Reagan National Airport: Capacity to Handle Additional Flights and Impact
on Other Area Airports (Letter Report, 09/17/1999, GAO/RCED-99-234).
GAO examined the impact of legislative proposals to increase the number
of flights at Ronald Reagan Washington National Airport on two other
area airports-Washington Dulles International (BWI) Airport and
Baltimore/Washington International Airport, focusing on: (1) the most
prominent proposals that would allow an increased number of takeoffs and
landings at Reagan National and create exemptions to the perimeter rule;
(2) the extent to which Reagan National could safely accommodate more
takeoffs and landings; and (3) whether adding flights at Reagan National
to and from destinations beyond the current perimeter would cause
passengers to shift their travel from Dulles or BWI.
GAO noted that: (1) to improve the access that various communities have
to Washington, D.C., and to increase competition in some of those
markets, three major legislative proposals introduced during 1999 would
provide exemptions to the number of commercial jet flights allowed at
Reagan National by: (a) adding between 6 to 36 jet flights per day; (b)
permitting flights to destinations beyond the existing 1,250-mile
perimeter; and (c) reviewing whether additional flights affect noise,
safety, and the environment around Reagan National; (2) according to an
analysis by the Department of Transportation (DOT), Reagan National
could accommodate up to seven additional flights per hour without
compromising safety; (3) airport officials acknowledge that Reagan
National could handle additional hourly flights without incurring
significant delays, but they believe the number of flights to be less
than seven per day; (4) DOT and airport officials agree that Reagan
National could accommodate 36 new jet flights per day, as proposed in
one bill; (5) DOT has some flexibility to allow airlines to operate
flights in slots that are available but unused by effectively moving the
slots to the times that are more compatible with commercial interests
and consumer demand; (6) according to GAO's analysis of the impact of
four new airlines on competition among the area's airports, adding
nonstop flights from Reagan National to destinations beyond the existing
1,250-mile perimeter would likely cause only a limited number of
passengers to switch from BWI or Dulles to Reagan National; (7) GAO's
analysis indicated that many travellers using BWI or Dulles for travel
beyond the perimeter are likely to continue to prefer them because of
the price or convenience and would not switch to Reagan National; (8)
other business travellers are likely to switch if longer-distance
nonstop flights become available at Reagan National because that is
their preferred airport; (9) the fares at Reagan National for nonstop
flights beyond the perimeter may be higher than for similar flights at
the other airports because low-fare airlines may have difficulty gaining
access to Reagan National's facilities; and (10) even if all of the 12
to 24 nonstop flights per day to and from destinations beyond the
perimeter suggested by the proposed legislation moved from BWI or Dulles
to Reagan National, they would represent between 1 and 2 percent of the
total flights at those airports.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: RCED-99-234
TITLE: Reagan National Airport: Capacity to Handle Additional
Flights and Impact on Other Area Airports
DATE: 09/17/1999
SUBJECT: Air transportation operations
Airline regulation
Airports
Airline industry
Proposed legislation
Transportation legislation
Competition
Safety standards
Transportation safety
IDENTIFIER: Ronald Reagan Washington National Airport (DC)
Dulles International Airport (VA)
Baltimore-Washington International Airport (Baltimore, MD)
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Cover
================================================================ COVER
Report to the Secretary of Transportation
September 1999
REAGAN NATIONAL AIRPORT - CAPACITY
TO HANDLE ADDITIONAL FLIGHTS AND
IMPACT ON OTHER AREA AIRPORTS
GAO/RCED-99-234
Reagan National Airport
(348164)
Abbreviations
=============================================================== ABBREV
BWI - Baltimore/Washington International Airport
DOT - Department of Transportation
FAA - Federal Aviation Administration
GAO - U.S. General Accounting Office
IFR - Instrument Flight Rules
MWAA - Metropolitan Washington Airports Authority
Letter
=============================================================== LETTER
B-282375
September , 1999
The Honorable Rodney Slater
Secretary of Transportation
Dear Mr. Secretary:
Over two decades ago, the Congress deregulated the airline industry,
phasing out the federal government's control over fares and service
and allowing market forces to determine the price, quantity, and
quality of domestic air service. As we have reported,\1 fares have
declined and service has improved overall since deregulation, but
deregulation's benefits have not been evenly distributed throughout
the United States. Furthermore, the federal high-density rule, which
controls the number of takeoffs and landings that may occur each day
within hourly time periods, and perimeter rules, which limit the
distance of nonstop flights that can serve an airport, have created
barriers to entry for new airlines wishing to begin service and for
established airlines seeking to serve new markets, and can influence
competition. Ronald Reagan Washington National Airport (Reagan
National) is subject to both types of rules. To take off or land
during any given hour at Reagan National, an airline must first
obtain a �slot,� which is an authorization from the federal
government to do so. In addition, under current restrictions, no
airline may operate a nonstop flight that exceeds 1,250 miles to or
from the airport.
Several legislative proposals currently before the Congress address
these slot and perimeter restrictions by allowing additional flights
at Reagan National. However, questions have been raised about the
impact of adding flights and extending the perimeter at Reagan
National on the operations at the other two airports in the
Washington, D.C., metropolitan area�Washington Dulles International
(Dulles) and Baltimore/Washington International (BWI).
To examine the potential impact of these proposals on Dulles and BWI,
we (1) described the most prominent proposals that would allow an
increased number of takeoffs and landings at Reagan National and
create exemptions to the perimeter rule, (2) examined the extent to
which Reagan National could safely accommodate more takeoffs and
landings, and (3) analyzed whether adding flights at Reagan National
to and from destinations beyond the current perimeter would cause
passengers to shift their travel from Dulles or BWI.
This study did not evaluate the potential congestion and noise that
could result from an increase in operations at Reagan National.\2
Ultimately, as it has done previously in changing the rules governing
operations at Reagan National, the Congress must balance the benefits
that additional flights may bring to the traveling public against the
local community's concerns about the effect of those flights on
noise, the environment, and the area's other two major airports.
--------------------
\1 See list of related GAO products at the end of this report.
\2 GAO has separate reviews under way examining noise and
environmental issues related to airport operations. These include
broad reviews of the Federal Aviation Administration's noise
mitigation programs and responsibilities, the effect of airport
operations on the environment, and the monitoring and enforcement of
noise abatement procedures at Reagan National.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :1
To improve the access that various communities have to Washington,
D.C., and to increase competition in some of those markets, three
major legislative proposals introduced during 1999 would provide
exemptions to the number of commercial jet flights allowed at Reagan
National. Current law permits 37 jet flights per hour. The
proposals would add between 6 and 36 jet flights per day. In
addition, two of the proposals would permit flights to destinations
beyond the existing 1,250-mile perimeter. These two bills also
contain provisions that would require reviews of whether the
additional flights affect noise, safety, and the environment around
Reagan National.
According to an analysis by the Department of Transportation (DOT),
Reagan National could accommodate up to seven additional flights per
hour without compromising safety. Above that number, Reagan
National's infrastructure�such as its gates and runways�begins to
limit the number of takeoffs and landings, increasing flight delays.
Airport officials acknowledge that Reagan National could handle
additional hourly flights without incurring significant delays, but
they believe the number of flights to be less than seven per hour.
Thus, DOT and airport officials agree that Reagan National could
accommodate 36 new jet flights per day, as proposed in one bill.
Moreover, DOT has some flexibility to allow airlines to operate
flights in slots that are currently available but unused by
effectively moving the slots to times that are more compatible with
commercial interests and consumer demand.
According to our analysis of the impact of four new airlines on
competition among the area's airports, adding nonstop flights from
Reagan National to destinations beyond the existing 1,250-mile
perimeter, as proposed in the Congress, would likely cause only a
limited number of passengers to switch from BWI or Dulles to Reagan
National. While we did not directly estimate the demand for nonstop
travel between Reagan National and destinations outside the
perimeter, our analysis indicates that many travelers currently using
BWI or Dulles for travel beyond the perimeter are likely to continue
to prefer them because of price or convenience and would not switch
to Reagan National. That is, business travelers who prefer BWI or
Dulles because these airports are closer to their homes or businesses
are likely to continue to use them. However, other business
travelers are likely to switch if longer-distance nonstop flights
become available at Reagan National because that is their preferred
airport. With respect to leisure travelers, the fares at Reagan
National for nonstop flights beyond the perimeter may be higher than
for similar flights at the other airports because low-fare airlines
may have difficulty gaining access to Reagan National's facilities.
Consequently, leisure travelers are generally unlikely to switch in
large numbers. Finally, even if all of the 12 to 24 nonstop flights
per day to and from destinations beyond the perimeter suggested by
the proposed legislation moved from BWI or Dulles to Reagan National,
they would represent between 1 and 2 percent of the total flights at
those airports (11 and 21 percent of the nonstop flights from BWI and
Dulles to destinations beyond the perimeter).
BACKGROUND
------------------------------------------------------------ Letter :2
Reagan National Airport,\3 built by the federal government, opened on
June 16, 1941, on the western bank of the Potomac River, across from
Washington, D.C. The airport has three runways and 42 air carrier
gates.\4 The airline with the largest number of operations at Reagan
National is US Airways, which in 1998 had over 40 percent of all
large air carrier operations, expressed in terms of aircraft
departures.\5 The next largest operators at Reagan National are Delta
Air Lines and American Airlines, with 16 percent and 15 percent of
departures, respectively. During 1998, these three airlines together
accounted for 68 percent of total passenger enplanements\6 at the
airport.
Since May 1966, a perimeter rule has been in place at Reagan National
restricting airlines from operating nonstop flights between it and
airports of a particular distance. At first, the Federal Aviation
Administration (FAA) had concerns that allowing jets to fly into
Reagan National would create a noise problem and would conflict with
further development at newly built Dulles Airport. As a result, with
the airlines agreeing, the Civil Aeronautics Board approved a
650-mile perimeter, with exceptions for seven cities between 650 and
1,000 miles away that enjoyed grandfather status as of December 1,
1965.\7 In 1981, FAA formalized the perimeter rule, setting the
perimeter at 1,000 miles.
Similarly, since 1969, the federal government has restricted the
number of commercial takeoffs and landings at Reagan National to 48
per hour: 37 for jets and 11 for commuter aircraft. FAA authorizes
general aviation users�primarily operators of small corporate
aircraft�to make an additional 12 takeoffs or landings during each
hour.\8
In 1986, the Congress elevated the slot and perimeter rules from FAA
regulation to federal statute as part of the Metropolitan Washington
Airports Act of 1986.\9 The act also led to the transfer of authority
over Reagan National and Dulles from the federal government to the
Metropolitan Washington Airports Authority (MWAA) and set the
perimeter at 1,250 miles, which allowed nonstop flights to Houston
and Dallas. Notwithstanding the regulatory limits on operations, FAA
used other authority granted it to permit an exemption to enable
Braniff Airlines to resume operations at Reagan National with four
slots, even though all air carrier slots were already allocated.\10
These four slots were later allocated to America West Airlines.\11
Dulles opened on November 19, 1962. The federal government built
Dulles in part to provide a facility for nonstop �long-haul� air
carrier traffic (that is, flights bound to or from locations beyond
Reagan National's perimeter) in the Washington, D.C. area. Among
major carriers, United Airlines has the largest number of jet
operations at Dulles (over 36 percent of large carrier departures in
1998), and its regional affiliate, Atlantic Coast Airlines, has the
largest number of commuter operations. The other major carriers with
significant numbers of operations at Dulles in 1998 were Delta (13
percent of departures), US Airways (12 percent of departures), and
American (10 percent of departures). Until the mid-1980s, Dulles was
relatively underutilized. More recently, however, the number of air
carrier operations at Dulles has greatly expanded. During the early
1990s, �new entrant� airlines, such as ValuJet and Western Pacific,
initiated service there. Since early 1999, United has increased by
more than one-third the number of its departures at Dulles to 118 per
day. US Airways' low-cost subsidiary, MetroJet, began operations in
December 1998 and by June 1999 offered 39 daily flights from Dulles.
BWI, built by the city of Baltimore and originally named Friendship
International Airport, was opened on June 24, 1950. BWI is located
10 miles southwest of Baltimore and approximately 30 miles northeast
of Washington, D.C. US Airways and Southwest Airlines were the
airport's dominant airlines in 1998, with 36 percent of departures
and 28 percent of departures, respectively. Figure 1 shows the
location of each of the three airports in the metropolitan
Washington, D.C., area. Appendix I shows the configurations of
Reagan National, Dulles, and BWI, illustrating the number of runways,
the size of terminals, and the restrictions on expansion at Reagan
National.
Figure 1: Location of Reagan
National, Dulles, and BWI
Airports Around the Washington,
D.C., Metropolitan Area
(See figure in printed
edition.)
Until recently, more of the region's passengers used Reagan National
than the other two airports. Reagan National has handled about 15
million passengers per year since the late 1970s. Using its latest
available statistics on passenger enplanements, FAA estimated that
BWI would surpass Reagan National in total passengers in 1999 and
that Dulles would surpass Reagan National in 2004 (see fig. 2).
However, by 1998, other data indicated that BWI already was handling
more passengers than either Reagan National or Dulles.
Figure 2: Number of Actual and
Projected Passengers at Reagan
National, Dulles, and BWI
Airports, 1976 Through 2010
(See figure in printed
edition.)
Source: FAA.
--------------------
\3 The airport's official name was changed from Washington National
Airport to Ronald Reagan Washington National Airport under P.L.
105-154, 112 Stat. 3 (1998).
\4 Air carrier (that is, jet) gates are those that are designed to
accommodate large air carriers, generally defined as jet aircraft
seating 56 passengers or more. In contrast, gates designed for use
by smaller commuter aircraft are referred to as commuter gates.
Commuter aircraft are generally turboprop aircraft seating fewer than
56 passengers. Within the past few years, several commuter airlines
have begun using small jet aircraft (�regional jets�) in their
fleets. To avoid confusion throughout the remainder of this report,
we will refer to all commuter aircraft, regardless of whether they
are regional jets or turboprops, as commuter aircraft.
\5 Smaller commuter carriers, which often serve as regional
affiliates for major airlines, are not required to report these data
and are not included. For example, Atlantic Coast Airlines, which
flies as United Express and serves as a regional commuter carrier for
United Airlines, is not required to report these data. Thus, figures
for the number of departures for United Airlines do not include those
made by United Express.
\6 �Passenger enplanements� represent the total number of passengers
boarding an aircraft. A passenger who must make a single connection
between his or her origin and destination counts as two enplaned
passengers because he or she boarded two separate flights. To
estimate the total number of passengers using an airport, the number
of passenger enplanements is doubled to account for those passengers
disembarking at the airport as well.
\7 Civil Aeronautics Board Order E-23743, May 25, 1966. The seven
cities included hubs for major airlines during that period, such as
Miami, Minneapolis-St. Paul, and St. Louis.
\8 In 1969, facing increasing delays and congestion, FAA applied
special air traffic rules to certain airports that it designated as
high-density airports: Chicago's O'Hare; New York's LaGuardia and
Kennedy; Newark, New Jersey; and Reagan National. (DOT dropped
Newark International Airport's designation as a high-density airport
in October 1970.) Because of the restricted number of allowable
operations, these airports are generally known as �slot-controlled,�
and the special air traffic rules governing the allowable number of
operations are referred to as �slot rules,� or �high-density rules.�
The total number of slots allowed at Reagan National has remained
unchanged since the slot rule was put in place in 1969, although the
original limit on the number of jet slots was 40 per hour. FAA
reduced it to 37 in 1981.
\9 P. L. No. 99-591, 100 Stat. 3341-376, title VI.
\10 FAA Exemption No. 2927, Feb. 24, 1984. FAA used its statutory
authority, since amended, under 49 U.S.C. section 40109 to grant
this exemption from its high-density rules on the basis of a public
interest finding.
\11 FAA Exemption No. 5133, Jan. 12, 1990.
RECENT LEGISLATIVE PROPOSALS
WOULD ADD FLIGHTS AT REAGAN
NATIONAL
------------------------------------------------------------ Letter :3
During this Congress, several bills have been introduced that would
provide exemptions to Reagan National's slot and perimeter rules.
The bills vary in the total number of jet flights (takeoffs and
landings) that they would add at Reagan National, ranging from 6 to
36.\12 They also differ on whether and how many flights would be
permitted to and from destinations beyond the existing 1,250-mile
perimeter. No pending bill proposes eliminating the slot and
perimeter rules at Reagan National.\13 Table 1 summarizes the key
provisions of the major bills pending as of August 31, 1999,
including their provisions on maintaining air service to communities
inside the perimeter and assessing the Washington, D.C., area's
concerns about possible environmental impacts, including noise.
Table 1
Summary of Major Pending Legislation
That Would Modify Reagan National's Slot
or Perimeter Rules
Proposed
modifications
Pending to slot and Other key Status as of
legislation Sponsor perimeter provisions August 31, 1999
-------------- -------------- -------------- -------------- ----------------
S. 82 Senator John Permits 36 new New service Passed the
McCain, jet flights must not Senate Committee
Chairman, daily (18 reduce travel on Commerce,
Senate takeoffs and options to Science, and
Committee on 18 landings). communities Transportation;
Commerce, Two-thirds of within the pending with
Science, and all new jet perimeter; DOT full Senate.
Transportation flights could must assess
serve the impact on
destinations noise, safety,
beyond the and the
perimeter. environment.
H.R. 1000 Representative Permits 6 new Requires DOT Passed the House
Bud Shuster, jet flights to grant slots of
Chairman, daily (3 only for Representatives;
House takeoffs and 3 service to referred to the
Committee on landings). No airports where Senate Committee
Transportation new flight service is on Commerce,
and could serve a insufficient Science, and
Infrastructure destination and fares are Transportation.
beyond the high.
perimeter.
S. 536 Senator John Permits 12 new New service Pending with the
Warner jet flights must not Senate Committee
daily (6 reduce travel on Commerce,
takeoffs and 6 options to Science, and
landings). All communities Transportation.
new jet within the
flights could perimeter; DOT
serve must assess
destinations the impact on
beyond the noise, safety,
perimeter. and the
environment.
--------------------------------------------------------------------------------
Source: GAO's analysis of legislative proposals.
In our 1996 report and in testimony this past January,\14 we
suggested that the Congress consider granting DOT the authority to
modify the perimeter rule at Reagan National when proposed new
service would substantially increase competition. We did not
recommend that the rule be eliminated because doing so could have
unintended consequences, such as reducing the amount of service to
smaller communities in the Northeast and Southeast. This could
happen if the airlines serving Reagan National were to shift their
service from these communities to take advantage of more profitable,
longer-distance routes. In addition, in our January testimony, we
recognized that the communities in which the airports are located
will be concerned with any proposals to accommodate additional
service because of potential noise, safety, and congestion problems.
Provisions in some of the pending legislation seek to mitigate these
concerns.
--------------------
\12 Two of these bills would also allow an additional 12 daily
commuter flights.
\13 In addition, S. 545, introduced for the Clinton administration
by Senator Ernest Hollings, has proposed revisions to increase
competition at the nation's three other slot-controlled
airports--Chicago O'Hare, New York Kennedy, and New York LaGuardia�by
phasing out slot controls. This bill does not suggest similar
revisions to the rules governing Reagan National. H.R. 1000 also
calls for a phaseout of slot controls at O'Hare, LaGuardia, and
Kennedy. Slot controls are to be completely phased out at O'Hare by
2002 and at LaGuardia and Kennedy by 2007.
\14 Airline Deregulation: Barriers to Entry Continue to Limit
Competition in Several Key Domestic Markets (GAO/RCED-97-4, Oct. 18,
1996) and Federal Aviation Administration: Issues Concerning the
Reauthorization of Aviation Programs (GAO/T-RCED-99-68, Jan. 20,
1999).
REAGAN NATIONAL HAS THE
CAPACITY TO ABSORB A LIMITED
NUMBER OF ADDITIONAL FLIGHTS
------------------------------------------------------------ Letter :4
If the slot and perimeter rules were revised, the constraints of
Reagan National's infrastructure, such as its relatively short
runways and limited number of gates, would prevent it from
accommodating a significantly larger number of flights. According to
a 1995 DOT study, the airport could absorb seven more flights per
hour (for a total of 126 per day) above the current number allowed by
law, but flights above that number could result in significant
airport congestion and delay.\15 MWAA officials believe that the
airport could accommodate fewer flights before delays become
significant. However, some flights could be added at Reagan National
without increasing the total number of currently available slots
because not all slots at the airport are allocated and because some
slots that are allocated are not fully used.
--------------------
\15 U.S. DOT, Report to the Congress: A Study of the High Density
Rule, May 1995. This report contained no recommendations but
provided a factual basis for making decisions pertaining to
slot-controlled airports.
REAGAN NATIONAL'S
INFRASTRUCTURE LIMITS ITS
CAPACITY TO HANDLE MUCH
ADDITIONAL AIR TRAFFIC
---------------------------------------------------------- Letter :4.1
Even if the slot and perimeter rules were revised, Reagan National's
ability to support an increased number of flights is limited by the
ability of its runways and gates to accommodate a significantly
larger number of jet aircraft.\16 A 1995 DOT study on the slot rule
found that, because of improvements to air traffic management, Reagan
National's infrastructure could support more flights per hour without
affecting air safety. The DOT report indicated that while removal of
the slot rule would result in an increase in operations, air safety
would not be affected because FAA's air traffic control staff would
continue to apply programs and procedures that ensure safety.
The study estimated that the airport's �balanced capacity�\17 was 67
flights per hour, or 7 flights per hour more than the 60 currently
permitted. (This would result in an additional 126 flights per day.)
It did not specify how these flights could be divided among jets,
commuter aircraft, or general aviation aircraft. The study projected
that if the number of slots were increased by 7, delays of 15 minutes
or more as a percent of total operations could increase from about
0.5 percent to 3 percent and cause the airlines to experience a
decreased profit. (The average delay for the other slot-controlled
airports in fiscal years 1997 and 1998 was about 3.6 percent.) At the
same time, however, the costs associated with the increase in delays
would be partially offset by consumer benefits. Should the slot rule
be eliminated, the demand for air service could exceed the airport's
balanced capacity for 10 hours each day, and delays would be much
greater. An FAA official told us that the report's key findings are
generally still applicable.
MWAA officials thought that Reagan National could accommodate a few
more flights per hour but perhaps not as many as seven. They said
that the number of flights the airport could handle per hour was in
the �low- to mid-60s� (for a total of about 70 additional flights per
day) before delays became significant. They emphasized that they
remained concerned about any possible noise-related impact that
additional flights might have on the area. However, MWAA has not
conducted its own analysis to determine how many additional flights
per hour could be safely accommodated without an undue increase in
delays.
The length of Reagan National's runways is a key factor restricting
the number of takeoffs and landings. Only one of its three runways
is long enough to routinely accommodate most jet aircraft. FAA and
MWAA officials observed that the use of this longest runway is
increasing because commuter airlines are replacing traditional
propeller aircraft, which can use the shorter runways, with regional
jets, which must use the longest runway.
Furthermore, should the perimeter be expanded, airlines would find
that Reagan National has a limited capacity to accommodate large
aircraft. To date, only narrow-body aircraft, such as the Boeing 737
and MD-80, have been used at the airport. Should flights beyond the
perimeter be allowed, airlines could use wide-body aircraft no larger
than the Boeing 767-300.\18 Reagan National's renovation allowed
airlines to use wide-body aircraft as large as the Boeing 767-300,
but only in limited numbers. \19 Because of the size of their
wingspans (156 feet each), two Boeing 767s could not pass each other
on adjacent taxiways or use adjacent gates. Furthermore, Reagan
National has only five gates that could accommodate a Boeing 767, and
the use of these gates would require that aircraft using adjacent
gates be smaller in size than could otherwise be used. In addition,
even some newer narrow-body aircraft, such as the Boeing 757-300,
could have difficulty using some of the airport's gates because their
length would hamper aircraft movements.
The limited availability of gates and other facilities at Reagan
National provides incumbent airlines with little opportunity to add
service or shift flights from Dulles or BWI, as some industry
observers have suggested could happen if the perimeter rule were
changed. For instance, if United were allowed to begin operating
nonstop service to destinations beyond the perimeter, it would find
that shifting a significant number of its transcontinental flights
from Dulles to Reagan National would be difficult. This is because
the airline is already using its three gates at Reagan National on a
frequent basis throughout the day and because the number of slots to
be offered under proposed legislation is limited. In addition,
United has no slots and gates at Reagan National for its regional
commuter affiliate to bring passengers in from other eastern markets
that would connect with those transcontinental flights.
Moreover, if any of the proposed legislation is enacted and airlines
that do not already serve Reagan National are awarded slots, they may
have difficulty obtaining the gates, ticket counters, baggage
handling areas, and other facilities necessary to initiate new
service, especially at key periods during each business day. Reagan
National currently has 42 gates available for jet operations.
According to MWAA, all of these gates are leased to the incumbent
�tenant� airlines until 2014.\20 MWAA may make a gate available to
another airline when it is not needed to support the tenant airline's
scheduled operations. While a tenant airline cannot prevent another
airline from using the gate when it does not need it, the only
effective opportunity for a new entrant to initiate service at key
business times of the day�or for an incumbent to expand service�is
through a contractual arrangement with the tenant airline. To date,
this is how new entrants have gained access to the airport. Until
1996, for instance, Midwest Express had gate-use agreements,
initially with United and later with Northwest Airlines, to support
its daily nonstop service to Milwaukee and Omaha. In August 1996,
Midwest Express began leasing its own gate directly from MWAA.
Today, similar opportunities exist for new entrants to share daytime
gate space with incumbents whose �turn rates� are relatively low.\21
Opportunities may exist, for example, to sublease from Trans World
Airlines, Northwest, and Continental Airlines, none of which makes
more than six daily turns per gate.
Several incumbent airlines are unlikely to sublease their gates to
new competitors because they use them frequently each day to support
their own operations. Collectively, the major airlines use Reagan
National's 42 jet gates at a high rate relative to the industry
average. Airline analysts consider Southwest to be the most
efficient major U.S. airline because it averages 10 turns per gate
per day at airports where it operates. At Reagan National, US
Airways makes nearly 200 daily flights from its 12 jet gates, for an
average of eight turns per gate per day.\22 Several of Reagan
National's other major airlines also use their gates frequently
throughout the day; Delta and United, for example, make an average of
eight turns and six turns per gate per day, respectively.\23 Measured
against the typical industry rate of seven aircraft turns per gate
per day, these three airlines have little or no ability to sublease
these gates to new entrants, especially during peak business hours.
Although MWAA has no plans to increase the number of gates at Reagan
National, MWAA officials emphasized that they will work with
incumbent airlines to ensure that any new entrant wishing to serve
Reagan National can do so. MWAA officials stated that they address
gate access whenever necessary. Since 1986, for instance, MWAA has
helped two airlines�Midway and Midwest Express�to gain access to
gates and other facilities at the airport. In addition, every 3
years, MWAA undertakes a broad, formal assessment of the airlines'
use of gates and associated facilities at Reagan National. Reagan
National's next formal reassessment is scheduled for the summer of
2000.
--------------------
\16 Reagan National's geographic boundaries also combine to limit the
airport's ability to accommodate a significant number of additional
flights. Reagan National is bordered on the east by the Potomac
River and on the west by National Park Service land. The existence
of these features makes adding or lengthening the airport's runways
virtually impossible.
\17 �Balanced capacity� refers to the average ability of an airport's
runways to support a certain number of operations per hour under
varying weather and wind conditions.
\18 We found no standard definition of a wide-body aircraft.
According to an MWAA official, a wide-body aircraft is generally
considered to be an aircraft with two aisles, such as a Boeing 747.
For scale comparisons of this aircraft and other aircraft used at
Reagan National, Dulles, or BWI, see app. II.
\19 Reagan National now has five gates that can accommodate wide-body
aircraft, but it will have an additional gate when its renovation is
complete. In comparison, Dulles has more than 60 gates that can
serve wide-body aircraft.
\20 Under certain conditions, MWAA may terminate leases in 2004.
\21 A �turn� is an informal industry term referring to one aircraft's
combined inbound and outbound flight operations at a given gate.
\22 This excludes US Airways' shuttle flights to New York City, which
operate out of two separate gates. Each day, the airline operates 15
shuttle flights from each of these gates (approximately eight turns
per gate).
\23 By comparison, at Dulles, United operates approximately 118
flights from 36 gates, thus averaging fewer than four turns per gate
per day.
SOME EXISTING SLOTS AT
REAGAN NATIONAL HAVE NOT
BEEN ALLOCATED TO AIRLINES,
WHILE OTHERS ARE NOT
EFFICIENTLY USED
---------------------------------------------------------- Letter :4.2
FAA controls the allocation of available jet and commuter slots at
Reagan National during an 18-hour period every day, from 6:00 a.m.
until midnight. Specifically, FAA makes 868 slots available per day
to jet and commuter airlines--37 jet slots available each hour during
the 18-hour period, for a total of 670 daily available jet slots, and
11 commuter slots per hour during the 18-hour period, for a total of
198 daily available commuter slots.\24
Of the 670 available jet slots, 86 have not been requested for
allocation. Each of these 86 jet slots falls either in the early
morning (between 6:00 and 7:00) or in the late evening (between 9:00
and midnight). According to MWAA officials, these jet slots remain
unallocated because there is less demand for passenger service during
these hours and because the airlines do not use aircraft that comply
with MWAA's stricter noise requirements in effect after 10:00 p.m.
To date, the airlines also have not requested that FAA allocate 35
commuter slots for their use.\25
In addition, not all allocated slots are being used in the most
efficient manner. Each day, small commuter aircraft use 36 slots
designated for jet traffic during busy times of the day. US Airways
Express, a commuter airline, uses 20 of these 36 jet slots to serve a
variety of nearby cities with small propeller aircraft during the
mid-day hours. An FAA official acknowledged that commuters often
operate flights in jet slots but emphasized that this practice is
permissible under federal regulation.
Finally, some weekday peak-hour slots at Reagan National are not
being fully used, resulting in fewer flights at certain times than
are permitted under the current slot limits. FAA regulations require
that an airline use each slot a minimum of 80 percent of the time
over a 2-month reporting period, or the agency will withdraw it.
According to FAA's May 1999 analysis of slot-use data recently
submitted by the major airlines, some airlines report operating
flights in a staggered manner among allocated slots during the
standard 2-month reporting periods to ensure compliance with the
minimum-use regulations for each slot. For example, because the
regulations allow a slot to go unused for up to 20 percent of the
time, a carrier with five slots in 1 hour must operate only four
flights in that hour on any day to obtain 80-percent use for each of
its five slots. The carrier is allowed to �rotate� its four flights
across the five slots over the 2-month period to prevent FAA from
withdrawing the slot. The practice of a carrier's rotating actual
flights among its allocated slots is commonly referred to as
"babysitting." FAA officials emphasized that babysitting is not
prohibited by existing regulation, provided that a slot meets the
minimum-use requirements.
--------------------
\24 In addition to the 37 hourly jet slots, FAA makes available 4 jet
slots to America West under a special slot exemption authority.
America West uses these jet slots to operate flights to its Phoenix
hub via Columbus, Ohio, at 8:00 a.m., 3:00 p.m., 4:00 p.m., and 9:00
p.m. FAA includes these four additional jet slots in its count of
available daily jet slots. The total number of jet slots available
each day equals 670.
\25 Current law defines the peak-hour period as between 7:00 a.m.
and 9:59 p.m. In certain circumstances, DOT has the authority to
�re-time� (i.e., change the assigned hour) up to two slots per hour.
49 U.S.C. section 41714(d) permits the Secretary of Transportation
to allow air carriers holding or operating slots to re-time them, but
only under specified conditions and upon a finding that exceptional
circumstances exist. The most important of these conditions are that
the total number of slots during peak hours are not increased and
that the number of operations in any 1-hour period not be increased
by more than two. The law does not allow DOT to �re-time� off-peak
slots to peak hours. For example, in September 1994, DOT allowed
Midwest Express to obtain two jet slots that were available at 9:00
p.m., and then re-time them for use at 7:00 p.m. DOT took this
action primarily to allow Midwest Express to accommodate passengers
demanding convenient nonstop service to and from Omaha, Nebraska.
DOT's decision to provide this exemption to Midwest Express means
that the total number of slots currently allocated to all airlines at
7:00 p.m. exceeds the limit of 37 jet operations per hour at Reagan
National by 2, as is permitted under 49 U.S.C. section
41714(d)(1)(C). In addition, Midwest Express has applied for Reagan
National's two remaining unallocated 9:00 p.m. slots.
ONLY A LIMITED NUMBER OF
PASSENGERS ARE LIKELY TO SWITCH
TO REAGAN NATIONAL FOR SERVICE
BEYOND THE PERIMETER
------------------------------------------------------------ Letter :5
Only a limited number of passengers might switch from using BWI or
Dulles to Reagan National to take advantage of nonstop service to
destinations beyond the perimeter should the Congress provide the
opportunity. Previous experiences in the Washington, D.C.,
metropolitan area with airlines introducing new or low-fare service
suggest that relatively few passengers are likely to switch from
using BWI or Dulles to Reagan National. Furthermore, the amount and
type of service provided by additional flights at Reagan National as
a result of the proposals before the Congress would affect the number
and mix of passengers most likely to switch.
PREVIOUS WASHINGTON AREA
AIRPORT EXPERIENCES PROVIDE
INSIGHT INTO THE EXTENT TO
WHICH PASSENGERS MIGHT
SWITCH TO REAGAN NATIONAL
---------------------------------------------------------- Letter :5.1
To gain insight into whether passengers who currently use BWI or
Dulles might switch to using Reagan National, we determined the
extent to which passengers switched from one area airport to another
when provided with an incentive. Typically, passengers prefer to fly
from the airport that is most convenient for them. For the purpose
of our analysis, we used the introduction of �low-fare� service at
BWI and Dulles as an incentive that could attract passengers from one
area airport to another. (During the 1990s, no airline introduced
�low-fare� service to or from Reagan National.) We did this because
the effect of price changes at one airport on the passenger traffic
and fares at another airport is frequently used as a measure of the
extent to which passengers view airports as substitutes for one
another.\26
In our analysis, we distinguished between the reactions of passengers
traveling for leisure and for business purposes.\27 As a general
rule, individuals traveling for leisure purposes tend to be more
sensitive to price differences than those traveling for business.
That is, leisure passengers are more likely than business passengers
to change their travel plans (that is, switch�or substitute�airports)
in response to differences in airfares. However, various other
factors, such as the availability of low fares or nonstop service at
one airport that is not provided at another, may persuade travelers
to switch from the airport that they might otherwise use.\28
To evaluate the impact of low-fare service on passenger choice, we
identified three cases in which an airline new to an airport (a �new
entrant�) introduced low-fare service at an area airport and one case
in which an airline introduced new service without offering low-fare
service. We then determined how these �entry events� affected
passenger traffic and fares for both leisure and business travelers
at all three area airports. The four entry events we examined were
(1) ValuJet's entry into the Dulles�Atlanta market during 1994, (2)
Southwest's entry into the BWI�St. Louis market during 1994, (3)
Western Pacific's entry into the Dulles�Denver market during 1997,
and (4) Midway Airlines' entry into the Reagan
National�Raleigh/Durham market during 1995. Appendix III contains a
more complete description of our methodology.
Our analysis indicated that, for a number of reasons, relatively few
passengers switched airports in response to the service offered by
the new entrant. Although the entry of a new carrier substantially
lowered the fares between the two airports served by the new entrant,
the low fares at one airport had, at most, only a small effect on the
number of passengers paying high fares (generally, business
travelers) at the other area airports. This indicates that
passengers who pay high fares have a strong preference for the
airport that is most convenient for them. For those passengers, the
airports are poor substitutes for one another. In contrast,
passengers who traveled at low fares (generally, leisure travelers)
showed some willingness to switch among the area's three airports.
Yet even this group, which is more sensitive to price changes than
business travelers, demonstrated some preference for one airport.
This indicates that for leisure travelers, these airports may be
modest substitutes for each other. In addition, the lower fares
increased the total number of passengers flying. The results of our
analyses are summarized in table 2 and described in more detail in
appendix IV.
Table 2
Summary of the Effects on Passengers and
Fares of New Entry at the Three
Washington-Area Airports
Entrant airline/Airport-
pair market entered Airport/Previous Provider Effect of entry
---------------------------- ---------------------------- -----------------------------
ValuJet/Dulles-Atlanta Dulles/Delta Low fares substantially
increase the total traffic
between Dulles and Atlanta.
Little change in number of
high-fare passengers.
Reagan National/ Increase in the number of
Delta and TWA low-fare passengers.
Little change in the number
of high-fare passengers.
TWA exited market.
BWI/Delta, US Airways, and Large decrease in the number
TWA of low-fare passengers, who
probably switched to other
airports.
Little effect on high-fare
passengers.
Southwest/BWI�St. Louis Dulles/TWA Slight decline in the number
of low-fare passengers who
possibly switched to BWI.
Small increase in the number
of high-fare passengers.
Reagan National/TWA Large decline in the number
of low-fare passengers, who
probably switched to BWI.
Little effect on high-fare
passengers.
BWI/TWA and US Airways Large increase in the total
number of passengers, most at
low fares.
Decline in the number of
high-fare passengers. US
Airways exited market.
Western Pacific/ Dulles/United Low fares increased the
Dulles�Denver number of travelers.
Large decline in the number
of high-fare passengers.
Reagan National/none No nonstop service; Denver is
outside the current
perimeter.
Little change in connecting
service.
BWI/United Lower fares increase both the
number of low-fare and total
passengers; no apparent
switch of passengers.
Modest decline in the number
of high-fare passengers.
Midway/Reagan Dulles No nonstop service at the
National�Raleigh-Durham time of Midway's entry.
Reagan National/US Airways Low fares increased the
number of travelers.
Decline in the number of
high-fare passengers, who
then traveled at lower fares.
BWI/US Airways Modest decrease in the number
of low-fare passengers.
Large increase in the number
of high-fare passengers,
probably because of American
Airlines' exit.
-----------------------------------------------------------------------------------------
We believe there is an unmet demand for nonstop travel between Reagan
National and destinations outside the perimeter. However, we were
unable to directly estimate the size of this unmet demand. Precise
estimates of the number of travelers who might switch from using
Dulles or BWI to Reagan National would depend on a number of major
assumptions about airline behavior and the markets that would be
served. For example, United officials noted that an airline's
reaction to changes in the slot and perimeter rules would depend on a
variety of conditions, such as the way the perimeter rule was
changed, the availability of sufficient facilities at Reagan
National, and other competitive pressures. If some version of the
legislative proposals under consideration were enacted, the effect on
Reagan National air travelers would depend on which airlines received
exemptions to the perimeter rule (along with the necessary slots and
facilities at Reagan National), the amount and type of service they
provided, and the markets they served.
If exemptions allowed the major airlines already serving Reagan
National to operate to and from large western cities, those airlines
could capitalize on the scarcity of their new nonstop service and
charge a premium fare. This would tend to restrict the benefits from
such service to travelers doing business in downtown Washington,
D.C., rather than to the more price-sensitive leisure travelers, who
would be unlikely to switch because lower fares might still be
available at BWI or Dulles. Nevertheless, our analysis of the market
entries by these four airlines indicates that if new nonstop service
to locations outside the perimeter is allowed, not all business
passengers are likely to switch to Reagan National from BWI or
Dulles. Business travelers who prefer BWI or Dulles because these
airports are closer to their home or business are likely to continue
to use these airports. Other business travelers are likely to switch
if longer-distance flights become available because they would prefer
to use Reagan National. Leisure travelers are generally unlikely to
switch in large numbers because, under this scenario, the fares at
Reagan National for nonstop flights beyond the perimeter may be
higher than for similar flights at the other airports.
If exemptions were awarded to low-cost airlines, more leisure
travelers would be likely to benefit. Often lacking national
networks and alliance agreements with the major airlines, low-cost
carriers tend not to attract as many business travelers and thus
depend more on leisure passengers. As we pointed out earlier,
however, the lack of available facilities at Reagan National may
inhibit the ability of new entrants to initiate service at
commercially viable times. MWAA officials told us that they have
always been able to accommodate airlines that wanted to initiate new
service at Reagan National. Nonetheless, the experience of Midwest
Express indicates that gaining reasonable access to its own
facilities at Reagan National can take some time.
--------------------
\26 This general approach is widely accepted by the economics
profession and used by the Department of Justice and the Federal
Trade Commission to determine whether two similar products compete
with each other or whether they are in distinct markets.
\27 Airline ticket data do not indicate whether passengers are
traveling for business or leisure purposes. To simplify our
analysis, we assumed that travelers purchasing cheaper tickets, which
normally require advance purchase and a Saturday-night stayover, were
leisure travelers and those who purchased more expensive tickets,
often fares available at the last minute, were business travelers.
\28 Passenger preference surveys also provide valuable insight into
this issue. About every 5 years, the Metropolitan Washington Council
of Government surveys passengers at each of the three major airports.
This survey includes questions on which airport passengers prefer to
use. The 1992 survey reported that 43 percent of locally originating
passengers preferred to use Reagan National, 22 percent preferred
Dulles, and 23 percent preferred BWI, with 12 percent expressing no
opinion. The Council of Governments conducted its most recent
passenger survey in 1998 but has not had the funding needed to
analyze the data and publish the results. We believe the more recent
survey might reflect changes in passenger preferences that could have
taken place since 1992, especially those that reflect the notable
increase in employment and population in the vicinity of Dulles
Airport, along with the introduction of low-fare service discussed in
this section and the renovation of all three area airports.
LIMITED SHIFT IN AIRLINE
OPERATIONS AND PASSENGER
TRAFFIC UNLIKELY TO AFFECT
DULLES OR BWI SIGNIFICANTLY
---------------------------------------------------------- Letter :5.2
Airline industry experts with whom we spoke said that the impact on
Dulles or BWI of modifying the perimeter rule would depend on how the
rule was changed and how many additional flights would be added at
Reagan National. Nevertheless, they generally dismissed the notion
that moderate changes in the slot and perimeter rules at Reagan
National would adversely affect BWI or Dulles because they do not
view the Washington, D.C., metropolitan area as a single market for
the three airports. Rather, they believe that the market for each of
the area's three commercial airports is largely different.
Furthermore, some of the experts did not believe that the number of
passengers switching would be detrimental to Dulles because of the
sizable growth of business in the vicinity of Dulles. They said that
unlike years ago, when Dulles needed the protection afforded by the
slot and perimeter rules at Reagan National, Dulles is now an
established airport with a natural customer base in its geographic
area.
The airline experts we spoke with speculated that Dulles would lose
some business travelers if nonstop long-haul flights to cities beyond
the perimeter were offered at Reagan National. However, even if all
of the 6 to 12 roundtrip nonstop flights per day to destinations
beyond the perimeter suggested by the proposed legislation moved from
BWI or Dulles to Reagan National, they would represent between 1 and
2 percent of the total flights at those airports (11 to 21 percent of
the nonstop flights to destinations beyond the perimeter). We
believe it is unlikely that the 6 to 12 flights would move to Reagan
National because the existing long-haul service at Dulles relies in
part on connecting traffic. In addition, such a scenario would be
unlikely because some of the passengers flying on new nonstop flights
from Reagan National would be the same passengers who are currently
using one-stop service from the airport. Only US Airways�which does
not have major long-haul service at Dulles--has a significant
commuter operation at Reagan National. United operates more
transcontinental flights than any other airline at Dulles but has no
commuter flights into Reagan National to bring connecting passengers
in from other East Coast locations. In addition, because of the
constraints on the size of Reagan National's runways, taxiways, and
gates, the airport could accommodate only some of the aircraft that
airlines now use at Dulles or BWI for transcontinental service.
Thus, we believe that changes to the slot and perimeter rules at
Reagan National would not result in a significant shift of passenger
traffic or service among the three area airports and that neither BWI
nor Dulles would experience significant adverse effects.
AGENCY COMMENTS
------------------------------------------------------------ Letter :6
We provided copies of our draft report to DOT, FAA, MWAA, and the
Maryland Aviation Administration. We met with officials from DOT and
FAA, including DOT's Deputy Assistant General Counsel and FAA's
Assistant Manager, Air Traffic Operations. These agencies generally
agreed with our findings and provided several comments to clarify
technical issues concerning slot allocation and use. We spoke with
the Director, Policy Development, Maryland Aviation Administration,
who also agreed with the report's findings and provided us with
technical comments. We incorporated the comments on clarity and
technical issues as appropriate.
MWAA agrees that Reagan National Airport could support a modest
number of additional flights and asserts that its reasons for wishing
to retain existing limits stem primarily from policies that it deems
important to the operation of the airports in the Washington, D.C.,
region. MWAA commented that we did not clearly place Reagan
National's slot and perimeter rules in the context of these policies.
In addition, MWAA suggested that our use of �balanced capacity� to
measure the number of flight operations that Reagan National should
be able to accommodate overstates the airport's capacity. We
believe, as does DOT, that balanced capacity is a superior method for
determining what the airport's capacity ought to be because it
accounts for the operation of aircraft during all weather conditions.
MWAA had several other technical comments, which we addressed in the
report, as appropriate. MWAA's comments, along with our responses to
them, appear in appendix V.
---------------------------------------------------------- Letter :6.1
We conducted our work from March 1999 through August 1999 in
accordance with generally accepted government auditing standards.
If you or your staff have any questions about this report, please
call me or Steve Martin at (202) 512-2834. Staff contacts and others
who made key contributions to this report are listed in appendix VI.
Sincerely yours,
John H. Anderson, Jr.
Director, Transportation Issues
CONFIGURATION OF THE THREE
AIRPORTS IN THE WASHINGTON, D.C.,
METROPOLITAN AREA
=========================================================== Appendix I
Figure I.1: Ronald Reagan
Washington National Airport
(See figure in printed
edition.)
Source: Metropolitan Washington Airports Authority.
Figure I.2: Dulles
International Airport
(See figure in printed
edition.)
Source: Metropolitan Washington Airports Authority.
Figure I.3:
Baltimore/Washington
International Airport
(See figure in printed
edition.)
Source: Maryland Aviation Administration.
COMPARISON OF THE SIZES OF VARIOUS
AIRCRAFT THAT USE REAGAN NATIONAL,
DULLES, AND BWI AIRPORTS
========================================================== Appendix II
(See figure in printed
edition.)
(See figure in printed
edition.)
Source: The Boeing Corporation
SCOPE AND METHODOLOGY
========================================================= Appendix III
To examine the potential impact of several legislative proposals
currently before the Congress that would address restrictions on
flights at Ronald Reagan Washington National Airport (Reagan
National), we (1) described the most prominent proposals that would
allow an increased number of takeoffs and landings at Reagan National
and create exemptions to the perimeter rule, (2) examined the extent
to which Reagan National could safely accommodate more takeoffs and
landings, and (3) analyzed whether adding flights at Reagan National
to and from destinations beyond the current perimeter would cause
passengers to shift their travel from Dulles or BWI.
To address the first objective, we reviewed the three leading
legislative proposals that have been introduced in the 106\th
Congress and compared their similarities and differences. We also
examined the legislative history of the federal government's
involvement with the Washington, D.C., area airports. This review
included various laws and regulations, such as the Metropolitan
Washington Airports Act of 1986, in which the federal government
ceded control of Reagan National and Dulles to the newly created
Metropolitan Washington Airports Authority (MWAA). Finally, we
reviewed exemptions to the slot and perimeter rules that have been
permitted over time.
For the second objective, we determined how airlines are using
existing slots. We did this to gain insight into the extent to which
Reagan National may be able to absorb additional air traffic and
passengers if the slot and perimeter rules change and if airlines
operating at Dulles and BWI decide either to initiate service at
Reagan National or move service from those airports to Reagan
National. We analyzed data from the Federal Aviation Administration
(FAA) on the actual use of allocated air carrier (jet) and commuter
slots in terms of the existing slot limitations to determine if slots
are being used in an economically efficient manner.\29 This analysis
included reviewing data on which airlines operated commuter aircraft
in jet slots and how airlines met the federal regulatory requirements
that slots be used 80 percent of the time during 2-month periods.
We also examined Reagan National's capacity in terms of the maximum
number of flights allowed by the slot rule. We determined the
limitations presented by the airport's runways, taxiways, gates, and
terminal areas to accommodate not only more flights (with more
passengers) but also flights by aircraft larger than those normally
operating there now--aircraft capable of flying long-range or
transcontinental routes. We reviewed the data contained in a 1995
study by the Department of Transportation (DOT) on the high-density
rule,\30 as well as data provided by FAA on the runway lengths needed
to accommodate different aircraft capable of flying long-range
routes. We also determined from MWAA the number and location of
gates at Reagan National that had been constructed to accommodate
larger, heavier aircraft than are now used at the airport. We
interviewed FAA and MWAA officials about the effect on Reagan
National's operations of the introduction of long-range aircraft,
along with the substitution by commuter carriers of regional jets for
turboprop aircraft.
Finally, for the third objective, we analyzed the extent to which
passengers would shift their travel from any one of the area's three
airports to another in response to new travel options. To do so, we
analyzed cases in which airlines that previously did not fly to and
from one airport (defined here as �new entrants�) introduced service
to destinations already served by other airlines (defined here as
incumbent airlines). Using data originally provided to DOT by the
airlines, we identified all new entrants that began operations at one
of the three airports during the 1990s. Because individuals
traveling for leisure are known to be more sensitive to changes in
prices than individuals traveling for business, we separately
analyzed the distribution of passengers and the fares they paid for
each airport.
We restricted our analyses to cases in which the new entrants
initiated service at a significant level. We eliminated those new
entrants that served only as commuter affiliates to a major airline,
along with those that failed to carry the equivalent of at least two
planeloads daily (approximately 20,000 passengers per quarter). We
further limited our analysis of those cases to destinations that the
new entrant served on a nonstop basis. Thus, we examined the effects
on passenger traffic and fares that may have been produced by four
new entrants during the 1990s: Southwest Airlines' 1993 introduction
of service at BWI; ValuJet's 1994 introduction of service at
Washington Dulles; Western Pacific's 1994 introduction of service at
Washington Dulles; and Midway's 1994 introduction of service at
Reagan National. Between the time that they began service in the
Washington area and the time of our review (through the fourth
quarter of 1998), according to the most recent available data,
Southwest and ValuJet (now operating as AirTran Airlines) began
nonstop service to a number of destinations. We selected only one
market for each carrier. In general, we excluded destination cities
that are served by more than one airport. We did this because we
would not be able to determine whether changes in air traffic and
fares between the Washington, D.C., area airports and the destination
city were due to the new competition in the Washington, D.C., area,
or to competitive effects from the second airport in the destination
city (for example, we excluded an analysis of the effect of
Southwest's entry into the BWI-to-Chicago Midway Airport market
because we would not be able to separately identify any effect that
Chicago's O'Hare International Airport may exert on traffic and fares
in the market).\31
In measuring the number of passengers traveling in a market and the
fares they paid, we also excluded itineraries involving (1) flights
making an intermediate stop between their origin and destination,
except in the case of travel between Denver and the three area
airports; (2) flights making any stop outside the continental United
States; (3) nonrevenue flights taken by airline employees or
passengers using frequent flyer awards; (4) flights for which the
fare was unknown (for example, charters); and (5) flights with
certain missing data, such as those on fares, segments, date, or
operating airline. We also excluded itineraries involving more than
one airline. We reported fares on a one-way basis.
To determine whether the entry by these airlines produced an effect
on (1) the number of passengers carried by incumbent airlines at the
airport where the entry took place; (2) the number of passengers
carried at either of the other two area airports in the same
airport-pair market; or (3) fares paid by those passengers, we
analyzed traffic and fare data for those particular routes, beginning
2 quarters prior to the new entrants' service and 2 quarters
afterward. For example, if an entrant began service in the second
quarter of 1995, we examined changes in competitors' fares at each of
the three area airports between the fourth quarter of 1994 and the
fourth quarter of 1995. We selected this 4-quarter interval to
minimize any effects that seasonal air travel might introduce into
the analysis (during the winter, fewer passengers fly on most routes,
and fares are generally lower; the situation is reversed during the
peak summer travel months).
We obtained these data from DOT's Bureau of Transportation
Statistics, Office of Airline Information. These data are reported
originally by the operating airlines and constitute a 10-percent
sample of all tickets. Because they are drawn from a sample, they
are subject to sampling error (that is, the likelihood that the
result produced from analyzing the sample is different from the
�true� value). We did not calculate the sampling errors during this
review. In the past, however, when we have used these data, we have
found the sampling errors to be very small.\32
Finally, we examined whether the entry events exerted different
effects on leisure and business travelers, who generally represent
separate passenger markets. Leisure travelers tend to be more
sensitive to price changes than are business travelers. Moreover,
airlines pay special attention to business travelers because these
travelers are responsible for generating a disproportionate amount of
airline revenue. We examined changes in the overall distribution of
passenger traffic by analyzing for each airline pre-entry and
post-entry changes in the number of passengers paying fares in
different fare categories, defined in $50 increments. Because
airline ticket data do not indicate the purpose for which individuals
traveled, we assumed that passengers paying higher fares were
generally those traveling for business and those paying lower fares
were generally traveling for leisure.
We conducted our work from March 1999 through August 1999 in
accordance with generally accepted government auditing standards.
--------------------
\29 We define an �economically efficient manner� to mean the extent
to which the scarce slot resources are used to serve the greatest
number of passengers. We recognize that holders of slots may have
different perspectives on what they consider to be the best use of
those slot resources.
\30 U.S. DOT, Report to the Congress: A Study of the High Density
Rule, May 1995.
\31 These airlines may have provided nonstop service to other cities
as well, but we excluded those routes from our analyses because, for
example, they did not meet our criterion for the minimum passenger
load.
\32 See, for example, Airline Deregulation: Changes in Airfares,
Service, and Safety at Small, Medium-Sized, and Large Communities
(GAO/RCED-96-79, Apr. 19, 1996).
ADDITIONAL INFORMATION ON
SUBSTITUTABILITY OF AIRPORTS
========================================================== Appendix IV
Since 1993, several new airlines have begun service to the
Washington, D.C., area. This appendix describes the impact of four
of those new airlines on competition among the area's airports.
Specifically, it describes the effect that (1) ValuJet's new service
between Washington Dulles and Atlanta's Hartsfield International
Airport (Atlanta) had on the number of passengers and the fares they
paid for travel between Atlanta and Reagan National and BWI; (2)
Southwest Airlines' (Southwest) new service between BWI and St.
Louis Lambert Field (St. Louis) had on the number of passengers and
the fares they paid for travel between St. Louis and Dulles and
Reagan National; (3) Western Pacific's new service between Dulles and
Denver International Airport (Denver) had on the number of passengers
and the fares they paid for travel between Denver and BWI and Reagan
National; and (4) Midway's new service between Reagan National and
Raleigh-Durham International Airport (Raleigh-Durham) had on the
number of passengers and the fares they paid for travel between
Raleigh-Durham and Dulles and BWI. As discussed in the report and
appendix III, we assessed the substitutability of Washington's three
airports by determining the extent to which passengers switched from
one Washington area airport to another when new service became
available. The more the airports are substitutable, the more likely
passengers are to switch airports in response to new service options.
VALUJET'S ENTRY AT DULLES
DURING 1994 SUGGESTS THAT
REAGAN NATIONAL AND DULLES MAY
BE SUBSTITUTES FOR LEISURE
PASSENGERS BUT THAT BUSINESS
PASSENGERS REGARD EACH AIRPORT
AS SEPARATE
-------------------------------------------------------- Appendix IV:1
ValuJet's entry at Dulles significantly increased the number of
passengers who flew on low-fare tickets for travel between Dulles and
Atlanta. The number of passengers paying between $50 and $99 for
one-way tickets between Atlanta and Dulles increased almost fivefold,
from about 1,000 to almost 5,000 passengers between the end of 1993
and the end of 1994. Similarly, but to a lesser extent, ValuJet had
the same effect on low fares and passenger traffic at Reagan
National. Over the same period, the number of low-fare passengers
served by Delta Air Lines (Delta) increased modestly, from 7,640 to
9,850, suggesting that Delta viewed the two airports as substitutes.
However, the number of low-fare passengers on this route decreased
overall because Trans World Airlines (TWA) stopped serving this route
after ValuJet's entry at Dulles. In contrast, ValuJet's entry at
Dulles did not exert a downward pressure on the higher fares paid by
business passengers at any of the three area airports, and the number
of passengers paying these fares remained about the same. Since the
airlines did not need to reduce fares charged to business passengers
to keep them from switching, we conclude that business travelers did
not perceive the three airports to be substitutes. On the other
hand, because some leisure passengers may have switched from BWI to
Dulles to obtain lower fares, we conclude that they regard the
airports as moderate substitutes.
When ValuJet began service at Dulles in 1994, Delta was the principal
carrier of passengers between Dulles and Atlanta, an airport that
also serves as Delta's operations hub. Delta, and to a much lesser
extent, TWA and US Airways, provided nonstop service to each of the
three Washington, D.C., area airports at a wide variety of fares.
When ValuJet began offering low-fare service between Dulles and its
base of operations, Atlanta, during the second quarter of 1994, most
of ValuJet's passengers flew on tickets that cost between $50 and $99
each way, usually for a round-trip ticket.\33 In comparison, fares
charged by the other air carriers for travel between Washington's
three airports and Atlanta ranged between $50 and $549.
At Dulles, ValuJet's entry into the market for travel between Dulles
and Atlanta had a significant impact on the fares charged by Delta,
which appeared to have lowered the fares it charged between those
airports. As shown in figure IV.1, the distribution of fares on
Delta for travel between Dulles and Atlanta shifted substantially in
favor of lower fares after ValuJet began its operations.\34 Because
Delta offered more seats at prices matching some of ValuJet's lower
fares, the fares generally charged to leisure passengers, Delta's
passenger levels at lower fare levels dramatically increased from
approximately 11,700 to 29,000 passengers per quarter (or about 130
to 320 per day) for fares between $50 and $199. In contrast, the
impact of ValuJet's entry on the number of passengers traveling at
the more expensive fares, those between $300 and $399 each way, did
not change substantially. These lower fares also resulted in a
greater number of passengers traveling between Dulles and Atlanta, an
increase from 54,220 (about 593 passengers per day) to 94,950
passengers (about 1,038 per day).
Figure IV.1: Change in the
Distribution of Fares and the
Number of Passengers Flying on
Delta Between Dulles and
Atlanta, Before and After,
ValuJet's Entry Into the
Dulles-Atlanta Market
(See figure in printed
edition.)
Note: To ease comparisons on the total number of passengers among
the three airports, we used the same scale showing the number of
passengers for each airport.
Source: GAO's analysis of DOT's data.
ValuJet's offering low fares in the market between Dulles and Atlanta
had a similar, but more modest effect on fares and passenger traffic
between Reagan National and Atlanta. The distribution of fares that
Delta charged for travel between Reagan National and Atlanta changed
only slightly in response to ValuJet's entry at Dulles. As figure
IV.2 shows, the only substantial change was an increase in the number
of passengers, from 6,600 passengers per quarter to nearly 22,500 per
quarter, paying between $150 and $199 to travel between Dulles and
Atlanta. This increase took place in a fare category whose prices
exceeded the $50 to $99 charged by ValuJet for the same route. For
the $50 to $99 fare category at Reagan National, the increase in the
number of passengers was quite moderate�an increase of 7,600 to 9,900
passengers. In contrast, over the same time period, the number of
the more expensive business tickets sold changed only slightly. Part
of Delta's increased passenger loads may be attributable to TWA's
dropping service between Reagan National and Atlanta during 1994.
Figure IV.2: Change in the
Distribution of Fares and
Number of Passengers Flying on
Delta Between Reagan National
and Atlanta, Before and After
ValuJet's Entry into the
Dulles-Atlanta Market
(See figure in printed
edition.)
Source: GAO's analysis of DOT's data.
After ValuJet's entry at Dulles, the number of BWI passengers
traveling in the lower fare category--$50 to $99�fell significantly,
even though Delta did not reduce its total capacity in the market.
As seen in figure IV.3, the number of low-fare passengers in this
category decreased from about 43,000 to about 26,000. Thus, it
appears that passengers who had been traveling on low fares between
BWI and Atlanta switched to Dulles. However, the distribution of
fares generally paid by business passengers remained largely
unchanged by ValuJet's entry at Dulles. US Airways (then USAir) also
served the route between BWI and Atlanta. After ValuJet began
service at Dulles, the distribution of fares paid by passengers on US
Airways remained largely unchanged.
Figure IV.3: Change in the
Distribution of Fares and
Number of Passengers Flying on
Delta Between BWI and Atlanta,
Before and After ValuJet's
Entry Into the Dulles-Atlanta
Market
(See figure in printed
edition.)
Source: GAO's analysis of DOT's data.
--------------------
\33 These fares are based on round-trip and one-way itineraries and
are expressed on a one-way basis.
\34 We examined changes in airfares for the period covering 2
quarters before the new carrier's entry through 2 quarters after. In
this case, we examined changes in Delta's fares in the fourth
quarters of 1993 and 1994. Looking at changes across the same
seasonal quarter also helps minimize any changes in airfares
associated with seasonality (i.e., comparing traffic and fares during
peak summer travel with those during the winter off-season).
SOUTHWEST'S SERVICE BETWEEN BWI
AND ST. LOUIS SUGGESTS THAT
REAGAN NATIONAL, DULLES, AND
BWI ARE SUBSTITUTES FOR LEISURE
PASSENGERS BUT NOT FOR BUSINESS
PASSENGERS
-------------------------------------------------------- Appendix IV:2
Southwest's entry into the market between BWI and St. Louis
demonstrated that many leisure passengers apparently were willing to
go to BWI to obtain the low fares available there rather than
continuing to use Reagan National. Southwest began service between
BWI and St. Louis during the second quarter of 1994. Before
Southwest began service between BWI and St. Louis, TWA and US
Airways served that route. Between the fourth quarter of 1993 and
the fourth quarter of 1994, the total number of passengers flying
between Baltimore and St. Louis grew from under 30,000 to over
80,000 (an increase of over 174 percent).\35 By the fourth quarter of
1994, Southwest carried nearly 31,000 passengers between BWI and St.
Louis (almost 340 per day, each way), each of whom paid between $50
and $99 each way.
As shown in figure IV.4, the new service by Southwest changed both
the competition in the BWI--St. Louis market and the distribution of
fares. US Airways, which carried about 4,900 passengers (or about 54
per day) on that route in the third quarter of 1993, dropped its
service. TWA, which carried more than three times as many passengers
than US Airways during the same quarter, matched some of Southwest's
fares and the number of passengers traveling at low fares increased
dramatically. Prior to Southwest's entry, TWA carried about 6,500
passengers per quarter (slightly more than 70 per day) at fares of
less than $100 each way during the fourth quarter of 1993. One year
later, during the fourth quarter of 1994, the number of passengers
traveling on TWA at fares of less than $100 increased to over 33,000
per quarter (about 365 per day). Some of that increase is likely
attributable to TWA's increasing its capacity (measured by the amount
of available seats, reflecting either an increase in flight frequency
or the use of larger aircraft) between BWI and St. Louis by almost
50 percent over the period. On the other hand, the number of
passengers paying high fares declined. The number of passengers
paying between $200 and $299 declined from more than 3,100 per
quarter (about 34 per day) to about 500 per quarter (about 6 per
day).
Figure IV.4: Change in the
Distribution of Fares and
Number of Passengers Flying on
TWA Between BWI and St. Louis,
Before and After Southwest's
Entry Into the BWI-St. Louis
Market
(See figure in printed
edition.)
Source: GAO's analysis of DOT's data.
Southwest's service between BWI and St. Louis affected the
distribution of fares paid for nonstop service offered by TWA between
Reagan National and St. Louis, especially for lower fares typically
paid by leisure travelers. As shown in figure IV.5, the number of
passengers paying between $50 and $149 at Reagan National declined
from about 19,000 per quarter (about 211 per day) to about 6,000 per
quarter (about 66 per day), despite TWA's adding more than 20 percent
in capacity in the market. These passengers likely switched to the
low-fare service being offered between BWI and St. Louis�as
described earlier, the number of passengers flying at fares less than
$100 each way increased dramatically after Southwest began its
service. Thus, many of the passengers who paid low fares�generally
leisure passengers�were willing to go to BWI for the lower available
fares rather than continuing with TWA's somewhat higher fares at
Reagan National. In contrast, the number of higher-fare passengers
traveling between Reagan National and St. Louis (those traveling for
fares between $200 and $299 each way) declined only marginally during
the period. As a result, we conclude that these passengers�who are
likely to be business passengers�were not willing to substitute BWI
for Reagan National.
Figure IV.5: Change in the
Distribution of Fares and
Number of Passengers Flying on
TWA between Reagan National and
St. Louis, before and After
Southwest's Entry into the
BWI-St. Louis Market
(See figure in printed
edition.)
Source: GAO's analysis of DOT's data.
The change in the distribution of passengers and fares paid for
service between Dulles and St. Louis is similar to the change
observed on service between Reagan National and St. Louis, although
the number of passengers traveling between Dulles and St. Louis is
much smaller. As shown in figure IV.6, the number of passengers
paying low fares declined modestly. The number of passengers paying
between $50 and $149 each way declined from roughly 4,100 during the
fourth quarter of 1993 (under 50 per day) to about 2,200 during the
same quarter of 1994 (less than 25 per day). Over the same period,
TWA also increased its capacity between these two airports by roughly
16 percent. This shows some willingness on the part of low-fare
passengers to switch from Dulles to BWI. In contrast, there is
little evidence that high-fare passengers are willing to switch. In
fact, the number of passengers paying more than $150 each way
increased.
Figure IV.6: Change in the
Distribution of Fares and
Number of Passengers Flying on
TWA Between Dulles and St.
Louis, Before and After
Southwest's Entry Into the
BWI-St. Louis Market
(See figure in printed
edition.)
Source: GAO's analysis of DOT's data.
An academic study of Southwest's service from BWI to Cleveland and
Chicago Midway airports is consistent with our analysis.\36 That
analysis of the effect that Southwest's entry into those markets had
on passenger traffic and fares from Reagan National and Dulles showed
that Southwest's entry stimulated significant new passenger traffic
and lowered fares at BWI and had smaller, less uniform effects at
Reagan National and Dulles.
--------------------
\35 A year before Southwest's entry on this route, the BWI-St. Louis
market ranked as the 624\th largest U.S. domestic city pair, with
approximately 25,000 passengers per quarter (nearly 280 passengers
per day). One year after Southwest entered the market, it was the
147\th largest market, with about 106,000 passengers flying that
quarter (nearly 1,200 per day).
\36 Dresner, Martin, Jiun-Sheng Chris Lin, and Robert Windle, �The
Impact of Low-Cost Carriers on Airport and Route Competition,�
Journal of Transport Economics and Policy, Sept. 1996, pp. 309-328.
The study concluded that Southwest's entry into the Cleveland market
had no apparent effect on passenger traffic between Reagan National
or Dulles and Ohio, but that its entry into Chicago's Midway Airport
may have had some effect on prices between Reagan National and
Illinois. While the methodology of this study was somewhat different
than our methodology, the basic conclusion is the same�the
introduction of new service did not substantially change the traffic
at other area airports. The authors noted that the decline in fares
between Reagan National and Illinois followed the decline at BWI by 9
months, and may have been triggered by an unusually steep decline in
passenger traffic at the airport during the end of 1993 and beginning
of 1994.
WESTERN PACIFIC'S SERVICE
BETWEEN DULLES AND DENVER
SUGGESTS THAT NEW LONG-HAUL
SERVICE AT DULLES HAD LITTLE
EFFECT ON PASSENGERS'
PREFERENCES FOR REAGAN NATIONAL
OR BWI
-------------------------------------------------------- Appendix IV:3
Western Pacific Airlines was a small, low-cost carrier offering
service between Dulles and Colorado Springs, which was initially its
main base of operations. In 1997, Western Pacific moved its base of
operations to Denver, which is also a hub for United Airlines
(United). Because Western Pacific moved its operations to Denver,
its nonstop service between Dulles and Denver competed directly with
United Airlines' nonstop service between those two airports and
potentially competed with nonstop service between BWI and Denver.
There is no nonstop service between Reagan National and Denver
because Denver is outside Reagan National's perimeter. Western
Pacific has since ceased its operations.
The new service offered by Western Pacific between Dulles and Denver
changed the fares charged by United. United carried substantially
more passengers at low fares after Western Pacific moved its
operations to Denver than it had carried before. As shown in figure
IV.7, during the fourth quarter of 1996, United carried approximately
41,000 passengers (about 450 per day) at fares between $100 and $249
each way. After Western Pacific's move, United carried about 73,000
passengers (about 800 per day) in the same price range. United made
this change in fares with only a minor (about 2 percent) increase in
its total capacity on this route. The presence of Western Pacific
also substantially reduced the number of passengers paying high fares
of between $500 and $699 each way. Prior to Western Pacific's
service to Denver, United carried about 13,000 passengers per quarter
(about 140 per day) at those higher fares, but that figure dropped to
about 2,400 (less than 30 per day) after Western Pacific's move.
Figure IV.7: Change in the
Distribution of Fares and
Number of Passengers Flying on
United Between Dulles and
Denver, Before and After
Western Pacific's Entry Into
the Dulles-Denver Market
(See figure in printed
edition.)
Source: GAO's analysis of DOT's data.
Western Pacific's service between Dulles and Denver had an effect on
some leisure and business fares for travel between BWI and Denver.
In addition, the total number of passengers traveling between Dulles
and Denver increased substantially. As shown in figure IV.8, after
Western Pacific began its service, United carried more passengers
between BWI and Denver. The number of passengers paying fares
between $100 and $249 each way increased from about 7,200 (about 80
per day) to about 13,500 (nearly 150 per day) from the fourth quarter
of 1996 to the same period in 1997. This may be because United
increased the number of available low-fare seats between BWI and
Denver to be more comparable with the number available between Dulles
and Denver. As at Dulles, United added very little capacity to the
route, increasing its number of available seats by less than 3
percent. As such, it is evident that BWI and Dulles are partial
substitutes for leisure traffic. Because of the lower fares between
BWI and Denver, there was a decrease in the number of passengers
paying relatively high fares. The number of travelers paying fares
between $600 and $749 declined from about 2,700 (about 30 per day) to
about 1,610 (less than 18 per day) per quarter. However, because the
number of passengers paying high fares for flights between Dulles and
Denver also fell during this period, we conclude that the decline in
the number of high-fare passengers occurred because those passengers
were able to take advantage of the additional competition to pay
lower fares at their preferred airport rather than switching from one
airport to another.
Figure IV.8: Change in the
Distribution of Fares and
Number of Passengers Flying on
United Between BWI and Denver,
Before and After Western
Pacific's Entry Into the
Dulles-Denver Market
(See figure in printed
edition.)
Source: GAO's analysis of DOT's data.
In addition to assessing the impact of Western Pacific's new nonstop
service at Dulles on other nonstop service from the Washington, D.C.,
area, we assessed the effect that this new service had on the number
of passengers and fares that used connecting service. We did so
because the perimeter rule precludes any nonstop service between
Reagan National and Denver. We found that, prior to Western
Pacific's entry, relatively few passengers took connecting flights
from the Washington, D.C., area to Denver. Approximately 25 percent
of all Washington-Denver traffic took connecting flights, while the
vast majority flew nonstop between Dulles or BWI and Denver. Most of
those who took connecting flights did so from Reagan National, and
most of them flew at relatively low fares. After Western Pacific
began its service, the number of passengers on connecting flights at
relatively low fares for travel between Reagan National and Denver
increased by about one-third, while the number of passengers on
connecting flights at relatively low fares for travel between BWI or
Dulles and Denver decreased by similar percentages. We did not find
that Western Pacific's low-fare service caused any shift in the
airports used by travelers making connections.
MIDWAY'S SERVICE BETWEEN REAGAN
NATIONAL AND RALEIGH-DURHAM
SUGGESTS THAT PASSENGERS DO NOT
TREAT REAGAN NATIONAL, DULLES,
AND BWI AS SUBSTITUTES
-------------------------------------------------------- Appendix IV:4
Our analysis of the effect that Midway had on fares for travel
between the three Washington, D.C., area airports and Raleigh-Durham,
North Carolina, did not suggest that passengers are willing to change
airports to obtain different service or fares. Midway began
operations in November 1993 at Midway Airport in Chicago. In March
1995, it moved its hub to Raleigh-Durham. It began serving several
routes, mainly in the eastern United States, that were being dropped
by American Airlines (American). One of these routes was between
Reagan National and Raleigh-Durham. (American dropped its service
between Raleigh-Durham and BWI at the end of 1994 and its service
between Raleigh-Durham and Reagan National in the second quarter of
1995.) Although Midway is not considered to be a low-fare airline
like the other new entrant airlines whose experience we examined, we
included it in our analysis because its initiating service at Reagan
National was the only such event during the 1990s.
Unlike the other entry events that we examined, Midway did not enter
the market with substantially lower fares than American had been
charging. Midway carried about the same number of passengers at each
fare level as American had carried before eliminating its service
between Reagan National and Raleigh-Durham, although Midway carried a
somewhat higher number of passengers at lower fares. For example, in
the first quarter of 1995, American carried 43 percent of its Reagan
National-Raleigh-Durham passengers at fares of between $100 and $149
each way. In the first quarter of 1996, Midway carried 47 percent of
its passengers for the same amount. As shown in figure IV.9, US
Airways carried more passengers between Reagan National and
Raleigh-Durham at fares of between $50 and $149 than it had before
the service provided by Midway replaced the service provided by
American. US Airways had not significantly increased its capacity on
that route between the first quarters of 1995 and 1996. It appears
instead that US Airways made more seats available at those fares. We
do not believe that the increase US Airways experienced is related to
Midway's replacing American on that route. Rather, we believe that
Midway generally gained its passenger traffic from former American
passengers.\37
Figure IV.9: Change in the
Distribution of Fares and
Number of Passengers Flying on
US Airways Between Reagan
National and Raleigh-Durham,
Before and After Midway's Entry
Into the Reagan
National-Raleigh-Durham Market
(See figure in printed
edition.)
Source: GAO's analysis of DOT's data.
The service offered by Midway between Reagan National and
Raleigh-Durham had little impact on the number of passengers or the
fares that they paid for travel between BWI and Raleigh-Durham,
suggesting that travelers did not treat Reagan National and BWI as
substitutes. Figure IV.10 shows the number of passengers and the
fares that they paid for travel between BWI and Raleigh-Durham before
and after Midway began its service at Reagan National. The greatest
difference is the large increase in the number of passengers paying
between $250 and $299 each way, which was most likely caused by the
exit of American Airlines. This increase is largely offset by a
decrease in the number of passengers paying lower fares. However,
the modest decrease in passengers paying low fares does not indicate
that Midway's new service caused any shift of traffic from BWI to
Reagan National. Although this change in passenger traffic suggests
that passengers did not treat these airports as substitutes, the
change in the number of passengers and the fares they paid could also
be explained by the fact that Midway's entry did not substantially
lower the fares that other airlines charged for service between
Reagan National and Raleigh-Durham.
Figure IV.10: Change in the
Distribution of Fares and
Number of Passengers Flying on
US Airways Between BWI and
Raleigh-Durham, Before and
After Midway's Entry Into the
Reagan National-Raleigh-Durham
Market
(See figure in printed
edition.)
Source: GAO's analysis of DOT's data.
Because there was no nonstop service from Dulles to Raleigh-Durham,
we could not measure whether passengers would view those airports as
substitutes.
(See figure in printed edition.)Appendix V
--------------------
\37 Midway also has a frequent flyer program relationship with
American.
COMMENTS FROM THE METROPOLITAN
WASHINGTON AIRPORTS AUTHORITY AND
OUR EVALUATION
========================================================== Appendix IV
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
The following are GAO's responses to the Metropolitan Washington
Airports Authority's (MWAA) August 16, 1999, letter.
1. As we have reported in the past, operational barriers such as
slot and perimeter rules impede airline competition�the goal of the
industry's 1978 deregulation. In this report, we clearly state that
the report was done to examine the impact of various legislative
proposals on the operations of the Washington, D.C., area airports
and not to assess any underlying policies. We agree that the draft
report could have more clearly stated that it is not intended to
analyze the potential effect of changes in operations at Reagan
National on noise, congestion, and other environmental concerns, and
we made appropriate changes.
2. We believe, as does DOT, that �balanced capacity� is a more
appropriate method for determining an airport's capacity than the
method suggested by MWAA. While MWAA contends that Instrument Flight
Rules (IFR) should be used to measure capacity, DOT's Technical
Supplement No. 3 to its 1995 report\38 points out that IFR airfield
capacity is indicative of the lowest level of available capacity, and
thus virtually ensures constant availability of an airfield.\39 In
practice, this approach would leave large amounts of airfield
capacity unused because a significantly higher capacity could be
achieved during the better weather conditions under which Visual
Flight Rules apply.\40 According to data from FAA, less than 0.5
percent of all air traffic operations at Reagan National in 1998 were
delayed because of weather conditions. Because setting the number of
slots on the basis of balanced capacity reflects both bad and good
weather conditions, we did not revise our report.
3. By limiting its comments to how delays would change in IFR
conditions, MWAA suggests that the prevailing weather conditions at
Reagan National require IFR operations every day. However, as noted
earlier, FAA data show that less than 0.5 percent of all air traffic
operations at Reagan National in 1998 were delayed because of weather
conditions. We do not agree that we understated the potential delay
caused by weather, having noted in the report that delays of 15
minutes or more could increase. Furthermore, we clearly indicate how
delays would increase if the slot rule were eliminated. Thus, we did
not revise our report.
4. MWAA correctly notes that the DOT study estimated that adding
seven additional slots per hour would result in an overall net loss
and an increase in delays. The DOT study points out, however, that
consumers would benefit from additional flight services and that the
airport would benefit from an increase in landing fees, even as the
airlines would experience a net loss because of delays. MWAA also
correctly notes airlines' increasing use of regional jets. However,
FAA and DOT do not believe that this change alters their calculations
of Reagan National's balanced capacity. Thus, we did not revise the
report.
5. We do not believe our report implies that MWAA supports an
increase in operations. Rather, the report acknowledges MWAA's
recognition that the airport could accommodate additional flights.
6. MWAA correctly notes that federal law permits airlines to operate
small jet aircraft (that is, �regional jets�) in commuter slots.
However, we do not believe that clarification is necessary in
response to this comment. A footnote in our report explains that we
considered both regional jets and turboprop aircraft seating fewer
than 56 passengers to be commuter aircraft, and that we considered
aircraft seating 56 passengers or more (that is, �large aircraft�),
most of which are not turboprops, to be jets. Large aircraft are not
permitted to use commuter slots.
7. MWAA correctly notes that the transfer of Reagan National and
Dulles airports from federal to local authority did not take place
immediately upon the passage of the Metropolitan Washington Airports
Act of 1986. Rather, that act led to the transfer of authority in
June 1987. We modified our report in response to this comment.
8. We used actual and projected data that were the most currently
available from FAA at the time of our work. In addition, data
submitted by the airlines to DOT indicate that, in 1998, BWI handled
more passengers than Dulles, and nearly as many as Reagan National.
Thus, we continue to believe that these data are valid and made no
change to the report.
9. MWAA notes that preferential gate use at Reagan National is not a
�use-or-lose� concept. In response, we clarified the narrative.
Also in response to MWAA, we revised the report to clarify that a
tenant airline may not prevent a new entrant from gaining access to a
gate when the gate is not being used and that MWAA could reallocate
gates at any time, not just during the formal reassessment periods
that take place every 3 years.
--------------------
\38 U.S. DOT, Report to the Congress: A Study of the High Density
Rule, May 1995.
\39 Instrument Flight Rules govern procedures for conducting aircraft
operations during weather conditions when the cloud ceiling is less
than 1,000 feet and/or visibility is less than 3 miles, requiring
certain aircraft separations and other operating standards.
\40 Visual Flight Rules govern procedures for conducting aircraft
operations when the cloud ceiling is more than 1,000 feet and
visibility is 3 miles or more. Airport capacity under these
conditions is generally significantly higher than under conditions
under Instrument Flight Rules.
GAO CONTACTS AND STAFF
ACKNOWLEDGMENTS
========================================================== Appendix VI
GAO CONTACTS
John H. Anderson, Jr. (202) 512-2834
Steven C. Martin (202) 512-2834
ACKNOWLEDGMENTS
In addition to those named above, Sonja Bensen, Stephen Brown, Aaron
Casey, David Hooper, Joseph Kile, and Lewison Lem made key
contributions to this report.
RELATED GAO PRODUCTS
============================================================ Chapter 0
Airline Deregulation: Changes in Airfares, Service Quality, and
Barriers to Entry (GAO/RCED-99-92, Mar. 4, 1999).
Aviation Competition: Effects on Consumers From Domestic Airline
Alliances Vary (GAO/RCED-99-37, Jan. 15, 1999).
Aviation Competition: Proposed Domestic Airline Alliances Raise
Serious Issues (GAO/T-RCED-98-215, June 4, 1998).
Domestic Aviation: Service Problems and Limited Competition Continue
in Some Markets (GAO/T-RCED-98-176, Apr. 23, 1998).
Aviation Competition: International Aviation Alliances and the
Influence of Airline Marketing Practices (GAO/T-RCED-98-131, Mar.
19. 1998).
Airline Competition: Barriers to Entry Continue in Some Domestic
Markets (GAO/T-RCED-98-112, Mar. 5, 1998).
Domestic Aviation: Barriers Continue to Limit Competition
(GAO/T-RCED-98-32, Oct. 28, 1997).
Airline Deregulation: Addressing the Air Service Problems of Some
Communities (GAO/T-RCED-97-187, June 25, 1997).
International Aviation: Competition Issues in the U.S.-U.K. Market
(GAO/T-RCED-97-103, June 4, 1997).
Domestic Aviation: Barriers to Entry Continue to Limit Benefits of
Airline Deregulation (GAO/T-RCED-97-120, May 13, 1997).
Airline Deregulation: Barriers to Entry Continue to Limit
Competition in Several Key Domestic Markets (GAO/RCED-97-4, Oct. 18,
1996).
Domestic Aviation: Changes in Airfares, Service, and Safety Since
Airline Deregulation (GAO/T-RCED-96-126, Apr. 25, 1996).
Airline Deregulation: Changes in Airfares, Service, and Safety at
Small, Medium-Sized, and Large Communities (GAO/RCED-96-79, Apr. 19,
1996).
International Aviation: Airline Alliances Produce Benefits, but
Effect on Competition Is Uncertain (GAO/RCED-95-99, Apr. 6, 1995).
Airline Competition: Higher Fares and Less Competition Continue at
Concentrated Airports (GAO/RCED-93-171, July 15, 1993).
Computer Reservation Systems: Action Needed to Better Monitor the
CRS Industry and Eliminate CRS Biases (GAO/RCED-92-130, Mar. 20,
1992).
Airline Competition: Effects of Airline Market Concentration and
Barriers to Entry on Airfares (GAO/RCED-91-101, Apr. 26, 1991).
Airline Deregulation: Trends in Airfares at Airports in Small and
Medium-Sized Communities (GAO/RCED-91-13, Nov. 8, 1990).
Airline Competition: Industry Operating and Marketing Practices
Limit Market Entry (GAO/RCED-90-147, Aug. 29, 1990).
Airline Competition: Higher Fares and Reduced Competition at
Concentrated Airports (GAO/RCED-90-102, July 11, 1990).
Airline Deregulation: Barriers to Competition in the Airline
Industry (GAO/T-RCED-89-65, Sept. 20, 1989).
Airline Competition: Fare and Service Changes at St. Louis Since
the TWA-Ozark Merger (GAO/RCED-88-217BR, Sept. 21, 1988).
Competition in the Airline Computerized Reservation Systems
(GAO/T-RCED-88-62, Sept. 14, 1988).
Airline Competition: Impact of Computerized Reservation Systems
(GAO/RCED-86-74, May 9, 1986).
Airline Takeoff and Landing Slots: Department of Transportation's
Slot Allocation Rule (GAO/RCED-86-92, Jan. 31, 1986).
Deregulation: Increased Competition Is Making Airlines More
Efficient and Responsive to Consumers (GAO/RCED-86-26, Nov. 6,
1985).
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