPRM mirror those reached during the 
August 2004 schedule discussions and incorporated in the August 19, 
2004 Order, as amended. We accepted the higher limit in the 8 p.m. hour 
in the negotiated agreement and in recognition that the following hour 
had sufficient capacity to quickly absorb any potential delays. The 
actual flight schedules during the half-hour limits for 8 p.m. proposed 
in the NPRM, however, were not balanced. In reviewing the operational 
impact of the compression of arrivals in the first part of the 8 p.m. 
hour, we conclude that it is not appropriate to adopt the proposed 
higher, half-hour limit for this hour. While we will assign Arrival 
Authorizations in accordance with the carrier limits established in the 
Order, should any Arrival Authorizations in the 8 p.m. hour, or any 
other hour, be returned or withdrawn, they will be reassigned but 
within the half-hourly limit not to exceed 50 Arrival Authorizations.
    Some periods may have minor variations from the adopted hourly or 
half-hourly limits based on the Arrival Authorizations initially 
assigned. Some periods may be slightly over the adopted limits, while 
others are slightly under. We do not expect any new, major operational 
impacts, but we expect that some of these variations will be resolved 
over time as we consider schedule adjustments by carriers.
    We are also adopting provisions to accommodate newly requested 
international arrivals above the hourly limits,\12\ and we will also 
assign Arrival Authorizations for international arrivals, as described 
later. We have decided not to withdraw Arrival Authorizations from 
domestic operations in order to accommodate new international arrivals, 
as the Department expects the number of new international arrivals to 
be minimal during the life of this rule. The FAA intends to work with 
operators of international flights to minimize any potential impacts 
during peak hours but ultimately expects to accommodate these new 
flights even if there may be some operational or delay impacts. 
Additional discussion on the adopted rules that apply to international 
arrivals appears in a later section.
---------------------------------------------------------------------------

    \12\ The hourly limit of 88 scheduled arrivals per hour includes 
international arrivals scheduled for the Summer 2004 scheduling 
season.
---------------------------------------------------------------------------

    Although overall performance of the airport has exceeded the 
modeled results, several hours have scheduled arrivals below the levels 
permitted by the Order. Some carriers are not utilizing all their 
authorized scheduled arrival times, resulting in periods when the 
airport could accommodate additional flights. This rule adopts a usage 
provision in addition to a blind buy/sell/lease provision, which we 
expect to increase the actual utilization of the Authorizations 
(because carriers will either use them for their own flights or sell/
lease them to other carriers). Some Arrival Authorizations are 
available and will be assigned at the time of initial assignment under 
this rule. Requests for Arrival Authorizations for new international 
service will be accommodated first and any remaining Arrival 
Authorizations will then be assigned using a preferred lottery. Both of 
these assignment mechanisms and our rationale supporting the use of 
these mechanisms are fully described further in this document.
    In the third extension of the Order,\13\ the FAA specifically 
addressed the ten Arrival Authorizations previously operated by 
Independence Air and explained why those operations are not excess 
capacity. Independence Air ceased operations all operations on January 
6, and because Arrival Authorizations cannot be sold, leased, or 
transferred except on a one-for-one basis under the August 2005 order, 
they have been unused since that date. We concluded that all the 
subject Arrival Authorizations may not be available for reallocation 
because when negotiating scheduled reductions in anticipation of the 
August 2004 order, the FAA had to allocate Arrival Authorization in 
some peak afternoon and evening hours at levels that exceed the peak-
hour target of 88 scheduled arrivals per hour. Furthermore, foreign 
carriers whose operations were not affected by the Order, have adjusted 
their schedules from August 2004 resulting in increased scheduled 
arrivals during certain hours. The Arrival Authorizations assigned to 
Independence Air, particularly in the peak afternoon and evening hours 
will offset these periods of continued scheduling over the operational 
target. We expect that approximately four Arrival Authorizations that 
were operated by Independence Air will be available in the morning 
hours for assignment under this rule.
---------------------------------------------------------------------------

    \13\ Third extension of the Order dated March 27, 2006.
---------------------------------------------------------------------------

    As proposed, the FAA will semi-annually review the operational 
performance metrics for O'Hare, as well as any new, procedural or other 
capacity enhancement measures, to determine if additional Arrival 
Authorizations may be assigned. The FAA intends to increase the cap on 
operations when doing so is supported by the operational analyses 
performed in these reviews and our delay reduction objectives. We 
believe that various provisions of this rule discussed above adequately 
address the City's concern about utilizing existing capacity at the 
airport.
    This rule adopts a caveat in the provisions governing the initial 
assignment of Arrival Authorizations that was not proposed in the 
notice. The NPRM proposed that carriers conducting scheduled service to 
O'Hare under the August 2004 Order would receive corresponding Arrival 
Authorizations for that service. Recent

[[Page 51388]]

events have required that we contemplate a situation for which a 
carrier was operating at ORD under the Order but has since terminated 
all service at O'Hare prior to our concluding this rulemaking. In such 
a case, we conclude such carrier(s) should not be entitled to 
corresponding Arrival Authorizations under this rule. Arrival 
Authorizations are not property and in view of such, the agency has 
expressly limited opportunities to monetize and collateralize this 
authority under the rule adopted here. In the above situation, 
permitting a carrier to ``retain'' this authority under the rule would 
provide the carrier with the ability to unfairly monetize its operating 
authority at the expense of other carriers seeking to operate at O'Hare 
or increase service. We do not find it fair or in the public interest 
to provide a carrier that is not serving the airport with the 
opportunity to monetize and collateralize the authority under the rule 
adopted here. Consequently, we have included a provision to require 
that for a carrier to receive an initial assignment of Arrival 
Authorizations, the carrier must be conducting some level of service at 
the airport as of October 29, 2006.
New Entrant/Limited Incumbent Preference for New Capacity
    The proposal contemplated initially assigning all of the Arrival 
Authorizations based on the airport's existing scheduling limits and 
according to the carriers' existing operations. This assignment would 
benefit all of the incumbent carriers, especially United and American, 
which would hold the vast majority of Arrival Authorizations.
    The Notice proposed that any Arrival Authorizations withdrawn or 
returned to the FAA would be reallocated by lottery to new entrants and 
to carriers with few operations (``limited incumbents''). In addition, 
the Notice proposed that, with respect to additional capacity created 
by an increase in operational caps from 88 to 89 or 90 arrivals per 
hour, the resulting additional Arrival Authorizations also be assigned 
by lottery to new entrants and limited incumbents. Under both 
scenarios, those Arrival Authorizations remaining after lottery would 
be assigned to incumbent carriers and then on an interim basis until 
the next lottery. Under the proposal, with respect to additional 
capacity created by an increase in operational caps above 90 arrivals 
per hour, the additional Arrival Authorizations would be assigned by 
lottery with no preference based on carrier identity.
    We invited comments on whether the preference for new entrants and 
limited incumbents would promote competition. Specifically, we asked 
whether the service benefits potentially obtainable from incumbent 
carriers' networks argue against use of a lottery that prefers new 
entrant and limited incumbent carriers.
    We first address our authority to adopt such a preference and then 
address the policy considerations supporting the preference. Lastly, we 
address arguments relating to allegations of an unconstitutional taking 
of property or deprivation of due process.
    1. Authority to impose a preference for new entrants/limited 
incumbents.
    American and United challenged the FAA's authority to impose a 
preference and argued that the FAA cannot engage in economic regulation 
by favoring some carriers over others to ``promote competition.''
    Any scheme to limit flights at O'Hare must allocate those operating 
authorities according to some criteria. We expect that any set of 
criteria adopted would benefit certain carriers to the detriment of 
others and no one formula would be universally acceptable to all 
affected carriers. The FAA's statutory authority to regulate the 
navigable airspace does not expressly direct the agency to consider any 
specific factor in allocating airspace rights. Absent such expression, 
we must look to the public interest in determining criteria for 
assignment of these Arrival Authorizations. In considering the public 
interest, we are guided by the policy goals prescribed for the 
Secretary \14\ and the pro-competition policies followed by Congress in 
adopting legislation on matters such as slot exemptions and airport 
grant programs. See, e.g., Delta Air Lines v. CAB, 674 F.2d 1 (D.C. 
Cir. 1982). The courts have approved the Secretary's reliance on the 
pro-competition polices in allocating slots under the HDR. Northwest 
Airlines v. Goldschmidt, 645 F.2d 1309, 1315 (8th Cir. 1980).
---------------------------------------------------------------------------

    \14\ See 49 U.S.C. 40101(a)(4), (6), (10-13)).
---------------------------------------------------------------------------

    As we articulated in the August 2004 Order, Congress has set forth 
a policy of promoting deregulation and competition in the airline 
industry by means of the Airline Deregulation Act of 1978 and 
subsequent legislation. In AIR-21, Congress authorized the award of 
slot exemptions at the HDR airports to new entrants and limited 
incumbents--i.e., those carriers that have little or no presence at the 
slot-controlled airports. (See 49 U.S.C. 41714(c), (h), 41716(b), 
41717(c), 41718(b)(1).) Congress also included similar provisions in 
statutes governing airport grants and passenger facilities charges, 
designed to encourage airports to adopt policies that will promote 
competition. (See 49 U.S.C. 40117(k), 47106(f), and 47107(s).)
    The Department's prior pronouncements and decisions on the 
efficient use of the airspace have frequently cited concerns about 
airport access and competition. For example, under the HDR, we 
established a regulatory framework that included a buy/sell provision 
to address the goals of access, competition and small community 
service. Also, under the HDR, the Department sought to alleviate the 
advantage that incumbent carriers gained under the initial allocation 
of the HDR--which ``grandfathered'' hundreds of slots for existing 
operations)--and to afford new entry at the slot-controlled airports. 
We did so by withdrawing up to 5 percent of the air carrier slots at 
LaGuardia, O'Hare and Washington National Airport to allocate by 
lottery to new entrants and limited incumbents.\15\ More recently, in 
response to the escalating number of AIR-21 slot exemptions filed for 
LaGuardia Airport in December 2000, the FAA issued orders governing the 
allocation of those slot exemptions that took into account the need to 
promote competition.\16\
---------------------------------------------------------------------------

    \15\ See FAA's ``Special Slot Withdrawal and Reallocation 
Procedures,'' 51 FR 8632 (1986).
    \16\ See High Density Airports; Notice of Extension for the 
Lottery Allocation and Notice of Lottery for Limited Slot Exemptions 
at LaGuardia Airport 66 FR 41294 (Aug. 7, 2001) (expanding the scope 
of new entrants eligible to participate in the lottery to those that 
did not participate in the Dec. 4, 2000 lottery and those that had 
not applied for the AIR-21 slot exemptions by Dec. 4, 2000); High 
Density Airports, 67 FR 65826 (Oct. 28, 2002) (adopting the new 
entrant preference procedure for reallocating by lottery withdrawn 
or returned exemption slots at LaGuardia).
---------------------------------------------------------------------------

    2. Policy considerations concerning the new entrant/limited 
incumbent preference.
    This part of the proposal received the most comment. Support for 
the preference came from those air carriers or their representatives 
that could benefit from the proposal, such as Alaska Airlines, America 
West, Independence Air, and ACAA. Those opposed to the preference 
include American, Delta Air Lines (Delta), US Airways, United, LECG LLC 
(in coordination with United), Regional Airline Association (RAA), the 
City, and Members of Congress.
    Alaska Airlines strongly supported our reliance on competition 
considerations and argued that the preference is fair, appropriate and 
supports a key public interest objective. America West urged the FAA to

[[Page 51389]]

establish a system by which Arrival Authorizations are withdrawn from 
incumbent carriers if any new entrant or limited incumbent requests one 
and none are available. America West further commented that new 
entrants and limited incumbents should have first access to all new 
Arrival Authorizations even if they exceed 90 per hour. ACAA supported 
preferential treatment for new entrants and limited incumbents and 
asked that Arrival Authorizations held by American and United be 
withdrawn and redistributed at the rate of 2 additional Arrival 
Authorizations per hour. Additionally, ACAA asked that 5% of those 
Arrival Authorizations held by American and United be withdrawn and 
redistributed to new entrants and limited incumbents each year the rule 
is in place.
    The City argued, in contrast, that the FAA should not discriminate 
among types of carriers and noted that O'Hare is one of the most 
competitive markets in the nation. The City also was concerned that the 
proposed preference would discourage incumbent carriers from working on 
meaningful delay reduction (that is, capacity enhancing) technological, 
and/or procedural changes at O'Hare, given that any resulting new 
capacity would initially benefit its competitors. The City also noted 
that allocation by random lottery may not result in the highest and 
best use of a limited resource.
    Members of Congress commented that the proposal treats foreign 
carriers, new entrants, and limited incumbents preferentially and 
severely disadvantages the hub carriers, who have invested heavily in 
O'Hare. They also commented that Chicago is a highly competitive 
marketplace and all but four of the major U.S. carriers are represented 
in this region.
    American commented that it and United had both reduced operations 
throughout 2004 while other carriers were allowed to increase 
operations without any constraint. American refuted the assertion in 
the NPRM that it can shift flights in response to consumer demand 
stating that, as O'Hare is its hub airport, the timing of flights is 
critically important to creating the maximum number of potential 
connecting opportunities. American contended that it reduced its 
schedule to meet the agency's scheduling target under the August 2004 
Order and that Arrival Authorizations in excess of 88 per hour do not 
realistically represent ``new'' capacity.
    Delta commented that the preference for allocating capacity does 
not place ``maximum reliance upon competitive market forces and 
competition'' as stated in the NPRM. Delta argued that the proposal 
undermines competition by favoring some carriers over others, and that 
future capacity should be distributed using the same public auction 
procedure proposed for buy/sell transactions, with all carriers 
permitted to compete equally for those rights.
    US Airways commented that it is uniquely disadvantaged by the 
preference for new entrants and limited incumbents. US Airways argues 
that new entrants and limited incumbents could get new capacity and 
large incumbent carriers could operate flexibly with their larger 
holdings, but it could not respond competitively because it is neither 
a limited incumbent nor a large carrier at O'Hare.\17\ US Airways noted 
that the NPRM did not provide any analysis indicating new entrant and 
limited incumbent carriers would, in fact, offer the travelling public 
more benefits than the network carriers or any analysis assessing the 
impact of Midway Airport. US Airways would prefer that all additional 
Arrival Authorizations be allocated through a no-preference lottery 
available to all carriers. US Airways claimed the stated policy 
directive to rely on competitive market forces and the pro-competition 
policies in the Airline Deregulation Act are not served by the proposed 
preferred lottery because it favors certain types of competitors at the 
expense of others.
---------------------------------------------------------------------------

    \17\ US Airways does not indicate specifically why having 17 
arrivals is unique relative to other non-hub carriers. Air Canada 
has 16 arrivals; Northwest has 20; Delta has 21; and Continental has 
22.
---------------------------------------------------------------------------

    United also argued that adequate competition clearly exists at 
O'Hare and that findings presented in comments filed by LECG show 
Chicago to have the ``second highest penetration of low fare carriers 
out of 11 major hub cities and it also has the lowest weighted average 
fare of any of the 11 major hub cities examined.'' \18\ United 
contended that the FAA offered contradictory arguments by acknowledging 
Chicago as a competitive market in the cost-benefit analysis while 
proposing preferential treatment for certain carriers in the name of 
competition. Additionally, United asked the FAA to take Midway Airport 
into account when considering competition.\19\
---------------------------------------------------------------------------

    \18\ Hub cities included in the LECG analysis include: New York, 
Chicago, Denver, Philadelphia, Houston, Dallas, Charlotte, Detroit, 
Minneapolis, Atlanta, and Cincinnati.
    \19\ According to the LECG analysis, ``In 2004 Midway offered 
non-stop service to all but two of the 25 large hubs with non-stop 
service from O'Hare (Honolulu and Salt Lake City).''
---------------------------------------------------------------------------

    United also expressed concern that the inability to obtain new 
Arrival Authorizations could put it at a competitive disadvantage while 
demand for international service grows and that it would have to 
decrease its service to small and mid-size communities in order to 
compete internationally.
    We have decided to retain the proposed lottery preference. The rule 
will give new entrants and limited incumbents a relatively small 
advantage in obtaining additional Arrival Authorizations from a pool 
that, at most, will be 30 Arrival Authorizations per day--out of the 
more than 1,200 scheduled peak hour arrivals at O'Hare. By way of 
contrast, American and United each operate more than 400 arrivals per 
day. Additionally, both carriers conduct international operations and 
might benefit by receiving Authorizations for those flights outside the 
operational cap. (See discussion on international allocation in this 
document.) Unlike airlines with only a few flights at O'Hare, these 
carriers also have the ability to maintain their market presence by 
substituting larger jets for regional jets on some of their flights.
    New entrants and limited incumbents will receive a preference in 
the reassignment of available Arrival Authorizations created by any 
increase in the hourly limitation from 88 to 89 or 90 authorizations 
per hour. In addition, we are adopting a ``blind'' buy/sell mechanism 
for transactions involving Arrival Authorizations by shielding the 
identity of parties to proposed transactions. This process should give 
a greater opportunity for smaller carriers to purchase or lease 
necessary arrival privileges. In this regard, we are influenced by the 
views of DOJ and others criticizing the lack of a robust secondary 
market under the HDR and urging us to adopt procedures that will result 
in an efficient allocation of slots and competitive entry at 
constrained airports.\20\ At the same time, however, by leaving the 
current assignment of arrival privileges essentially unchanged from our 
existing orders, the vast majority of operating privileges will be held 
by the two largest carriers at the airport.
---------------------------------------------------------------------------

    \20\ DOJ argued in its comments that transparency in the market, 
market power vested in the incumbents, and repeated use of temporary 
administrative allocation mechanisms (that do not create long-term 
property rights) all contributed to the insufficiency liquidity of 
the secondary market under the HDR.
---------------------------------------------------------------------------

    Entry, particularly by low-fare airlines, is an essential 
ingredient for airline competition. Studies of airline industry 
competition under deregulation have concluded that low-fare entry has a 
substantial impact on price and service. For instance,

[[Page 51390]]

Southwest initiated service into Philadelphia in May 2004, and since 
that time the fares in Philadelphia have shifted from being 19 percent 
higher to 2 percent lower than fares in comparable domestic markets 
(comparing the Fourth Quarter 2003 to the Fourth Quarter 2004). A 
policy that fails to provide any special treatment for new entry, the 
approach recommended by United and other larger incumbents, would 
curtail competition that leads to substantial fare reductions, 
increased service, and enables more people to travel.
    The final rule also differs from our proposal in two other 
respects: First, we are not adopting the provision that would have 
required a new entrant or limited incumbent carrier to forfeit Arrival 
Authorizations obtained in a preferred lottery upon an agreement 
providing for the sale, merger, or acquisition by another person of 
more than 50 percent ownership or control of that carrier. The final 
rule provides for a 12-month limitation on the sale and lease of 
Arrival Authorizations obtained in a preferred lottery and we do not 
believe it is necessary to adopt further limitations, as doing so might 
interfere with normal business decisions by a carrier. Second, we are 
clarifying that an incumbent carrier who obtains Arrival Authorizations 
on an interim basis may use them for at least a year before the 
Authorizations would again be made available to new entrant and limited 
incumbent carriers in another lottery. This should provide some 
schedule stability without creating a material obstacle to potential 
new entry.
    3. Takings Clause and Due Process Claims
    United has claimed that the FAA would be violating the carrier's 
substantive due process rights by limiting its operations and giving 
competitors preferential access to Arrival Authorizations. United also 
argues that its flight schedules and operating rights at O'Hare are 
intangible property that the FAA confiscated without due process of 
law.\21\ U.S. Airways also argued that the proposal could violate the 
takings clause of the Constitution, because ``an economically 
unsupported government policy is undermining the value of years of 
investment and business planning that was premised on the ability to 
compete at ORD on a national and international basis.''
---------------------------------------------------------------------------

    \21\ 21 United states that the FAA Chief Counsel has 
characterized airline operations as `valuable assets' [n. 62 to 
United's Comments]. The Chief Counsel, however, stated instead that 
the High Density buy-sell rule had the collateral effect of creating 
a valuable asset. Andrew B. Steinberg & James W. Tegtimeier, Dealing 
With Airport Congestion: The Regulatory Challenger of Demand 
Management, 19 Air & Space Law. 1, 16 (Winter 2005).
---------------------------------------------------------------------------

    We responded to a similar argument from United in the August 2004 
Order. Our analysis set forth in that Order is essentially the same 
here. The Supreme Court instructs us to consider three factors in 
determining whether government action constitutes a taking requiring 
compensation: the action's character, its economic impact, and the 
extent to which the action interferes with investment-backed 
expectations.\22\ These standards do not suggest a plausible Takings 
Clause claim here.
---------------------------------------------------------------------------

    \22\ Connolly v. Pension Benefit Guaranty Corp., 475 U.S. 211, 
224-225 (1986); Concrete Pipe & Products v. Construction Laborers 
Pension Trust, 508 U.S. 602 (1993).
---------------------------------------------------------------------------

    This rule, not unlike other rules or the August 2004 Order, adjusts 
the benefits and burdens of economic life in order to promote the 
common good. This rule limits flights at O'Hare in order to relieve the 
congestion that choked a key airport and caused delays throughout the 
NAS. This rule will benefit the industry and the travelling public. 
This rule codifies the current level of operations mandated by the 
August 2004 Order and does not require additional flight reductions. 
Since the Order has been in effect, O'Hare has experienced more than a 
20 percent delay reduction from the delays experienced prior to the 
issuance of the Order. Furthermore, this rule will be in effect for a 
relatively short period so as not to unduly interfere with the 
marketplace more so than necessary. This type of regulation is not 
normally deemed a taking of property.\23\ And, unlike the governmental 
action in Eastern Enterprises v. Apfel, 524 U.S. 498 (1998), we are not 
unfairly singling out an air carrier based on its conduct far in the 
past and unrelated to any future commitments or injury it caused. 
Rather, the two largest O'Hare air carriers significantly increased 
their flights starting in late-2003, causing over scheduling and delay 
conditions.
---------------------------------------------------------------------------

    \23\ Connolly, 475 U.S. at 225.
---------------------------------------------------------------------------

    The second element of the Court's standard involves the rule's 
economic impact. There is no evidence that restricting O'Hare flights 
for a limited period of time will have an unduly harmful impact on any 
air carrier. To the extent there is an economic impact by virtue of 
this rule, it may be mitigated and moderated by the reduced operating 
costs resulting from prior congestion and the potential opportunities 
for limited growth during the life of this rule.
    The third element of the Court's standard concerns whether the rule 
will interfere with a firm's investment expectations.\24\ That is not 
the case here. We have repeatedly used our authority to manage the 
efficient use of the airspace to administer the HDR at O'Hare and three 
other major airports and done so over many years. More recently, we 
imposed additional restrictions at LaGuardia because of increased 
delays at that airport, and from time to time have taken other steps to 
cause airlines to reduce flights in order to prevent unacceptable 
levels of delays. Further, even though the Airline Deregulation Act of 
1978 terminated the Government's regulation of air carriers' rates, 
routes, and services, the Department and the FAA nonetheless have 
extensive regulatory authority over domestic airline operations. The 
Department and the FAA, for example, regulate in the areas of 
certificates, compliance, handicapped discrimination, records on the 
movement of traffic, carrier management, unfair and deceptive 
practices, unfair methods of competition, and airline safety. The 
Department and the FAA's regulation of airport development and noise 
also affect an airline's investment expectations.
---------------------------------------------------------------------------

    \24\ Cf. Connolly, 475 U.S. at 226-227.
---------------------------------------------------------------------------

    As we stated in the August 2004 Order, no airline owns the airspace 
at O'Hare and no airline has a license to operate a specific number of 
flights at the airport. The circumstances at O'Hare do not indicate 
that any carrier holds a cognizable ``property interest'' in 
maintaining its schedules at the airport. O'Hare has long been subject 
to slot rules, it has never had unlimited capacity, and carriers should 
have known that large increases in service could lead to new controls 
on the use of the airport's capacity. Therefore, United and U.S. 
Airways could not have reasonably believed they would be able to add or 
operate all the flights they wanted in perpetuity.
    In any event, United's argument that the regulation is tantamount 
to a taking without just compensation is contrary to Takings Clause 
precedent. Continental Air Lines v. Dole, 784 F.2d 1245 (5th Cir. 
1986). The Continental decision quoted Justice Holmes' statement, 
``Government hardly could go on if to some extent values incident to 
property could not be diminished without paying for every such change 
in the general law.'' 784 F. 2d at 1252 (quoting Pennsylvania Coal Co. 
v. Mahon, 260 U.S. 393, 413 (1922))
    United also claimed that the regulation discriminates against 
incumbents in violation of United's

[[Page 51391]]

Equal Protection rights. The test for determining whether an economic 
classification is vulnerable to an Equal Protection clause challenge is 
if it ``proceeds along suspect lines [or] infringes fundamental 
constitutional rights'' and ``if there is any reasonably conceivable 
state of facts that could provide a rational basis for the 
classification.'' \25\ An incumbent air carrier is not a ``suspect'' 
class within the meaning of the Constitution's Equal Protection clause. 
Further, an air carrier has no fundamental constitutional right to an 
operation at a particular airport. There is a rational basis for the 
preference in this regulation. The limited preference will benefit 
consumers because it will promote entry and new competition at O'Hare 
and new entry has the potential to lower airfares at O'Hare. It is 
consistent with the public policies established by Congress. Finally, 
it does not impose significant harm on the incumbent carriers since the 
allocation to them of their November 2004 operations enables them to 
continue to operate their networks. Further, United has not shown that 
the regulation is ``so arbitrary or irrational that it runs afoul of 
the Due Process Clause'' and ``fails to serve any legitimate 
governmental objective.'' \26\ This regulation serves to meet the 
recognized need of addressing persistent flight delays related to over 
scheduling at O'Hare, and is intended as an interim measure because the 
FAA anticipates that the rule will yield to longer-term solutions to 
traffic congestion at the airport.
---------------------------------------------------------------------------

    \25\ FCC v. Beach Communications, Inc., 508 U.S. 307, 313 
(1993).
    \26\ Lingle v. Chevron U.S.A. Inc., S. Ct. No. 04-163, slip op. 
at 12 (2005).
---------------------------------------------------------------------------

Limited Incumbent Carriers
    The NPRM proposed to define a limited incumbent carrier as a 
carrier that operates eight or fewer Arrival Authorizations at O'Hare 
and has never sold or given up an Arrival Authorization. In the 
proposed rule we stated our belief that this approach represented a 
fair approach to carriers that are not new entrants but should be 
afforded some additional consideration due to their limited presence at 
the airport. We also noted that the proposed term is consistent with 
the August 2004 Order.
    America West commented that a cap of eight Arrival Authorizations 
for limited incumbents would be inadequate to generate sustained price 
competition at O'Hare. Furthermore, the carrier argued that the 
proposal does not satisfy Congress' objective to promote competition, 
because Congress (in AIR-21) capped limited incumbents at 20 slot 
exemptions at LaGuardia, which is a smaller airport than O'Hare. 
America West then argued that Arrival Authorizations should be 
withdrawn from incumbents to fulfill requests from new entrants and 
limited incumbents.
    Conversely, American argued that the definition of limited 
incumbent should be consistent with the International Air Transport 
Association (IATA) Worldwide Scheduling Guidelines and the European 
Union's slot regulation (EU 793/2004), which define a new entrant 
carrier as a carrier that holds fewer than five slots at an airport on 
the day for which they are requested.
    Independence Air and Alaska Airlines requested that the definition 
be expanded to include a carrier that operates 10 or fewer flights. 
Independence Air pointed out that the modest increase of two arrivals 
would bring that carrier into the scope of the definition of this 
category. The carrier also argued that this small change supports the 
public interest of fostering competition by affording the carrier a 
preference in a lottery to counter the vast number of Arrival 
Authorizations held by the two dominant carriers.
    We proposed eight Arrival Authorizations as the threshold for 
determining limited incumbent status, as that was the number set forth 
in the August 2004 Order. There is no bright line test for limited 
incumbency and the initial selection of eight Arrival Authorizations 
was consistent with the pro-competition goals of AIR-21. We do not view 
it necessary to create a more generous exception for such carriers, nor 
are we persuaded by the arguments of the carriers to increase this 
number to 10. Had we proposed 10 Arrival Authorizations in the notice, 
it is likely that carriers (other than Independence Air) would have 
sought a higher number. We note that although AIR-21 changed the 
definition of a ``new entrant/limited incumbent'' carrier to a carrier 
that holds 20 slots and slot exemptions; it was very different in its 
provisions for slot exemptions for new entrants at O'Hare. At O'Hare, 
AIR-21 slot exemptions for new entrants were limited to 30 in total, in 
contrast to the statutory provisions for LaGuardia and JFK, which 
capped new entrants at 20 slot exemptions each. Consequently, we 
reiterate the rationale behind our test for limited incumbency as 
proposed in the NPRM and in the August 2004 Order and, with minor edits 
for clarity, we adopt the definition of limited incumbent as proposed.
    Alaska Airlines supported the proposal, as stated in the NPRM, to 
allocate flights initially to the carrier actually operating the 
flight, except where the operating carrier does not market its service 
independently and in its own name. Alaska stated that it has full 
control over the flights it operates at O'Hare and it should not be 
penalized because some flights also carry the American code.
    Alaska's comment is consistent with how we proposed to treat code 
share arrangements in the NPRM. We proposed that, with limited 
exception, Arrival Authorizations would be allocated solely to the 
carrier that actually operated the flight, regardless of any code 
sharing agreements. We further proposed that in making our initial 
Arrival Authorization determinations, we do not intend to assign 
Arrival Authorizations to a carrier that is essentially operating its 
service as a contractor for another carrier and does not market its 
service independently and in its own name. We have been presented with 
no information that would suggest this distinction is invalid. 
Therefore, this rule adopts our proposal that where the operating 
carrier conducts the flight solely under the control of another 
carrier, the carrier controlling the inventory of the flight will 
receive the Arrival Authorization.
    We also find it necessary to adopt some minor edits to the 
definition for clarity. In defining this term, we resort to using the 
phrase ``U.S. or Canadian air carrier that holds or operates, on its 
own behalf, 8 or fewer Arrival Authorizations * * *'' As this rule also 
permits leasing, it is critical to characterize a carrier's rights 
respective to the operating authority accurately. In addition, the rule 
clarifies that for an Arrival Authorization held or operated by a U.S. 
or Canadian carrier to count towards limited incumbent status, the 
relevant carrier must hold or operate that authorization on its own 
behalf. This will not penalize a carrier that conducts service at 
O'Hare primarily as a contractor for another carrier and does not 
market its service independently and in its own name from the ability 
to obtain authorizations in its own name in a lottery.
Blind Buy/Sell Market
    Under the proposed rule, we provided that the purchase and sale of 
Arrival Authorizations would be allowed to promote maximum reliance on 
market forces and efficient utilization of the Arrival Authorizations. 
To ensure that all carriers have a chance to obtain these valuable 
privileges, sales of Arrival Authorizations would be permitted only 
through a ``blind market'' overseen by

[[Page 51392]]

the FAA in which the only consideration for transactions would be 
monetary. Thus, under the proposal, the identity of the bidder would be 
confidential and the transaction could not involve real property, such 
as gates, non-monetary assets, or other services in lieu of cash. In 
the NPRM, we did not propose specific regulatory text to permit the 
leasing of Arrival Authorizations but put out the concept for comment.
    The majority of commenters did not object to use of a blind 
secondary market as proposed for the buying and selling of Arrival 
Authorizations. A majority of commenters did, however, object to the 
prohibition on using non-monetary assets as payment and the proposed 
limits on the use of Arrival Authorizations as collateral for loans.
    DOJ urged the Department to move aggressively to adopt either 
congestion pricing or an auction to allocate scarce airport/airspace 
capacity at O'Hare, cautioning that anything short would lead to an 
inefficient allocation. DOJ also stated that while the ``blind'' aspect 
of the secondary market may remedy problems associated with the bidding 
process, this proposal does nothing to encourage the two largest 
carriers to sell Arrival Authorizations. According to DOJ, other 
carriers that also have a presence at O'Hare, generally use that access 
to connect their hubs with Chicago and therefore, place high value on 
those Arrival Authorizations and thus are unlikely to sell. 
Consequently, DOJ does not see that this rule would result in many 
sales.
    American supported the concept of a market for Arrival 
Authorizations but opposed the proposal to regulate and govern the 
operation of that market, arguing for an independent, free, and 
competitive market similar to the HDR. U.S. Airways, United and Delta 
argued that under the HDR, carriers selling slots in the secondary 
market of necessity evaluated the total compensation package being 
offered before choosing the successful bid. Moreover, U.S. Airways 
believed that given the industry's liquidity problems and the 
operational needs of carriers at various airports, an airline selling 
or buying an Arrival Authorization ought to be able to accept or offer 
non-monetary consideration (i.e. services, ground handling) as part of 
the bid.
    United suggested a revised approach to conducting the secondary 
market and alternatively proposed that the FAA serve as the 
clearinghouse through which sales of Arrival Authorizations are 
completed. In this alternative, a carrier wishing to sell (or to buy) 
an Arrival Authorization would notify the FAA of the relevant details 
and the FAA would post such notice to potentially interested air 
carriers. United suggested a similar process for carriers seeking to 
obtain Arrival Authorizations. United also commented that restricting 
the sale to an all-cash-basis unnecessarily limits the flexibility of 
buyers and sellers and could effectively freeze some buyers out of the 
bidding entirely. Under United's proposal, sellers would be presented 
with all bids that are received by FAA, but the identity of the bidders 
would not be disclosed. Once the seller selected the offer it deems 
most attractive, the identity of the bidder would be disclosed to the 
seller and the transaction could be completed. United similarly urged 
the FAA to permit leasing/subleasing because it would allow carriers to 
adjust their schedules based on seasonal and market fluctuations. 
Lastly, United submitted that the secondary market will not be robust 
as long as new entrants, limited incumbents, and foreign carriers get 
Arrival Authorizations free of charge from the government.
    RAA commented that the current system of buying, selling, leasing, 
and sub-leasing slots at HDR airports has worked effectively and does 
not warrant any change for the limited duration of this proposed rule. 
At the very least, RAA suggested that if sales are to be blind, there 
is no reason to preclude non-cash considerations for Arrival 
Authorizations.
    Independence Air contended that buyers will ``undoubtedly wish to 
negotiate terms, including but not limited to, the terms of any 
warranties, the definition of what constitutes a default under the 
purchase agreement, limitations of liability, customary representations 
as to corporate authorization, approval and agreement enforceability, 
and damages for any breach of the agreement and other commercially and 
legally important matters prudently included in any significant 
purchase and sale agreement.'' Independence Air suggested that the FAA 
is not in a position to broker the details of a commercial arrangement 
and should not adopt a rule that cannot be readily enforced and that 
can so easily be manipulated by carriers. Independence Air also did not 
support the proposed cash only basis for transactions.
    The ACAA supported the blind market system and stated that this 
market mechanism is reasonable and available to all carriers. ACAA 
further argued that American and United should be blocked from 
acquiring additional Arrival Authorizations if any other carrier 
submits a bid in any sale so that these two carriers cannot bid higher 
to block entry of low-fare carriers.
    The City supported the buying and selling of Arrival 
Authorizations, but requested that as airport operator it be given a 
consultative role with the airlines in the process of a significant 
sale or lease of Arrival Authorizations (or at least advance notice of 
such a sale or lease), with a portion of the funds reserved for the 
airport.
    America West also supported the proposed secondary market but 
commented that the FAA, not the selling carrier, should keep the 
proceeds of sales on the blind secondary market. America West explained 
that proceeds from the sale of Arrival Authorizations could be directed 
to enhancing capacity at O'Hare. Alternatively, if proceeds from the 
sale went to the selling carrier(s), America West said there would be a 
perverse incentive for airlines to resist expansion of airports because 
such expansion would eliminate the ``paper value'' of their Arrival 
Authorizations.
    A constant criticism of the HDR buy/sell provision was that it did 
not ensure a ``fair'' distribution of slots across the industry because 
the largest slot-holders (typically, legacy carriers) could consider 
the identity of would-be buyers or lessees and choose not to provide 
them with slots--so as to deprive potential new entrants of airport 
access. Smaller carriers informed us that they were not even made aware 
when slots were available for sale or lease. The blind aspect of the 
buy/sell provision established by this rule should ameliorate this 
problem, at least to some degree, by making it more difficult for slot 
holders to consider the would-be buyer/lessee's likely use of Arrival 
Authorizations.
    We acknowledge that our proposal to restrict the use of non-
monetary considerations in transactions involving Arrival 
Authorizations (i.e., the ``cash-only'' aspect of our rule) was 
unpopular among the commenters. Most of the comments suggested that 
each air carrier should be allowed to consider the value of specific 
gates, baggage handling, marketing arrangements, and other potential 
offers in lieu of cash. (Under our proposal carriers may, of course, 
continue to pursue business opportunities in the ordinary course so as 
to exchange services or facilities at O'Hare or other airports, but 
they cannot use Arrival Authorizations as part of any such 
discussions.) Although there is merit to this position, nevertheless we 
continue to be concerned that the uniqueness of non-monetary assets, 
proposed as consideration in potential

[[Page 51393]]

transactions, would effectively undermine the ``blind'' nature of the 
secondary market. The inclusion of such non-monetary assets would make 
it virtually impossible to hide identities during the bid evaluation 
process unless the FAA chose to ascribe a monetary value to non-
monetary assets, a difficult and protracted exercise that would not be 
useful given the short duration of this rule. Therefore, the ``cash-
only'' aspect of our proposal is unchanged in the final rule.
    We reject United's suggested approach for similar reasons. Under 
United's approach, all bids would be forwarded to the selling carrier 
for review and selection. Once the selling carrier selected a bid, the 
identity of the selected bid would be released and the affected 
carriers would be free to consummate the transaction. United's approach 
only makes sense if non-monetary assets are permitted in the bidding 
package. If, however, the bids are strictly limited to money, nothing 
is gained by receiving all the bids because the only relevant bid is 
the highest one.
    United also suggested that the FAA establish a corresponding 
process that would allow a carrier seeking to purchase or lease an 
Arrival Authorization to advise the FAA with that information to be 
made public in a similar (blind) manner. We accept this suggestion and 
provide for such notification in this rule. As in the case for sales or 
leases, we will not disclose the identity of the carrier but will 
include information such as time and frequency desired, effective date, 
reserve price, or other pertinent information. This information will be 
posted within two business days and for a period of at least 10 days. 
All offers of Arrival Authorizations for sale or lease will be 
processed in accordance with the adopted rules.
    America West recommended that the FAA retain all proceeds from the 
sale of Arrival Authorizations for use in capacity expansion projects 
at the airport. While this proposal has appeal, the FAA is currently 
prohibited by statute from promulgating rules that result in the agency 
collecting user-fees \27\ and accepting revenue for the sale of Arrival 
Authorizations.
---------------------------------------------------------------------------

    \27\ Consolidated Appropriations Act, 2005, Pub. L. 108-447, 
Federal Aviation Administration, Operations, Title I, Division H, 
118 Stat. 2809, 3201 (2204)
---------------------------------------------------------------------------

    With respect to the City's requests, the required public posting of 
the available Arrival Authorizations will provide all interested 
parties, including the City, with notice of transactions. The City may 
exercise its proprietary powers as airport operator with respect to 
managing the efficient utilization of gates and related facilities, 
including directing sharing of unused gate space, overseeing subleasing 
requests, and otherwise negotiating gate assignments or conversions to 
common-use, where practicable. Requiring advance airline-airport 
consultations otherwise would interfere with the efficient assignment 
mechanism we anticipate to occur in the blind market. Given our limited 
options, a lottery system provides the fairest and most unbiased 
process for allocating new capacity while the blind buy-sell market 
provides potential opportunities for carriers that value the Arrival 
Authorizations the most.
Leasing of Arrival Authorizations
    The comments supported allowing leasing of Arrival Authorizations 
and cited positive experiences with leasing arrangements under the HDR. 
Delta argued that if leasing is prohibited, incumbent carriers facing 
temporary market conditions or seasonal fluctuations in demand for 
their service at the airport would be forced to operate sub-optimal 
service patterns to preserve their airport access rights until 
conditions improved. Furthermore, Delta commented that the opportunity 
to lease Arrival Authorizations gives carriers the flexibility to test 
marginal new markets without committing the potentially significant 
capital investment that a purchase-only rule would impose.
    RAA commented that leasing and sub-leasing should be permitted as 
they play a crucial role in allowing carriers to adopt seasonal changes 
in demand.
    Independence Air echoed other carriers and urged the agency to 
permit leasing as it is a logical and necessary means to make an 
efficient market and urged the FAA to allow leasing in the final rule. 
However, Independence Air did not believe the FAA can effectively match 
lessors and lessees simply on the basis of which lessee is willing to 
pay the most for the Arrival Authorization. As with buying/selling 
Arrival Authorizations, Independence Air contended that there are many 
commercial and legal considerations that impact a lessor's motivation 
to enter into an Arrival Authorization lease agreement.
    As discussed in the NPRM, leasing of arrival privileges would allow 
the carriers to accommodate seasonality and market fluctuations 
inherent in airline operations. Leasing permits access to the airport 
that some carriers may not otherwise have. Leasing also can result in 
higher efficiencies and lower costs to the carriers holding the Arrival 
Authorizations. Allowing leases and sub-leases of Arrival 
Authorizations also makes sense given the minimum usage requirement.
    As specified in the adopted regulations, leasing will be permitted 
subject to the same conditions as the buying or selling of Arrival 
Authorizations. A carrier seeking to lease Arrival Authorizations must 
notify the FAA, and the agency will post the solicitation (including 
relevant information) and accept all timely-filed bids. Only the 
highest bid will be forwarded to the potential seller or lessor, and 
the only permitted consideration is monetary. If the relevant carriers 
agree to negotiate or contract other details of the transaction that do 
not violate or infringe upon the applicable regulations, they may do so 
without FAA involvement.
    In addition, we adopt several modifications in this section.
    First, carriers that have Arrival Authorizations available for sale 
or lease may submit a base reserve price for Arrival Authorizations to 
the FAA for posting on the Web site along with other relevant 
information. Including a base reserve price provides a floor for the 
bids and facilitates the process.
    Second, we have deleted the requirement that a carrier must notify 
the FAA 30 days before the planned sale date. Upon review, we concluded 
that the 30 day requirement could be unduly restrictive, particularly 
for carriers that may want to lease an Arrival Authorization and, for 
scheduling reasons, may not be in a position to provide 30 days notice.
    Third, as a usage requirement is also adopted in this rule, 
carriers may need to shorten the duration of the bidding/selection 
process. Therefore, we have included two modifications: (1) The FAA 
will post notice of available Arrival Authorizations within two 
business days; and (2) the bidding period will be open for 10 business 
days. The NPRM did not specify the timeframe for bids to be submitted. 
We chose 10 business days, which should allow carriers sufficient time 
to assimilate data and make decisions. The 10 business-day period is 
not excessive and is intended to expedite the transaction process.
    Fourth and as discussed earlier, carriers may advise the FAA of 
their interest in obtaining Arrival Authorizations in the market and 
request that the agency post the information that a carrier is seeking 
Arrival Authorizations.
    The FAA will post listings of Arrival Authorizations for sale or 
lease through the blind market at http://

[[Page 51394]]

www.Demand-Management-Airports.faa.gov. Users may register with the Web 
site to receive immediate notification of information posted on this 
site.
Pledging of Arrival Authorizations
    United, Delta, U.S. Airways, and JP Morgan Chase & Co. (JP Morgan) 
all commented unfavourably on the proposal's prohibition on the 
pledging of Authorizations as collateral. They argued that preventing 
the collateralization of these ``assets'' will not reduce barriers to 
entry but rather contribute to the barriers. They contended that 
carriers may need access to this financing option in order to purchase 
Authorizations under the rule and that this prohibition eliminates this 
option for affected carriers.
    We have withdrawn the prohibition on pledging Arrival 
Authorizations as collateral in this rule. We do not seek to eliminate 
options available to carriers to secure needed financing. Arrival 
Authorizations are an operating privilege and we recognize that the 
buying, selling and leasing of these privileges may be advantageous to 
facilitate the carriers' efficient use of these privileges.
    As proposed, the final rule permits Arrival Authorizations to be 
assigned only to eligible air carriers and not other entities. Since 
collateralization arrangements are strictly a matter of contract 
between the affected carriers and other parties, we will not record 
changes to the holder/operator status to reflect any pledging of these 
Arrival Authorizations. Carriers are free to structure the pledging of 
these Authorizations, subject to other requirements of this rule.
International Arrivals
    In the NPRM, we proposed the following two options for assigning 
Arrival Authorizations to foreign air carriers:
    Administrative Option--The FAA would accommodate requests by 
foreign air carriers for new or additional access administratively. If 
an Arrival Authorization was not available within the time period 
requested by a foreign carrier, an Arrival Authorization would be 
withdrawn from a domestic carrier to accommodate that request.
    Elective Option--Foreign air carriers seeking additional Arrival 
Authorizations above the initial assignment of Arrival Authorizations 
could elect: (1) To obtain Arrival Authorizations as described above 
under the Administrative Option; or (2) or obtain Arrival 
Authorizations in the same manner prescribed to U.S. and Canadian air 
carriers, which is through the blind market and the lottery mechanisms.
    Operations by Canadian air carriers were excluded from these 
proposed options because Annex II of the 1995 bilateral aviation 
agreement between the U.S. and Canadian governments provides that 
Canadian air carriers be treated in the same manner as U.S. air 
carriers under airport access rules for domestic operations at O'Hare. 
Therefore, arrivals at O'Hare from Canada by U.S. and Canadian air 
carriers are assigned under the same procedures that apply to domestic 
and transborder flights.
    The proposal treated foreign air carriers differently than U.S. and 
Canadian air carriers for several reasons. First, air service 
agreements between U.S. and foreign governments obligate both parties 
to ensure fair and equal opportunity to compete in a market. Second, 
foreign air carrier operations have remained relatively constant over 
the last several years while at the same time, domestic operations have 
increased significantly. Third, U.S. air carriers have the ability to 
make international service decisions based on their allocated base of 
total Arrival Authorizations if additional Arrival Authorizations were 
not available for assignment by the FAA. This is not an option for 
foreign air carriers that have a limited presence at O'Hare. For most 
international operations, Chicago's Midway Airport is not a practical 
alternative airport for serving Chicago since Midway's runways could 
not accommodate the wide body aircraft serving many of the 
international points from O'Hare.
    Other elements of the NPRM applicable to Arrival Authorizations 
assigned to foreign air carriers, irrespective of the option, were: (1) 
Initial Arrival Authorizations would be assigned to foreign air 
carriers based on historical seasonal schedules; (2) Arrival 
Authorizations could not be bought, sold, or leased; (3) Arrival 
Authorizations would not be subject to a minimum usage requirement. 
However, if they are not used for more than a 15-day period, under the 
proposal they must be returned to the FAA.
    The Department faced this issue previously under the HDR. At 
O'Hare, foreign and domestic carriers were initially treated equally in 
that slots were withdrawn to accommodate international requests from 
both foreign and domestic carriers if not otherwise available. We 
subsequently amended the HDR to limit withdrawals for international 
operations for the benefit of carriers with 100 or more slots at 
O'Hare. Congress later capped the total number of domestic slots that 
could be withdrawn and reallocated for international service. 
Concurrently, Congress also authorized the Secretary of Transportation 
to grant exemptions from the HDR for foreign air carriers serving 
O'Hare. The Secretary exercised this authority as needed and until May 
2000, when the slot requirements for international flights were 
eliminated at O'Hare.
    Several commenters supported preferences or exemptions from the 
established cap for international arrivals without distinguishing 
between operations conducted by U.S. carriers and foreign air carriers.
    KLM Royal Dutch Airlines, as one of two foreign carriers to 
comment, did not favor any particular allocation option for foreign 
carriers. KLM did, however, support the August 2004 Order and suggested 
that the FAA follow IATA Worldwide Scheduling Guidelines, which most 
countries follow in allocating slots at constrained airports throughout 
the world. IATA expressed concern that the proposals could discriminate 
between U.S. and foreign air carriers.
    The other foreign air carrier to comment was Air France, who 
strongly supported an administrative assignment for new Arrival 
Authorizations and acknowledged that this could be accomplished under 
either Option 1 or 2. Air France currently operates one daily passenger 
flight between O'Hare and Paris, but has offered two such flights in 
the past. Air France stated that initiating international service 
requires significant investment and that foreign carriers may hesitate 
to make such an investment if they are unsure they can obtain an 
Arrival Authorization at O'Hare under the market or lottery systems. 
Air France argued that it is necessary to guarantee foreign carriers 
access to an Arrival Authorization at O'Hare should they decide to 
expand service there. Air France did not oppose the proposed 
prohibition on buying/selling, or leasing assigned Arrival 
Authorizations; nor did it oppose the return of Arrival Authorizations 
to the FAA if not used for more than 15 consecutive days.
    American and United agreed that the allocation provisions should 
not discriminate against foreign carriers, but argued that the proposed 
administrative option unduly rewards foreign carriers at the expense of 
U.S. carriers. Furthermore, they complained that they would be 
restricted from adding new international services unless they reduced 
domestic flights. They

[[Page 51395]]

submitted that foreign air carriers providing similar international 
services would continue to receive preferred treatment, which places 
U.S. carriers at a competitive disadvantage.
    United also pointed out that Congress had previously prohibited the 
Secretary of Transportation from withdrawing slots from domestic 
carriers to accommodate international operations while O'Hare was 
limited under the HDR. (See 49 U.S.C. 41714(b)(2)). United disputed our 
reliance on international air services agreements as a rationale for 
the proposed Administrative Option, observing that other countries do 
not interpret the bilateral agreements as requiring them to make slots 
available for U.S. air carriers. United commented that this proposal is 
not in the national interest because it weakens an already unfavorable 
trade balance by shifting carriage of international passengers (and 
their revenue) from U.S. carriers to foreign corporations. United 
prefers exempting all international arrivals, which would not arguably 
violate any international air service agreement. Lastly, United noted 
that U.S. carriers have been denied access to foreign airports when 
capacity is limited.
    The City also argued for exempting all international flights 
because international operations are a small portion of the total 
flights at O'Hare and that the gate, immigration and terminal 
facilities at Terminal 5 would provide a natural limit to these 
flights.
    We have reviewed the number of international arrivals conducted by 
foreign air carriers and domestic carriers during the peak hours. 
Together, these arrivals account for six percent of total arrivals at 
O'Hare. This six percent is almost equally divided between foreign air 
carrier arrivals and U.S. air carriers. We note that while some foreign 
air carriers have periodically dropped service, other foreign air 
carriers have added service, such that the overall level has remained 
constant for several scheduling seasons. International operations by 
U.S. air carriers have also been relatively constant over the past 
several years.
    We do not agree with United's assertion that our reliance on 
international air service agreements was erroneous and misguided. We 
are bound by our agreements with foreign governments to ensure that the 
flag carriers of each party have a fair and equal opportunity to 
compete in the market.\28\ In particular, as the Department seeks to 
expand Open Skies agreements, we do not want to adopt limits that might 
preclude either domestic or foreign air carriers from taking advantage 
of new opportunities. At the same time, we are mindful that U.S. 
carriers are also constrained by facilities or slot constraints at some 
foreign airports and do not always get to operate their preferred 
schedules. We prefer to address those issues on a case-by-case basis 
rather than set up a regulatory framework that makes U.S.-constrained 
airports more difficult to access.
---------------------------------------------------------------------------

    \28\ Access to serve the Chicago area must generally be through 
O'Hare due to runway or facility constraints at other Chicago area 
airports.
---------------------------------------------------------------------------

    In view of the comments, we are adopting a revised approach that 
treats all international arrivals the same, regardless of whether 
operated by a foreign or domestic air carrier, a position which is also 
consistent with international air service agreements. An Arrival 
Authorization will be required for any international arrival at O'Hare 
and will be assigned at the requested time or in the adjacent hour if 
one is not otherwise available. Under the rule we may also assign a 
time for new or rescheduled international arrivals within an hour of 
the requested time if needed to address operational efficiencies and 
facilitate schedule de-peaking.
    As this approach does not involve any withdrawal of Arrival 
Authorizations from domestic carriers to accommodate new international 
arrivals, it may result in operations exceeding the adopted hourly 
limits. In adopting this approach, we weighed the public interest in 
maintaining our international obligations under various air service 
agreements with our congestion and delay reduction goals of this rule. 
Given the relative stability in the number of international arrivals 
since 2002 and the limited duration of this rule, we do not expect a 
dramatic increase in requests for Arrival Authorizations. As this rule 
is an interim measure, it is expected that new airport capacity will 
address this issue for the longer-term. We acknowledge that this 
approach may have some impact on the congestion and delay reduction 
goals of this rule. However, we believe that the public interest 
supports the offset of our delay reduction goals to accommodate our 
international obligations. We will consider the effect of any 
additional international arrivals as we conduct the semi-annual 
operational performance and capacity review.
    As a result of this new approach in addressing international 
arrivals, we must modify how we proposed to initially assign Arrival 
Authorizations for domestic use and for international use initially 
under this rule. In calculating the proposed cap of 88 arrivals per 
hour, we included all international operations scheduled for August 
2004 during the O'Hare schedule reduction meeting. Foreign air 
carriers, except Canadian air carriers, were not affected by the FAA's 
Order, and subsequently have added new flights and adjusted schedule 
times that will be reflected in the initial assignment under this rule. 
International operations by U.S. carriers were included in the August 
2004 Order as part of the overall carrier limits, and each carrier 
could choose the international market, domestic market, or transborder 
Canadian market to serve within those limits.\29\ Consequently, we will 
review each U.S. air carrier's operations under the August 2004 Order 
and assign Arrival Authorizations as either domestic or international, 
as appropriate. New international arrivals by U.S. carriers after the 
effective date of this rule will be eligible for assignment above the 
operational limits. The combined total of each U.S. air carriers' 
(initially assigned) Arrival Authorizations (domestic and 
international) will not exceed the total authorized for that carrier 
under the Order. We will make a similar determination to assign Arrival 
Authorizations for foreign air carrier operations using published 
schedules or other information available to the FAA for the base for 
the Summer 2006 and Winter 2006 scheduling seasons.
---------------------------------------------------------------------------

    \29\ Canadian carriers' scheduled arrivals were limited by the 
Order but do not include arrivals from points outside Canada. 
Therefore, no adjustments are needed under this provision.
---------------------------------------------------------------------------

    Beginning with the Summer 2007 scheduling season, and for every 
season thereafter, we will publish a notice in the Federal Register 
announcing the submission deadline for priority consideration for the 
assignment of historic and new international arrivals. This is similar 
to the IATA process followed by most slot-constrained airports outside 
the U.S. In assigning Arrival Authorizations for international 
arrivals, we expect to follow the procedures and processes of the IATA 
Guidelines to the extent those Guidelines do not conflict with this 
rule. All carriers must request Arrival Authorizations, in accordance 
with the scheduling season and information published by the FAA in the 
Federal Register.
    As proposed, we adopt the provision that the Secretary of 
Transportation may withhold the assignment of an Arrival Authorization 
to any foreign air carrier of a country that does not provide

[[Page 51396]]

equivalent rights of access to its airports for U.S. air carriers.
    As proposed, Arrival Authorizations assigned for international use 
may not be bought, sold, leased or otherwise transferred. Carriers may, 
however, trade these Arrival Authorizations assigned for international 
use on a one-for-one basis. We clarify that domestic Arrival 
Authorizations may be traded within the carrier's base subject to FAA 
approval. Arrival Authorizations assigned for international arrivals 
must be returned if not used for a 15-day period.
    Lastly, we revise the definition of the scheduling seasons to 
recognize the change in U.S. daylight saving time start and end dates 
beginning in March 2007 (Energy Policy Act of 2005, Pub. L. 109-58).
Minimum Usage Requirements
    In the NPRM, we sought comment on whether a minimum usage 
requirement would be necessary, and if so, whether an 80 percent or 90 
percent usage requirement over a bimonthly reporting period would be 
appropriate. As an alternative to the above usage requirement, we 
proposed a periodic withdrawal of the least used Arrival Authorizations 
for redistribution.
    The majority of commenters objected to having no usage requirement. 
The City argued that the landing rights represent scarce and valuable 
assets under this rule and that it is not prudent to omit a usage 
requirement. Delta commented that this option presented the risk that 
carriers that have more Arrival Authorizations than they can profitably 
use will simply hoard them and waste valuable capacity.
    DOJ agreed that a usage requirement could prevent Arrival 
Authorizations from going totally unused, but argued that a usage 
requirement was unlikely to prevent the hoarding of Arrival 
Authorizations to deprive competitors of these assets. DOJ also 
maintained that a usage requirement does nothing to increase the 
liquidity in the market and allow entry by more efficient carriers.
    Most commenters responded that a usage requirement in the 80-90 
percent range is appropriate. U.S. Airways, American, Delta and 
Independence Air supported the 80 percent requirement. The City, RAA 
and America West supported a 90 percent standard. United supported a 
usage requirement of 85 percent.
    American contended that the rule should conform to international 
minimum usage standards and seasonality. American supported an 80 
percent usage standard, which is used by IATA and the European Union 
(EU) slot regulations on a seasonal basis. American also argued that 
since the FAA conceded in the NPRM that most slots (under the HDR) were 
operated 90 percent of the time, it is nonsensical to use a new 
standard over one that is already universally known and accepted. In 
addition, the usage period should be consistent with the IATA 
designated summer (seven months) and winter (five months) scheduling 
seasons. American stated that domestic service patterns now follow the 
seasonality patterns for international operations and that failure to 
recognize this is not efficient or equitable. Consequently, under 
American's suggestion, it would be logical to lose an Arrival 
Authorization for a season, if a carrier is not using it for that 
period, rather than force the carrier to inefficiently schedule a 
flight just to avoid losing the Arrival Authorization.
    While American's suggestion to adopt a usage period similar to the 
IATA bi-annual scheduling season may be of some benefit, no other 
carrier has indicated that a two-month reporting period was unworkable. 
We also believe that the adoption of leasing provisions will assist 
carriers that experience some seasonal fluctuations in that they may 
choose to lease the Arrival Authorizations for the relevant period.
    We conclude that a minimum usage requirement is necessary, as these 
Arrival Authorizations will represent a scarce resource and our desire 
is to ensure the efficient utilization of these privileges for the 
duration of this rule. Our experience at O'Hare under the August 2004 
Order is that some carriers did not utilize their authorities and this 
resulted in unused capacity. Moreover, adoption of a minimum usage 
standard complements the ability to lease Arrival Authorizations, which 
is adopted in this rule and previously discussed.
    There is not a marked difference in projected slot utilization at a 
90 percent versus an 80 percent usage requirement over a two-month 
reporting period. We reviewed scenarios of an Arrival Authorization 
held Monday through Friday over a two-month reporting cycle and found 
that the difference in usage from 80 to 90 percent resulted in 
approximately 3-4 additional operations over the reporting period. 
Carriers, both domestic and foreign, have a lot of experience with an 
80 percent usage requirement, as provided under the HDR and 
internationally. As American argued, most carriers exceed the 80 
percent usage standard under the HDR, and we do not see that increasing 
the standard will result in a more efficient utilization record that 
warrants deviation from the present industry standard. Consequently, 
this rule adopts an 80 percent minimum usage requirement over a two-
month reporting period.
    There was no support in the comments for the alternative of 
periodically withdrawing the least utilized Arrival Authorizations. 
Comments viewed this option as disruptive to their businesses. Also, 
the City pointed out that even with the one percent withdrawal, there 
may still be ``inefficiently'' utilized Arrival Authorizations that are 
not withdrawn because they are not in the bottom one percent.
    In the NPRM, we proposed that those Arrival Authorizations assigned 
to new entrants and limited incumbents via lottery would not be subject 
to the usage requirement for the first 90 days after assignment. For 
Arrival Authorizations assigned to incumbent carriers via lottery, the 
usage requirement would be waived only for the first 60 days. United 
argued all carriers experience the same issues in starting new service, 
including the publishing, promotion and selling of that service and 
that incumbents should not be afforded less time to deal with similar 
issues. Furthermore, United argued that this waiver period should apply 
to Arrival Authorizations obtained via purchase, not just via lottery.
    We agree with United that different waiver periods are not 
warranted and that the 90-day waiver period should apply to Arrival 
Authorizations received by lottery and by purchase. We have determined 
not to extend this waiver to Arrival Authorizations involved in a lease 
because carriers involved in the lease transaction can determine the 
transaction effective date to include this issue.
    Arrival Authorizations assigned for international use are not 
subject to the usage requirement. Arrival Authorizations assigned for 
international use are allocated seasonally and must be returned to the 
FAA if not used for more than a two-week period. We think that this 
approach adequately addresses usage for these operations.
    In addition, we proposed two methods for reassigning Arrival 
Authorizations that do not meet a usage minimum, if adopted. Under the 
first method, the agency would conduct a lottery consisting of two 
rounds. In the first round, only new entrants and limited incumbents 
would be permitted to participate. In the second round, any remaining 
Arrival Authorizations would be assigned by lottery to incumbent 
carriers at the airport.

[[Page 51397]]

    Under the second method, carriers losing Arrival Authorizations for 
failing to meet the usage requirement would be required to sell them 
using the blind market process. New entrants and limited incumbents 
would have preference in purchasing the subject Arrival Authorizations 
and the proceeds of a sale would go to the air carrier that lost the 
Arrival Authorizations. Any unsold Arrival Authorizations would be 
returned to the carrier that lost them.
    Both Delta and United preferred the option that would permit 
carriers to be compensated for the loss of the Arrival Authorization, 
particularly if the Arrival Authorization was purchased on the market, 
rather than have the Arrival Authorizations withdrawn by the FAA. 
Furthermore, Delta contended that the mandatory sale will ensure that 
the Arrival Authorizations go to the highest bidder--a lottery makes no 
such assurance.
    We have reviewed this proposal in light of the other amendments 
adopted in this rule and conclude that neither option is necessary. 
Since this rule adopts a provision that permits leasing, carriers have 
an option that will result in compensation, and that can address market 
fluctuations, seasonality, and simple usage issues. Carriers are far 
more likely to lease Arrival Authorizations, rather than entertain a 
forced sale and loss of the them. Therefore, this rule provides that 
Arrival Authorizations not meeting the usage requirement will be 
withdrawn by the FAA for reassignment.
    America West also commented that carriers may circumvent a usage 
requirement by using Arrival Authorizations originally allocated for 
large aircraft operations with small aircraft. Consequently, America 
West requested that the rule provide that an Arrival Authorization will 
be withdrawn if its use is converted from large aircraft to small 
aircraft.
    ACAA supported a 90 percent usage requirement for air carriers with 
more than 50 Arrival Authorizations because large carriers have too 
many options to protect Arrival Authorizations if the usage requirement 
is lower.
    We do not support America West's suggestion that Arrival 
Authorizations for larger aircraft should receive different treatment 
under our usage requirements. This rule does not divide Arrival 
Authorizations into separate categories based on aircraft size. 
Furthermore, the initial assignment and subsequent reassignment of 
Arrival Authorizations does not contemplate aircraft size for the 
particular operation. Unlike the HDR, carriers have complete discretion 
under this rule to operate the aircraft they see fit for the service 
using the Arrival Authorizations. Regulating the aircraft size to use 
these Arrival Authorizations is unnecessary at this airport to meet the 
stated objectives of this rulemaking.
    Likewise, we have not adopted ACAA's suggestion that the 90 percent 
usage requirement apply to air carriers with more than 50 Arrival 
Authorizations. The purpose of the usage requirement is to ensure that 
these resources are being used efficiently, consistently and 
universally. The rule offers some opportunity to new entrants and 
limited incumbents to gain new or additional access to O'Hare. ACAA's 
proposal could undermine the efficiency goal of the universal usage 
requirement, and would not necessarily result in additional 
Authorizations being available for new entrant and limited incumbents.
    The City stated that given their fluidity, scheduled cargo 
operations, in comparison to schedule passenger operations, merit a 
lower usage minimum. We disagree. As discussed above, if cargo 
operators find that their scheduled operation cannot use the 
frequencies for which they hold the Arrival Authorization, the carriers 
are encouraged to make the frequencies available to other carriers via 
leasing. We do not see a need to establish a separate usage requirement 
for these flights.
    In the NPRM, we proposed to waive the usage requirement for a 
specific carrier in the event of a strike or labor dispute. Although we 
did not receive any comments on this provision, upon reconsideration, 
we have decided to withdraw this part of the proposal as the term, 
``labor dispute'' was so broad that it could apply to the filing of a 
grievance, a stop work action or other events that may or may not 
result in a strike. By including the provision that permits waiver in 
the event of a highly unusual and unpredictable condition that exceeds 
5 consecutive days, the rule provides carriers with latitude and 
flexibility to deal with unpredictable conditions, while maintaining 
the integrity and purpose of the usage requirement.
    Finally, we will waive the usage requirement for all carriers 
through December 31, 2006, which covers the first two months reporting 
period under the rule. The August 2004 Order does not contain any usage 
requirement and some carriers are not fully utilizing their permitted 
number of arrivals. Carriers typically complete their schedule planning 
process several months in advance of actual operations and most 
carriers have already finalized their November /December 2006 
schedules. While it is possible that some flights might be added to 
meet the usage rules, other carriers may decide to use the sale/lease 
options under the rule. We conclude that a limited waiver of the usage 
requirement is warranted to provide for minimal disruption of carrier 
schedules during the transition from the August 2004 Order and the rule 
adopted here. Therefore, the first report detailing usage of the 
Arrival Authorizations will be for the January-February 2007 period.
Sunset Date
    We proposed to terminate this rule on April 6, 2008. This date was 
selected for several reasons: (1) The City had proposed an O'Hare 
Modernization Program (OMP) that would increase the airport capacity 
and reduce the level of delays at the airport and the first phase would 
come on-line by the beginning of 2008 (the proposal was subsequently 
approved in the FAA's Record of Decision for the OMP dated September 
30, 2005); (2) improvements in the Instrument Landing System for 
runways 27L and 27R are expected to improve the performance of the 
airport in adverse weather conditions; and (3) the proposed date in 
2008 would allow regulation to address the present conditions at the 
airport until the benefits of these capacity enhancements are realized 
at the airport. Alternatively, if the OMP does not move forward in a 
timely manner, the proposed date would allow the FAA time to develop an 
alternative to this rulemaking.
    Some carriers questioned whether the rule would really be 
temporary. The City opposed the sunset date and argued that the date is 
too long for ``an invasive rule to constrain operations at O'Hare.'' 
The City preferred termination of the rule after one year of the rule's 
effective date and argued that the sunset provision should include a 
contingency on changes in operating conditions at O'Hare, i.e., if 
operations significantly decrease, the rule would sunset.
    As stated in the Notice, the agency's preferred approach to 
reducing delay and congestion is to enhance airport infrastructure, so 
that capacity meets demand. See, 49 U.S.C. 47101(a)(9). If the desired 
capacity does not materialize within the timeframe of this rule, we may 
consider other congestion management techniques to replace this rule. 
We are also open to revisiting this date if changes to the airline 
industry obviate the need for a congestion management rule at O'Hare.
    We cannot support a one-year rule at this point, as there will not 
be any measurable increase in capacity in such

[[Page 51398]]

a short period. We find it appropriate to extend the termination date 
of this rule through October 31, 2008, to reflect the current schedule 
for commissioning of the first runway (Runway 9L/27R). This date 
coordinates the rule with end of the summer scheduling season and U.S. 
daylight savings time, as amended by Public Law 109-58.\30\ Therefore, 
we adopt October 31, 2008 at 9 p.m., as the sunset date for this rule.
---------------------------------------------------------------------------

    \30\ Public Law 109-58 amends the start and end dates of U.S. 
daylight savings time beginning March 2007.
---------------------------------------------------------------------------

Paperwork Reduction Act

    As required by the Paperwork Reduction Act of 1995 (44 U.S.C. 
3507(d)), the FAA submitted a copy of the new information collection 
requirements(s) in this final rule to the Office of Management and 
Budget (OMB) for its review. OMB is still reviewing the submission and 
will provide an OMB Control Number when the review is complete.
    An agency may not collect or sponsor the collection of information, 
nor may it impose an information collection requirement unless it 
displays a currently valid OMB control number.

International Compatibility

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

Economic Assessment, Regulatory Flexibility Determination, Trade Impact 
Assessment, and Unfunded Mandates Assessment

    Changes to Federal regulations must undergo several economic 
analyses. First, Executive Order 12866 directs that each Federal agency 
shall propose or adopt a regulation only upon a reasoned determination 
that the benefits of the intended regulation justify its costs. Second, 
the Regulatory Flexibility Act of 1980 (5 U.S.C. 5601, et seq.) 
requires agencies to analyze the economic impact of regulatory changes 
on small entities. Third, the Trade Agreements Act (19 U.S.C. 4 2531-
2533) prohibits agencies from setting standards that create unnecessary 
obstacles to the foreign commerce of the United States. In developing 
U.S. standards, this Trade Act requires agencies to consider 
international standards and, where appropriate, to be the basis of U.S. 
standards. Fourth, the Unfunded Mandate Reform Act of 1995 (Public Law 
104-4) requires agencies to prepare a written assessment of the costs, 
benefits, and other effects of proposed or final rules that include a 
Federal mandate likely to result in the expenditure by State, local, or 
tribal governments, in the aggregate, or by the private sector, of $100 
million or more annually (adjusted for inflation).
    In conducting these analyses, FAA has determined this final rule 
(1) Has benefits that justify its costs; is not an economically 
significant regulatory action as defined by Executive Order 12866; and 
is ``significant'' as defined in DOT's Regulatory Policies and 
Procedures; (2) will not have a significant economic impact on a 
substantial number of small entities; (3) will not adversely affect 
international trade; and (4) will not impose an unfunded mandate on 
State, local, or tribal governments, or on the private sector. These 
analyses, set forth in this document, are summarized below.

Total Costs and Benefits of this Rulemaking

    FAA estimates that this final rule will result in a 32% reduction 
in delay at O'Hare, generating present value benefits of $475.6 million 
relative to November 2003 delays.
    The estimated present value cost of this final rule is less than 
$1.0 million.
Who Is Potentially Affected by This Rulemaking
     Operators of scheduled, domestic and Canadian flights at 
O'Hare.
     Domestic and foreign air carriers.
     All communities, including small communities with air 
service to O'Hare.
     Passengers of scheduled, domestic and Canadian flights to 
O'Hare.
     Chicago Department of Aviation.
     FAA Air Traffic Control.
Key Assumptions
     Baseline Flight Operations--Official Airline Guide (OAG) 
Schedule November 20, 2003 of 1,464 daily arrival flights (OAG plus 96 
unscheduled).
     Daily Flight Completion Factor: 97%/Daily Flight 
Cancellation Factor: 3%.
     No lost revenue due to cancelled flights--All Passengers 
are rebooked or rerouted to their destination.
     Delay improvements are 9.6 minutes per flight and 
equivalent to a 32% improvement in delay. We derive delay improvements 
from MITRE's Queuing Delay Model, which measures queuing delays against 
the OAG flight schedule.
     For this evaluation, the effective date is 10/29/06 and 
the sunset date is 10/31/08. We adjust annual estimates to reflect the 
1.5 days per week when the limits are not in effect (all-day Saturday 
and until noon on Sunday).
Other Important Assumptions
     Discount Rate--7%.
     Assumes 2005 Current Year Dollars.
     Final rule will sunset October 31, 2008.
     Ground and Airborne average cost per hour--$1,935.
     Passenger Value of Time--$28.60 per hour.
Alternatives We Have Considered
     Alternative 1--This alternative would have let 
the August 18, 2004, order expire on April 30, 2005. Based on history, 
FAA expects that operators would most likely continue to expand 
operations, further increasing airport delays.
     Alternative 2--The FAA is continuing to explore 
the feasibility of a market-based solution such as an auction or 
congestion pricing.
     Alternative 3--The FAA implements this final rule 
providing an interim solution while capacity enhancement measures and 
market-based mechanisms are reviewed.

Benefits of This Rulemaking

    The primary benefits of this rule will be the airline and passenger 
delay cost savings. The benefits reflect a prorating of the 5.5 days 
per week for which the operational limits are in effect, and the flight 
completion factor of 97%. The total estimated benefits, shown in table 
1 are $475.6 million in present value dollars.

[[Page 51399]]



                              Table 1.--Total Present Value Benefits of Final Rule
----------------------------------------------------------------------------------------------------------------
                                                      Airline delay cost    Passenger delay
                                                            savings          cost savings       Total benefits
----------------------------------------------------------------------------------------------------------------
2006................................................         $19,094,170         $21,212,339         $40,306,510
2007................................................         111,337,400         124,436,227         235,773,627
2008................................................          82,300,269         117,219,790         199,520,059
                                                     -----------------------------------------------------------
    Total...........................................         212,731,839         262,868,357         475,600,196
----------------------------------------------------------------------------------------------------------------

    The total airline delay cost savings of $212.7 million is shown in 
Table 2. The total passenger delay costs savings of $262.9 million is 
shown in Table 3.

                                       Table 2.--Airline Delay Cost Saving
----------------------------------------------------------------------------------------------------------------
                                      Avg total    Avg total       Avg
                                        delay        delay       variable    Prorated annual    Prorated present
                                      (minutes)   (hours) per    cost per     airline delay     value of airline
                                       per day        Day          hour        cost savings    delay cost saving
----------------------------------------------------------------------------------------------------------------
2006...............................       13,772          230       $1,935        $20,430,762        $19,094,170
2007...............................       13,772          230        1,935        127,470,189        111,337,400
2008...............................       13,772          230        1,935        100,821,369         82,300,269
                                    ----------------------------------------------------------------------------
    Total..........................  ...........  ...........  ...........        248,722,320        212,731,839
----------------------------------------------------------------------------------------------------------------


                                                                             Table 3.--Passenger Delay Cost Savings
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                   Annual
                                                                                                                                   daily                             Prorated
                                            Total              Average                                       Total      Total      hours               Daily pax    annual pax    Prorated PV of
                                            daily    Average   AC load  Passengers  Passengers  Avg delay    delay      delay    (prorated  Pax value    delay       passenger       pax delay
                                          arrivals  AC seats   factor   per flight    per day    arrival    minutes     hours    days rule   of time     costs         delay         reduction
                                                                                                                                   is in                             reduction
                                                                                                                                  effect)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2006....................................     1,420     104.3     0.728          75     107,827        9.6  1,035,142     17,252  3,864,528     $28.60   $493,417     $22,697,203     $21,212,339
2007....................................     1,420     104.5     0.731          76     108,479        9.6  1,041,400     17,357  4,981,365      28.60    496,401     142,467,037     124,436,227
2008....................................     1,420     104.9     0.734          76     109,341        9.6  1,049,677     17,495  1,399,569      28.60    500,346     143,599,283     117,219,790
                                         -------------------------------------------------------------------------------------------------------------------------------------------------------
    Total...............................  ........  ........  ........  ..........  ..........  .........  .........  .........  .........  .........  .........     308,763,523     262,868,357
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Costs of This Rulemaking

    The major costs of this final rule cover the blind market costs 
incurred by buyers and sellers of Arrivals Authorizations, the public 
costs of developing and managing the blind market, and other 
administrative and compliance costs. FAA believes that market pressures 
as well as provisions in this rule should mitigate the potential impact 
of this final rule on competition and airfares at O'Hare. The total 
present value costs of less than $1.0 million are shown in the last 
column of Table 4.

                                                     Table 4.--Present Values of Total Annual Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      FAA E-Bid                     FAA E-Bid      Other
                                                                       develop.     E-Bid system      admin.       admin.     Reporting     Total costs
                                                                        costs     operating costs     costs        costs        costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
2006...............................................................     $147,196          $23,364      $25,037     $125,183      $29,684        $350,464
2007...............................................................            0           43,672       46,797      233,987       15,734         340,189
2008...............................................................            0           20,407       21,868      109,339       12,254         163,868
                                                                    ------------------------------------------------------------------------------------
    Total..........................................................      147,196           87,444       93,702      468,509       57,672         854,522
--------------------------------------------------------------------------------------------------------------------------------------------------------

Regulatory Flexibility Determination

    The Regulatory Flexibility Act of 1980 (RFA) establishes ``as a 
principle of regulatory issuance that agencies shall endeavor, 
consistent with the objective of the rule and of applicable statutes, 
to fit regulatory and informational requirements to the scale of the 
business, organizations, and governmental jurisdictions subject to 
regulation''. To achieve that principle, the RFA requires agencies to 
solicit and consider flexible regulatory proposals and to explain the 
rationale for their actions. The RFA covers a wide-range of small 
entities, including small businesses, not-for-profit organizations, and 
small governmental jurisdictions.
    Agencies must perform a review to determine whether a proposed or 
final rule will have a significant economic impact on a substantial 
number of small entities. If the agency determines that it will, the 
agency must prepare a regulatory flexibility analysis as described in 
the Act.
    However, if an agency determines that a proposed or final rule is 
not expected to have a significant economic impact on a substantial 
number of small entities, section 605(b) of the 1980 RFA provides that 
the head of the agency may so certify and a regulatory flexibility 
analysis is not required. The certification must include a statement 
providing the factual basis for this

[[Page 51400]]

determination, and the reasoning should be clear. The basis for such 
FAA determination follows.
    The final rule affects all scheduled operators at O'Hare, more than 
just a few of which are small entities (where ``small entities'' are 
firms with 1,500 or fewer employees). The arrivals of all carriers 
currently providing service at O'Hare will be accommodated, thereby 
minimizing the impact on their schedules. For their given schedules, 
this final rule will lower their fuel burn costs substantially by 
reducing the number and magnitude of delays below those experienced 
prior to the August 2004 Order.
    If Arrival Authorizations are returned or withdrawn for nonuse, new 
entrants and limited incumbents (many of which are likely to be small 
entities) receive a preference in the reassignment of those 
authorities. If additional (new) capacity becomes available during the 
duration of this final rule, new entrants, limited incumbents and 
incumbents have equal opportunity to receive additional Arrival 
Authorizations through a lottery. Carriers with a limited number of 
operations at O'Hare are also protected from withdrawal of Arrival 
Authorizations if the FAA determines it is operationally necessary to 
reduce the number of flights at the airport. Therefore, this rule 
affords limited preference to small entity operators for the assignment 
of available capacity and again favors these small entity operators if 
airport operations are reduced.
    In ``grandfathering'' the air carriers' existing schedules, the 
final rule enables airlines to continue operating all existing air 
service to airports of communities with populations less than 50,000. 
Consequently, we do not expect this final rule to negatively impact 
airports in small communities.
    Therefore, the FAA certifies that this final rule will not have a 
significant economic impact on a substantial number of small entities.

International Trade Impact Assessment

    The Trade Agreement Act of 1979 prohibits Federal agencies from 
establishing any standards or engaging in related activities that 
create unnecessary obstacles to the foreign commerce of the United 
States. Legitimate domestic objectives, such as safety, are not 
considered unnecessary obstacles. The statute also requires 
consideration of international standards and, where appropriate, that 
they be the basis for U.S. standards. This rule excludes future growth 
in non-Canadian international arrivals from the hourly caps imposed. 
Thus, the FAA has assessed the potential effect of this final rule and 
determined that it will not create unnecessary obstacles to the foreign 
commerce of the United States.

Unfunded Mandates Assessment

    The Unfunded Mandates Reform Act of 1995 (the Act) is intended, 
among other things, to curb the practice of imposing unfunded Federal 
mandates on State, local, and tribal governments. Title II of the Act 
requires each Federal agency to prepare a written statement assessing 
the effects of any Federal mandate in a proposed or final agency rule 
that may result in an expenditure of $100 million or more (adjusted 
annually for inflation) in any one year by State, local, and tribal 
governments, in the aggregate, or by the private sector; such a mandate 
is deemed to be a ``significant regulatory action.'' The FAA currently 
uses an inflation-adjusted value of $128.1 million in lieu of $100 
million.
    This final rule does not contain such a mandate. Therefore, the 
requirements of Title II of the Unfunded Mandate Reform Act of 1995 do 
not apply.

Executive Order 13132, Federalism

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

Environmental Analysis

    FAA Order 1050.1E identifies FAA actions that are categorically 
excluded from preparation of an environmental assessment or 
environmental impact statement under the National Environmental Policy 
Act in the absence of extraordinary circumstances. The FAA has 
determined this rulemaking action qualifies for the categorical 
exclusion identified in paragraph 312F, Regulations, standards, and 
exemptions (excluding those which if implemented may cause a 
significant impact on the human environment). It has been determined 
that no extraordinary circumstances exist that may cause a significant 
impact and therefore no further environmental review is required.

Regulations That Significantly Affect Energy Supply, Distribution, or 
Use

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

List of Subjects in 14 CFR Part 93

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

The Amendment

0
In consideration of the foregoing, the Federal Aviation Administration 
adds Subpart B to part 93 of Chapter II of Title 14, Code of Federal 
Regulations, as follows:
0
1. The authority citation for this amendment continues to read as 
follows:

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


0
2. Subpart B is added to read as follows:

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

Sec.
93.21 Applicability.
93.22 Definitions.
93.23 Arrival Authorizations.
93.24 [Reserved]
93.25 Initial assignment of Arrival Authorizations to U.S. and 
Canadian air carriers for domestic and U.S./Canada transborder 
service.
93.26 Reversion and withdrawal of Arrival Authorizations.
93.27 Sale and lease of Arrival Authorizations.
93.28 One-for-one trade of Arrival Authorizations.
93.29 International Arrival Authorizations.
93.30 Assignment provisions for domestic and U.S./Canada transborder 
service.
93.31 Minimum usage requirement.
93.32 Administrative provisions.
93.33 [Reserved]

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


Sec.  93.21  Applicability.

    (a) This subpart prescribes the air traffic rules for the arrival 
of aircraft used for scheduled service, other than helicopters, at 
Chicago's O'Hare International Airport (O'Hare).
    (b) This subpart also prescribes procedures for the assignment, 
transfer, sale, lease, and withdrawal of Arrival Authorizations issued 
by the FAA for

[[Page 51401]]

scheduled operations by U.S. and foreign air carriers at O'Hare.
    (c) The provisions of this subpart apply to O'Hare during the hours 
of 7 a.m. through 8:59 p.m. Central Time, Monday through Friday, and 12 
p.m. through 8:59 p.m. Central Time on Sunday. No person shall operate 
any scheduled arrival into O'Hare during such hours without first 
obtaining an Arrival Authorization in accordance with this subpart.
    (d) Carriers that have Common Ownership shall be considered to be a 
single U.S. air carrier or foreign air carrier for purposes of this 
rule.
    (e) The provisions of this subpart are applicable beginning October 
29, 2006, and terminate at 9 p.m. on October 31, 2008.


Sec.  93.22  Definitions.

    For the purposes of this subpart, the following definitions apply:
    Arrival Authorization is the operational authority assigned by the 
FAA to a U.S. or foreign air carrier to conduct one scheduled arrival 
operation on a specific day of the week during a specific 30-minute 
period at O'Hare.
    Carrier is a U.S. air carrier, Canadian air carrier or foreign air 
carrier with authority to conduct scheduled service at O'Hare under 
Parts 121, 129, 135 of the Chapter and the appropriate economic 
authority for scheduled service under Title 49 of the United States 
Code.
    Common Ownership with respect to two or more carriers means having 
in common at least 50 percent beneficial ownership or control by the 
same entity or entities.
    Incumbent is any U.S. or Canadian air carrier that is not a New 
Entrant or Limited Incumbent.
    International Arrival Authorization is the operational authority 
assigned by the FAA to a Carrier to conduct one scheduled arrival 
operation at O'Hare from a foreign point or a continuation of a flight 
that began at a foreign point, except for arrivals at O'Hare from 
Canada by U.S. and Canadian air carriers.
    Limited Incumbent is any U.S. or Canadian air carrier that holds or 
operates, on its own behalf, 8 or fewer Arrival Authorizations provided 
that it has not sold or otherwise transferred Arrival Authorizations, 
other than one-for-one transfers permitted in this subpart. Any Limited 
Incumbent that sells or otherwise transfers an Arrival Authorization 
shall thereafter be treated as an Incumbent for purposes of this rule.
    New Entrant is any U.S. or Canadian air carrier that does not hold 
or operate, and has never held or operated any Arrival Authorization at 
O'Hare, on its own behalf.
    Preferred Lottery is a lottery conducted by the FAA to assign 
Arrival Authorizations, with initial preference for New Entrants and 
Limited Incumbents.
    Scheduled Arrival is the arrival segment of any operation regularly 
conducted by a carrier between O'Hare and another point regularly 
served by that carrier.
    Summer Scheduling Season is the period of time from the first 
Sunday in April until the last Sunday in October. Beginning March 11, 
2007, the summer scheduling season is the period of time from the 
second Sunday in March until the first Sunday in November.
    Winter Scheduling Season is the period of time from the last Sunday 
in October until the first Sunday in April. Beginning March 11, 2007, 
the winter scheduling season is the first Sunday in November until the 
second Sunday in March.


Sec.  93.23  Arrival Authorizations.

    (a) Except as otherwise established by the FAA under paragraph (d) 
of this section and Sec.  93.29 of this subpart, the number of Arrival 
Authorizations shall be limited to:
    (1) 88 per hour between the hours of 7 a.m. and 7:59 p.m. Monday 
through Friday and 12 p.m. and 7:59 p.m. Sunday,
    (i) Not to exceed 50 during each half-hour beginning at 7 a.m. and 
ending at 7:59 p.m.
    (ii) Not to exceed 88 within any two consecutive 30-minute periods.
    (2) 98 between 8 p.m. and 8:59 p.m. Monday through Friday, and 
Sunday, not to exceed 50 between 8 p.m. and 8:29 p.m. and 50 between 
8:30 p.m and 8:59 p.m.
    (b) An Arrival Authorization is a temporary operating privilege 
subject to FAA control. Only Carriers may hold Arrival Authorizations. 
Arrival Authorizations may not be bought, sold, leased, or otherwise 
transferred to another Carrier, except as provided in Sec. Sec.  93.27 
and 93.28 of this subpart.
    (c) Beginning six months from the effective date of this rule and 
on each six-month anniversary thereafter, the FAA shall conduct a 
review of existing capacity at O'Hare, to determine whether to increase 
the number of Arrival Authorizations. The FAA will consider the 
following factors:
    (1) The number of delays;
    (2) The length of delays;
    (3) Weather conditions;
    (4) On-time arrivals and departures;
    (5) The number of actual arrival operations;
    (6) Runway utilization and capacity plans; and
    (7) Other factors relating to the efficient management of the 
national air space system.
    (d) Notwithstanding paragraph (a), the Administrator may increase 
the number of Arrival Authorizations based on the review conducted in 
paragraph (c) of this section.


Sec.  93.24  [Reserved]


Sec.  93.25  Initial assignment of Arrival Authorizations to U.S. and 
Canadian air carriers for domestic and U.S./Canada transborder service.

    (a) The FAA shall assign to each U.S. and Canadian air carrier, 
conducting scheduled service at O'Hare, as of the effective date of 
this rule, Arrival Authorizations for each scheduled arrival that it 
published for either domestic or U.S./Canada transborder service for 
any day during the 7-day period of November 1 through 7, 2004, as 
evidenced by the FAA's records, not to exceed the peak-day limits for 
each carrier established under the August 18, 2004, ``Order Limiting 
Scheduled Operations at O'Hare International Airport.'' A carrier's 
total assignment under this paragraph will be reduced accordingly by 
any international Arrival Authorizations assigned under Sec.  93.29(a).
    (b) If a U.S. or Canadian air carrier did not publish a scheduled 
domestic or U.S./Canada transborder arrival during the period of time 
referenced in paragraph (a) of this section, but was entitled to do so 
under the August 18, 2004, ``Order Limiting Scheduled Operations at 
O'Hare International Airport,'' and is conducting scheduled service at 
O'Hare as of the effective date of this rule, a corresponding Arrival 
Authorization shall be assigned for that arrival.
    (c) Arrival Authorizations will be assigned to the U.S. or Canadian 
air carrier that actually operated the flight regardless of any 
codeshare or marketing arrangement unless such carrier did not market 
the flight under its own code and the inventory of the flight was under 
the control of another Carrier. If the inventory was under the control 
of another Carrier, the FAA shall assign the Arrival Authorization to 
that Carrier. Carriers may subsequently transfer Arrival Authorizations 
for use by other Carriers under their marketing control in accordance 
with Sec.  93.2(m).
    (d) Any Arrival Authorization not assigned under paragraphs (a) or 
(b) of this section will be assigned to carriers conducting scheduled 
international service under Sec.  93.29. Any remaining

[[Page 51402]]

Arrival Authorizations will be assigned by preferred lottery under 
Sec.  93.30.
    (e) The FAA Vice President, System Operations Services, is the 
final decision-maker for determinations under this section.


Sec.  93.26  Reversion and withdrawal of Arrival Authorizations.

    (a) A U.S. or Canadian air carrier's Arrival Authorizations 
assigned under Sec. Sec.  93.25 or 93.27 revert automatically to the 
FAA 30 days after the Carrier has ceased all operations at O'Hare for 
any reason other than a strike.
    (b) The FAA may withdraw or temporarily suspend Arrival 
Authorizations at any time as a result of reduced airport capacity or 
to fulfill operational needs. Whenever Arrival Authorizations must be 
withdrawn, they will be withdrawn in the required 30-minute Arrival 
Authorization time periods in accordance with the priority list 
established under Sec.  93.32 of this subpart.
    (c) Any Arrival Authorization that is withdrawn or temporarily 
suspended under paragraph (b) will, if reassigned, be reassigned to the 
Carrier from which it was taken, provided that the Carrier continues to 
conduct scheduled operations at O'Hare.
    (d) The FAA shall not withdraw or temporarily suspend under 
paragraph (b) any Arrival Authorizations if the result would be to 
reduce a Carrier's total number of Arrival Authorizations below eight.
    (e) Except as otherwise provided in paragraph (a) of this section, 
the FAA will notify the affected Carrier before withdrawing or 
temporarily suspending any Arrival Authorization and specify the date 
by which operations under the authorizations must cease. The FAA will 
provide at least 45 days' notice unless otherwise required by 
operational needs.


Sec.  93.27  Sale and lease of Arrival Authorizations.

    (a) No U.S. or Canadian air carriers may sell or lease its Arrival 
Authorizations at O'Hare except in accordance with the procedures in 
this section and in the manner prescribed by the FAA. Carriers may not 
buy, sell, lease or otherwise transfer control of Arrival 
Authorizations assigned under Sec.  93.29.
    (b) Only monetary consideration may be provided in any transaction 
conducted under this section.
    (c) New Entrants and Limited Incumbents may not sell, lease, or 
otherwise transfer control of any Arrival Authorizations assigned 
through a Preferred Lottery within 12 months of such assignment, except 
to another New Entrant or Limited Incumbent. One-for-one trades to 
other Carriers under Sec.  93.28 are permitted.
    (d) A U.S. or Canadian air carrier seeking to sell or lease an 
Arrival Authorization must provide the following information in writing 
to the FAA:
    (1) Arrival Authorization number and time;
    (2) Frequency;
    (3) Planned effective date(s) of transfer;
    (4) Minimum reserve price, if established by the offering carrier;
    (5) Other pertinent information, if applicable; and
    (6) Carrier's authorized representative.
    (e) The FAA will post a notice of the available Arrival 
Authorization and specific information concerning the proposed sale or 
lease transaction on the FAA Web site at http://www.fly.faa.gov. The 
Web site will include information regarding registration to be advised 
of posted transactions, and other relevant information pertaining to 
this section. The FAA will post the notice within two business days 
after receipt of all required information from the U.S or Canadian air 
carrier offering the Arrival Authorization for sale or lease. The 
notice will provide ten business days for bids to be received and will 
specify a bid closing date and time. Only U.S. and Canadian air 
carriers may bid on Arrival Authorizations. Information identifying the 
Carrier providing the Arrival Authorization for sale or lease will not 
be posted or released by the FAA until after the FAA has approved the 
transfer.
    (f) All bids must be sent to the FAA electronically, via the FAA 
Web site, by the closing date and time, and no extensions of time will 
be granted. Late bids will not be considered. All bids will be held 
confidential, with each bidder certifying in a form acceptable to the 
FAA that its bid has not been disclosed to any person not its agent.
    (g) The FAA will forward the highest qualifying bid to the selling 
or leasing U.S. or Canadian air carrier without identifying the bidder. 
The selling or leasing Carrier will have up to three business days to 
accept or reject the bid. The selling or leasing Carrier must notify 
the FAA via the Web site or in writing of its acceptance no later than 
5 p.m. Eastern Time on the third business day. If the selling or 
leasing Carrier does not notify the FAA of its acceptance within the 
allotted time, the transaction will terminate.
    (h) Upon acceptance, the FAA will notify the U. S. or Canadian air 
carrier, who submitted the highest bid, and request that the buyer/
lessee and the seller/lessor submit to the FAA the information (such as 
Arrival Authorization number, frequency and effective date(s) of 
transfer) required to transfer the Arrival Authorization.
    (i) Each U.S. or Canadian air carrier must provide the FAA evidence 
of its consent and each Carrier must certify that only monetary 
consideration will be or has been exchanged.
    (j) The FAA will approve requested transfers of Arrival 
Authorizations that comply with these regulations. The recipient U.S. 
or Canadian air carrier of the transfer may not use the Arrival 
Authorization until the conditions in paragraph (i) of this section 
have been met and the FAA has approved the transfer.
    (k) The FAA will keep a record of all bids received and of each 
Arrival Authorization transfer, including the identity of both Carriers 
and the winning bid price, all of which will be made available to the 
public.
    (l) U.S. or Canadian air carriers may request the FAA post notice 
that it is seeking to lease or purchase an Arrival Authorization at 
O'Hare. The Carrier may submit information in writing or via the FAA's 
Web site. This information may include the effective date, number or 
timing of Arrival Authorizations sought, whether a Carrier is seeking 
to purchase or lease, maximum price offered, or other pertinent 
information. The FAA may edit any submissions, or choose not to post 
certain information, in order to ensure the integrity of the 
solicitation process. Information identifying the Carrier seeking an 
Arrival Authorization for sale or lease will not be posted or released 
by the FAA. The FAA will post such requests within two business days of 
receipt for a period of at least 30 days. Any resulting offers to sell 
or lease Arrival Authorizations shall be conducted in accordance with 
this subsection.
    (m) A U.S. or Canadian air carrier may transfer an Arrival 
Authorization to another U.S. or Canadian air carrier that conducts 
operations at O'Hare solely under the transferring Carrier's marketing 
control, including the entire inventory of the flight. Each Carrier 
must provide written evidence of its consent to the transfer. The FAA 
will approve requested transfers that comply with these regulations. 
The FAA Vice President, System Operations Services, is the final 
decision-maker for determinations under this subsection. The recipient 
Carrier of the transfer may not use the Arrival Authorization until the 
FAA has provided written confirmation. A record of each Arrival 
Authorization will be kept on file by the

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FAA and made available to the public on request.


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

    (a) Except as otherwise provided in this subpart, any Carrier may 
exchange an Arrival Authorization it has been assigned with another 
Carrier on a one-for-one basis for the purpose of conducting that 
operation in a different half-hour time period.
    (b) Written evidence of each Carrier's consent to the transfer must 
be provided to the FAA.
    (c) The FAA will approve requested transfers of Arrival 
Authorizations that comply with these regulations. The recipient 
Carrier of the transfer may not use the Arrival Authorization until 
written confirmation has been received from the FAA.
    (d) A U.S. or Canadian air carrier assigned Arrival Authorizations 
under Sec.  93.29 may trade on a one-for-one basis within its own base 
of Arrival Authorizations subject to FAA approval, provided that the 
purpose is to operate the arrival flight from a foreign point outside 
Canada in a different half-hour time period than assigned. The FAA must 
confirm the transfer prior to operation.
    (e) A record of each Arrival Authorization exchange will be kept on 
file by the FAA and made available to the public upon request.
    (f) Carriers participating in a one-for-one transfer must certify 
to the FAA that no other consideration will be or has been provided for 
the exchange.


Sec.  93.29  International Arrival Authorizations.

    (a) Except as otherwise provided in paragraph (d) of this section, 
the FAA shall make an initial assignment of Arrival Authorizations to 
U.S. and Canadian carriers arriving from a foreign point, excluding 
Canada, or any other foreign carrier arriving from a foreign point or 
the continuation of a flight that begins at a foreign point for the 
winter and summer scheduling seasons as follows. This section does not 
apply to arrivals at O'Hare from Canada by U.S. or Canadian air 
carriers.
    (1) Winter Scheduling Season. Upon request, the FAA shall assign to 
each Carrier that published a scheduled arrival during the Winter 2006 
Scheduling Season, as evidenced by the FAA's records, a corresponding 
Arrival Authorization for the Winter 2007 Scheduling Season.
    (2) Summer Scheduling Season. Upon request, the FAA shall assign to 
each Carrier that published a scheduled arrival for the Summer 2006 
Scheduling Season, as evidenced by the FAA's records, a corresponding 
Arrival Authorization for the Summer 2007 Scheduling Season.
    (3) Arrival Authorizations will be assigned to the Carrier that 
actually operated the flight regardless of any codeshare or marketing 
arrangement unless the flight was predominately marketed, by contract, 
under the control of another Carrier. If the flight was under the 
marketing control of another Carrier or the entire inventory was under 
the control of another Carrier, the FAA shall assign the Arrival 
Authorization to that Carrier.
    (4) The FAA Vice President, System Operations Services, is the 
final decision-maker for determinations under this subsection.
    (b) Notwithstanding the limit on Arrival Authorization in Sec.  
93.23(a), any U.S. or Canadian air carrier arriving at O'Hare from a 
foreign point, excluding Canada, shall be assigned an Arrival 
Authorization under this section for that flight.
    (c) Notwithstanding the limit on Arrival Authorizations in Sec.  
93.23(a), any non-Canadian, foreign air carrier conducting scheduled 
service and arriving at O'Hare shall be assigned an Arrival 
Authorization under this section for that flight.
    (d) The Department of Transportation reserves the right to withhold 
the assignment of an Arrival Authorization to any foreign air carrier 
of a country that does not provide equivalent rights of access to its 
airports for U.S. air carriers, as determined by the Secretary of 
Transportation.
    (e) For each scheduling season, Carriers must request Arrival 
Authorizations under this section in accordance with the procedures 
announced by the FAA in the Federal Register. A Carrier may request to 
operate more flights from foreign points than the number for which it 
received Arrival Authorizations under Sec.  93.29(a) or to operate 
historic arrivals in a different half-hour than initially assigned for 
the previous corresponding scheduling season. The Arrival 
Authorizations will be assigned at the time requested unless:
    (1) An Arrival Authorization is available within one hour of the 
requested time, in which case, the unassigned Arrival Authorization 
will be used to satisfy the request; or
    (2) Operational efficiencies support assignment within one hour of 
the requested period. The FAA Vice President, System Operations 
Services, is the final decision-maker for determinations under this 
subsection.
    (f) Each request for Arrival Authorizations under this section 
shall specify the complete flight information including the carrier 
identifier, flight number, complete flight itinerary, frequency, 
scheduled arrival time, aircraft and service type, effective dates and 
whether the Arrival Authorization is for a new or historic flight.
    (g) Arrival Authorizations assigned under this section cannot be 
bought, sold, leased or transferred under Sec.  93.27 but subject to 
FAA approval may be traded on a one-for-one basis under Sec.  93.28 to 
meet the Carrier's operational needs.
    (h) Arrival Authorizations assigned under this section are not 
subject to minimum usage requirements of Sec.  93.31 of this subpart 
but will revert to the FAA if not used for 15 consecutive days. Arrival 
Authorizations assigned under this section may only be used for a 
flight arriving from a foreign point or for non-Canadian, foreign air 
carriers, the continuation of a flight that begins at a foreign point.


Sec.  93.30  Assignment provisions for domestic and U.S./Canada 
transborder service.

    (a) Whenever the FAA has determined that sufficient Arrival 
Authorizations are available, they will be assigned by lottery in 
accordance with this section. Only U.S. and Canadian air carriers are 
eligible to participate in a lottery. U.S. and Canadian air carriers 
must hold appropriate economic authority for scheduled service under 
Title 49 of the U.S.C. and FAA operating authority under parts 121, 
129, or 135 of this chapter to select Arrival Authorizations in a 
lottery.
    (b) Arrival Authorizations not assigned under Sec.  93.25, or 
returned to the FAA under Sec. Sec.  93.26(a) or 93.31 for reassignment 
shall be assigned by a Preferred Lottery.
    (c) Any Arrival Authorization available as the result of an 
increase in the hourly limits under Sec.  93.23(a) of this part from 88 
Arrival Authorizations to 89 or 90 shall be assigned by Preferred 
Lottery.
    (d) Any Arrival Authorizations available as the result of an 
increase above 90 in the hourly limits specified in Sec.  93.23(a) of 
this subpart shall be assigned by lottery that is open to all U.S. and 
Canadian air carriers eligible to participate.
    (e) The FAA will publish a notice in the Federal Register 
announcing the lottery dates and any special procedures for the 
lotteries.
    (f) Any U.S. or Canadian air carrier seeking to participate in any 
lottery must notify the FAA in writing, and

[[Page 51404]]

such notification must be received by the FAA 15 days prior to the 
lottery date. The U.S. or Canadian air carrier must specify if it is 
requesting to participate in a lottery as a New Entrant or Limited 
Incumbent. The U.S. or Canadian air carrier must also disclose in its 
notification whether it has Common Ownership with any other Carrier 
and, if so, identify such Carrier.
    (g) A random lottery shall be held to determine the order in which 
participating Carriers shall select an Arrival Authorization.
    (h) In any Preferred Lottery, each New Entrant and Limited 
Incumbent will have the opportunity to select Arrival Authorizations, 
if available as provided in paragraph (i) of this section, until it 
holds a total of eight Arrival Authorizations. Arrival Authorizations 
remaining after all New Entrants and Limited Incumbents have been 
accommodated may be assigned to any other Carrier participating in the 
lottery. Arrival Authorizations remaining after all New Entrants and 
Limited Incumbents have been accommodated may be assigned to any U.S. 
or Canadian air carrier participating in the lottery for a minimum of 
12 months, and then until the next lottery, when such Arrival 
Authorizations would again be available on a preferred basis to New 
Entrants and Limited Incumbents.
    (i) At the lottery, each Carrier must make its selection within 5 
minutes after being called or it shall lose its turn. If Arrival 
Authorizations still remain after each Carrier has had an opportunity 
to select Arrival Authorizations, the assignment sequence will be 
repeated in the same order. A Carrier may select one Arrival 
Authorization during each sequence, except that New Entrants may select 
two Arrival Authorizations, if available, in the first sequence of a 
Preferred Lottery.
    (j) If there are available Arrival Authorizations for a temporary 
period, for example, Arrival Authorizations pending assignment in a 
lottery or international arrivals that are temporarily returned, the 
FAA may assign these Authorizations on a non-permanent, first-come, 
first-served basis.


Sec.  93.31  Minimum usage requirement.

    (a) Except as provided in Sec.  93.29 and paragraphs (b) and (c) of 
this section, any Arrival Authorizations not used at least 80 percent 
of the time over a two-month period shall be withdrawn by the FAA.
    (b) Paragraph (a) of this section does not apply to Arrival 
Authorizations obtained under Sec.  93.30 or bought under Sec.  93.27 
during the first 90 days after assignment.
    (c) Paragraph (a) of this section does not apply to Arrival 
Authorizations of U.S. or Canadian air carrier forced by a strike to 
cease operations using those Arrival Authorizations.
    (d) Every U.S. and Canadian air carrier holding Arrival 
Authorizations shall forward in writing to the FAA Slot Administration 
Office in a format specified by the FAA a list of all Arrival 
Authorizations held by the Carrier along with a listing of the Arrival 
Authorizations actually operated for each day of the 2-month reporting 
period within 14 days after the last day of the 2-month reporting 
period beginning January 1 and every 2 months thereafter. The report 
shall identify for each assigned Arrival Authorization the withdrawal 
priority number and half-hour period, the flight number, 3-letter 
identifier of the operating Carrier used for air traffic control 
communications, scheduled time of operation, origin airport, and 
whether a scheduled arrival was actually operated by the Carrier on a 
specified day. The report shall identify any Common Ownership or 
control of, by, or with any other carrier. A senior official of the 
Carrier shall sign the report.
    (e) The Administrator may waive the requirements of paragraph (a) 
of this section in the event of a highly unusual and unpredictable 
condition which is beyond the control of the Carrier and which exists 
for a period of 5 consecutive days or more. Examples of conditions that 
could justify waiver under this paragraph are weather conditions that 
result in the restricted operation of an airport for an extended period 
of time or the grounding of any aircraft type.
    (f) The FAA will treat as used any Arrival Authorization held by a 
carrier on Thanksgiving Day, the Friday following Thanksgiving Day, and 
the period from December 24 through the first Sunday in January.


Sec.  93.32  Administrative provisions.

    (a) The FAA will assign, by random lottery, withdrawal priority 
numbers for the recall priority of Arrival Authorizations at O'Hare. 
The lowest numbered Arrival Authorization will be the last withdrawn. 
Newly created Arrival Authorizations will be assigned a priority 
withdrawal number and that number will be higher than any other Arrival 
Authorization withdrawal number previously assigned. Each Arrival 
Authorization will be assigned a designation consisting of the 
applicable withdrawal priority number, and the 30-minute time period 
for the Arrival Authorization. The designation will also indicate, as 
appropriate, if the Arrival Authorization is daily or for certain days 
of the week only; and is a summer or winter Arrival Authorization.
    (b) All transactions regarding Arrival Authorizations under this 
subpart must be in a written or electronic format approved by the FAA.


Sec.  93.33  [Reserved]

    Issued in Washington, DC, on August 21, 2006.
Marion C. Blakey,
Administrator.
[FR Doc. 06-7138 Filed 8-23-06; 9:00 am]
BILLING CODE 4910-13-P