[Federal Register Volume 71, Number 198 (Friday, October 13, 2006)]
[Notices]
[Pages 60600-60603]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-8658]


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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

[Docket No. FAA-2004-16944]


Operating Limitations at Chicago O'Hare International Airport; 
Notice of Order

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of Order.

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SUMMARY: On September 22, 2006, the FAA issued an order to show cause, 
which solicited written views on modifying the August 2004 Order 
temporarily limiting scheduled operations at O'Hare International 
Airport (O'Hare) to allow carriers to trade and transfer scheduled 
arrivals for consideration for the remaining duration of the Order. The 
FAA is

[[Page 60601]]

issuing a final modification to the Order based on the proposal.

FOR FURTHER INFORMATION CONTACT: Komal Jain, Office of the Chief 
Counsel, Regulations Division, AGC-240, Federal Aviation 
Administration, 800 Independence Avenue SW., Washington, DC 20591; 
telephone (202) 267-3073.

SUPPLEMENTARY INFORMATION:

Order To Show Cause

    Under the August 2004 Order, as amended, (the Order), the FAA may 
modify or withdraw any provision in the Order on its own or on 
application by any air carrier for good cause shown. On September 22, 
2006, the FAA issued an order to show cause (71 FR 56213, September 26, 
2006), which solicited written views on modifying the Order temporarily 
limiting scheduled operations at Chicago O'Hare International Airport 
(O'Hare). The order to show cause proposed to eliminate the August 2004 
Order's prohibition on trading or transferring Arrival Authorizations 
during the duration of the order.
    The August 2004 Order made effective a series of schedule 
adjustments that the air carriers individually agreed to during a 
scheduling reduction meeting convened under 49 U.S.C. 41722. These 
agreements, in general, resulted in a voluntary O'Hare peak-hour 
arrival rate of eighty-eight scheduled flights, with the exception of 
the 8 p.m. hour--the final peak hour of the day--when the rate would 
not exceed ninety-eight scheduled arrivals. The Order followed a period 
during which O'Hare operated without any regulatory constraint on the 
number of aircraft operations, and O'Hare experienced significant 
congestion-related delay. The Order took effect November 1, 2004, and 
was subsequently extended three times. It terminates at 9 p.m., Central 
Time, October 28, 2006.
    The Order was intended to establish a short-term regime limiting 
O'Hare flights while the FAA developed a longer-term solution through a 
rulemaking. The FAA is allowing the Order to terminate an October 28 
because the FAA has adopted a final rule regulating arrivals rights at 
O'Hare. That rule, the August 29, 2006, Final Rule, Congestion and 
Delay Reduction at Chicago O'Hare International Airport, becomes 
effective on October 29, 2006 (Final Rule). 71 FR 51382.
    The FAA has decided to amend the Order as proposed, with one 
change. We have decided to specify in the Order that transactions 
permitted by this modification to the August 2004 Order must be 
completed prior to the October 28, 2006 expiration of this Order and 
that the air carrier acquiring the arrival must commit to commencing 
operations resulting from the sale, lease, trade or transfer no later 
than January 27, 2007. We had proposed such operations begin no later 
than December 31, 2006 in the order to show cause and received no 
objection to that proposal. However, the FAA recognizes that placing 
the restriction in the Order could arguably permit the Order to 
continue after it has expired. As discussed below, a carrier acquiring 
an Arrival Authorization will be required to commit to the FAA that it 
will conduct operations using the arrival authorization no later than 
January 27, 2007. Additionally, we are amending the Final Rule to 
specify that initial allocations under the rule require operations to 
commence no later than January 27.
    We have expanded the contemplated time period to commence 
operations because the agency does not require a carrier to actually 
begin operations under the Final Rule until 90 days after it has 
acquired an Arrival Authorization by lottery or sale. This requirement 
is based on a recognition that some reasonable period of time must be 
provided to begin actually providing scheduled service. The proposed 
December 31 date is inconsistent with the FAA's assessment of the time 
necessary to begin operations articulated in the Final Rule. Although 
leases are not covered by a start-up waiver in the Final Rule, the 
short-term nature of the amended Order supports the same consideration.
    The FAA also reviewed the August 2004 Order in regard to new 
entrants and other air carriers initiating scheduled service to O'Hare 
while this Order remains in effect. The FAA recognizes that carriers 
not currently serving the airport have a number of actions to complete 
prior to actual operation at an airport. In addition to obtaining 
operating authorizations at a capacity-constrained airport, such a 
carrier must obtain access to facilities, gates and terminal space; 
must establish check-in and baggage procedures, aircraft ground 
handling operations, and station staffing; develop flight schedules; 
and begin offering services to the public. The Order does not specify 
the steps an air carrier must accomplish prior to actually being 
granted authority to conduct scheduled arrivals during the peak hours. 
The FAA expects that new entrant/limited incumbent carriers requesting 
scheduled arrivals to ``initiate'' scheduled services under the Order 
must demonstrate an actual intention to conduct services at O'Hare even 
if the actual operation does not commence by the expiration of the 
Order. At a minimum, prior to the expiration of the Order, an air 
carrier must demonstrate that it is offering scheduled services to the 
public in the United States in accordance with applicable Department of 
Transportation and FAA rules and may be required by the FAA to provide 
evidence of additional actions it is taking to start operations. An air 
carrier must begin actual scheduled flight operations utilizing the 
assigned Arrival Authorizations no later than January 27, 2007, or they 
will be withdrawn.

Discussion of Written Submissions: Proposed Allowance of Trades and 
Transfers for Consideration

    The order to show cause specifically requested written views on the 
FAA's tentative decision to eliminate, for the remainder of the Order, 
the prohibition on trading or transferring (buying, selling, or 
leasing) arrival authorizations for consideration. The FAA reached this 
tentative decision because it recognized that the limitation on trades 
and transfers under the Order could hamper the efficient transition 
from the Order to the Final Rule.
    Five respondents filed written views on the FAA's proposed 
modification of the Order. The respondents included two air carriers 
(American Airlines and United Air Lines), one air carrier organization 
(The Regional Airline Association (RAA)), the City of Chicago, and 
Independence Air. American also filed a motion to leave to file and 
answer in response to Independence Air, which we grant. None of the 
respondents opposed the modification of the Order. American Airlines, 
RAA and the City of Chicago expressed full support, favoring a free and 
open secondary market for scheduled arrivals at O'Hare.
    For the reasons set forth in the show-cause order, and in light of 
the commenters' support for the proposal, the FAA is amending the Order 
as proposed to allow trades and transfers of Arrival Authorizations. 
Two commenters--United Air Lines and Independence Air--have asked us to 
clarify or amend our proposal in some respects. We discuss their 
requests next.

Discussion of Written Submissions: United's Requests for Clarification 
and Technical Amendments

    United Air Lines sought clarification with respect to leases 
entered into during the effective period of the Order. First, as 
requested by United Air Lines, the FAA confirms that a lease entered

[[Page 60602]]

into between two air carriers prior to the termination of the Order on 
October 28 can extend into the future during the effective period of 
the Final Rule. Under this modification to the Order, two parties can 
enter into a long-term lease agreement as long as the terms of the 
lease have been approved by the FAA. When approving a lease 
arrangement, the FAA will require the written consent of each party as 
to the specific authorization(s) at issue, the scheduled arrival time, 
the frequency, and the start and end dates of the lease. Similar 
information must be provided for sales or other uneven trades or 
transfers. Under this amendment to the Order, the FAA will approve a 
sale, lease, or trade involving consideration if the transaction is 
completed prior to expiration of the Order on October 28, and the air 
carrier acquiring the allocation commits to commencing operations 
resulting from the trade or transfer no later than January 27, 2007.
    United Air Lines also asked the FAA to clarify that when the term 
of a lease expires (or otherwise terminates in accordance with the 
provisions of the lease), the Arrival Authorization will revert to the 
lessor-carrier without the need for any further approval or action by 
the FAA, as long as the lessor provides notice to the FAA of such 
expiration or termination. United Air Lines' assumption is correct. 
When a lease expires in accordance with the agreed upon end date, no 
further approval or action is required by the FAA, and the Arrival 
Authorization will revert back to the holder (lessor) of the 
authorization. If the lease is terminated prior to the scheduled end 
date (e.g., because of a breach or a recall provision in the lease 
agreement), the FAA will require consent from both parties before 
transferring the Arrival Authorization back to the holder.
    Lastly, United Air Lines points out that in modifying the Order, 
the FAA also must amend 14 CFR 93.25 regarding the initial assignment 
of Arrival Authorizations under the Final Rule. Under this section, 
Arrival Authorizations subject to the Final Rule to O'Hare are assigned 
(1) based on published scheduled service during the 7-day period of 
November 1 through 7, 2004 or (2) if the carrier did not publish a 
scheduled service during the 7-day period of November 1 through 7, 
2004, the scheduled service the carrier is entitled to publish under 
the August 2004 Order, as long as the carrier is conducting scheduled 
service at O'Hare on the effective date of the Final Rule.
    We recognize Sec.  93.25 raises questions of proper implementation 
in light of the potential adjustments that carriers may make under this 
Order, as amended. The FAA will recognize the transfer of holder status 
among air carriers that may now occur under the Order. The FAA expects 
this to resolve issues of initial assignment under the rule, and 
furthermore, if necessary, the FAA could invoke paragraph (e) of Sec.  
93.25 to resolve any conflicts that may arise in the assignment of 
arrivals by carrier at the termination of the Order. Because Sec.  
93.25 anticipates a carrier will actually be conducting scheduled 
operations at O'Hare on October 29, we are amending the final rule to 
clarify that operations need not begin prior to January 27, 2007 as 
long as the FAA has approved a transaction under the Order, as amended, 
prior to expiration of the Order. This change is necessary to fully 
effectuate the amended Order.
    Similarly, because of the amendment to the Order and the ability of 
carriers to change their holder status of scheduled arrivals prior to 
the effective date of the rule, the FAA also must clarify that in 
applying the definitions of ``new entrant,'' ``limited incumbent'' and 
``incumbent,'' the FAA will look to any authorizations held or operated 
by an air carrier during the duration of the Order. Thus, for example, 
if a carrier held ten scheduled arrivals on October 1, 2006 and sold or 
transferred four of those arrivals to another carrier on October 15, 
2006, the FAA will view that carrier has an incumbent, not as a limited 
incumbent, because, at one time, the carrier held more than eight 
authorizations to arrive at O'Hare.

Discussion of Written Submissions: Independence Air's Request To 
Reclaim Arrival Rights

    Independence Air, while supporting the proposed modification of the 
Order, asked that the FAA revise its proposed language in paragraph 6 
of the Order to permit any person previously allocated arrivals at 
O'Hare to enter into transactions with air carriers operating at O'Hare 
to sell, trade or lease such authorizations. Independence Air held ten 
Arrival Authorizations under the Order. Because Independence Air ceased 
all airline operations on January 5, 2006, it has not been using the 
Arrival Authorizations. The firm is now being liquidated. Independence 
Air claims that because the FAA has neither withdrawn its O'Hare 
authorizations nor reallocated them to another carrier, Independence 
Air's estate is entitled to the scheduled arrivals allocated to 
Independence Air in August 2004, and if the FAA were to adopt its 
proposed amendment of this Order's paragraph 6, the estate could 
transfer the scheduled arrivals for consideration. American Airlines, 
in a late filing to the docket, submitted an answer to Independence 
Air's request which opposes the change proposed by Independence Air.
    The change sought by Independence Air is not legally required and 
would be contrary to the public interest. Independence Air has been 
unable to use the arrival rights itself, and the Order barred 
Independence Air from selling or leasing them to any air carrier. As a 
result, Independence Air's interest in the rights long ago ceased to 
have any value.\1\ Furthermore, in the March 31, 2006 order extending 
the Order, the FAA indicated that Independence Air's Arrival 
Authorizations could be reassigned to other carriers if the FAA found 
that doing so was in the public interest. Independence Air did not 
object to that determination.
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    \1\ While there is no minimum use requirement under the Order, 
no air carrier is required to surrender its unused arrival 
authorizations to the FAA. Independence Air's assertion that it 
failed to do so provides it with a right to now claim the 
authorizations is therefore without merit. The Order did not contain 
a minimum use requirement because it did not create a means whereby 
other carriers could obtain unused Arrival Authorizations did not 
mean that a carrier not using its rights could nonetheless keep them 
for the duration of the Order.
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    The FAA additionally explained in the March 31, 2006 order that it 
would not reallocate Independence Air's Arrival Authorizations because 
they did not represent capacity available for use by other carriers 
without injuring O'Hare passengers and airlines. The FAA found it 
necessary to require Independence Air's Arrival Authorizations to 
remain dormant in order to mitigate congestion that occurred in the 
overscheduled peak afternoon hours. As we stated under the order to 
show cause, our primary purpose in proposing to lift the restrictions 
on transfers and sales of scheduled arrivals for the remaining duration 
of the Order is to facilitate the most efficient transition from the 
Order to the Final Rule. Because the Independence Air arrival 
authorizations were permanently withdrawn from the available pool of 
Arrival Authorizations over six months ago, the FAA again finds that 
reallocation of these retired authorizations would, in fact, be 
detrimental to efficiency. In any event, the Order applies only to air 
carriers conducting or initiating scheduled operations at O'Hare. Non-
carriers are not permitted to hold authorizations under either the 
Order or the Final Rule. Independence Air ceased operations on January 
5, 2006, and is no longer a certificated air carrier.
    We therefore reject Independence Air's suggestion that the proposed

[[Page 60603]]

language for paragraph 6 should be further revised.\2\
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    \2\ We additionally reject Independence Air's arguments for the 
following reasons. First, we do not view the Arrival Authorizations 
created in the August 2004 Order to be ``property'' within the 
definition of the Bankruptcy Code. 11 U.S.C. 541(a). These Arrival 
Authorizations did not provide the opportunity to receive value 
through a purchase, sale or lease and without a market, had no 
value. In re Gull Air, 890 F. 2d 1255 (1st Cir. 1989). They were 
merely restrictions on the use of property--airplanes, not property 
in themselves. In re Braniff Airways, 700 F. 2d 935 (5th Cir. 1983).
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JetBlue Request

    JetBlue has filed a request for Arrival Authorizations as a new 
entrant under the Order. United Air Lines has opposed that request. The 
FAA will address JetBlue's request in a later order.

Conclusion

    The FAA proposed to modify the August 2004 Order temporarily 
limiting scheduled operations at O'Hare to allow carriers to trade and 
transfer scheduled arrivals for consideration for the remaining 
duration of the Order based on our tentative determination that there 
is merit to allowing carriers to modify their schedules for competitive 
or operational reasons through various market mechanisms prior to the 
effective date of the August 29, 2006 Final Rule regulating scheduled 
arrivals at O'Hare. After considering the responses, the FAA has 
determined to make this finding final.
    Accordingly, with respect to scheduled flight operations at O'Hare 
under the August 2004 Order, as amended,  it is ordered that paragraph 
6 be amended to state:
    6. An air carrier who is currently operating or has committed prior 
to the expiration of this Order to operate at O'Hare by January 27, 
2007, may buy, sell, lease or otherwise transfer or trade any scheduled 
arrival from 7 a.m. through 8:59 p.m. to or from any other air carrier 
who is currently operating or has committed prior to the expiration of 
this Order to operate at O'Hare by January 27, 2007. Transactions 
permitted by this paragraph must be completed prior to the October 28, 
2006 expiration of this Order. Each air carrier must receive advance 
written approval of the Administrator, or her delegate, of the trade or 
transfer. All requests to trade or transfer a scheduled arrival must be 
submitted in writing to the FAA Slot Administration Office, facsimile 
(202) 267-7277 or e-mail [email protected], and must come from a 
designated representative of the air carrier.

    Issued in Washington, DC, on October 6, 2006.
Marion C. Blakey,
Administrator.
[FR Doc. 06-8658 Filed 10-10-06; 11:49 am]
BILLING CODE 4910-13-P