[Federal Register: August 21, 2003 (Volume 68, Number 162)]
[Notices]
[Page 50584-50587]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21au03-102]
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DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
[Docket No. FAA-2003-15745]
High Density Traffic Airports
AGENCY: Federal Aviation Administration (FAA), DOT.
ACTION: Disposition of comments on the lottery procedures.
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SUMMARY: This notice addresses comments received on the lottery
procedures to be used by the FAA in the allocation of limited air
carrier and commuter slots at Washington Reagan National Airport on
August 12, 2003. Additionally, this notice lists all carriers eligible
to participate and provides the carriers' classification for slot
selection in the lottery.
DATES: August 11, 2003.
Date/Location of Lottery: The lottery will be held in the Federal
Aviation Administration (FAA) Auditorium, 3rd floor, 800 Independence
Avenue, SW., Washington, DC 20591 on August 12, 2003, beginning a 1
p.m.
FOR FURTHER INFORMATION CONTACT: Lorelei Peter, Operations and Air
Traffic Law Branch, Regulations Division, Office of the Chief Counsel,
Federal Aviation Administration, 800 Independence Avenue, SW.,
Washington, DC 20591; telephone number (202) 267-3134.
SUPPLEMENTARY INFORMATION:
Background
On July 9, 2003, the FAA published in the Federal Register a notice
of lottery and allocation procedures for a limited number of air
carrier and commuter slots at Reagan National Airport (DCA) (68 FR
41037). A clarification regarding the applicable definition of a
limited incumbent carrier was published in the Federal Register on July
18, 2003 (68 FR 42796). On July 24, 2003, the FAA opened a docket for
the lottery (FAA-2003-15745) and invited interested parties to comment
on issues related to the lottery procedures by July 28, 2003. On July
31, 2003, the FAA issued a notice rescheduling the lottery from July
31, 2003, to August 12, 2003, in order to address these issues and
others raised in the comments, prior to the scheduled lottery (68 FR
47378; August 8, 2003).
This notice responds to the comments received, explains the lottery
procedures, and classifies the carriers eligible to participate in the
lottery under our applicable regulations as new entrants, limited
incumbents, and incumbents, as defined in 14 CFR 93.213. We also note
which carriers are considered single operators for the purposes of slot
allocation.
Discussion of Comments
The FAA received comments from the Metropolitan Washington Airports
Authority (MWAA), Air Canada, ATA Airlines (ATA), Spirit Airlines, US
Airways, the Air Carrier Association of America (ACAA) and Congressman
Regula, as well as several reply comments. The comments identified five
major issues, which are discussed below.
1. Definition of New Entrant
Under the applicable regulations, a ``new entrant'' carrier is an
air carrier or commuter operator that does not hold a slot at a
particular airport and has neither sold or given up a slot at that
airport since December 16, 1985 (14 CFR 93.213(a)(1)) (emphasis added).
A limited incumbent carrier is defined in 14 CFR 93.213(a)(5) and is a
commuter operator or air carrier operator that holds or operates fewer
than 12 air carrier or commuter slots, in any combination, at a
particular airport (emphasis added). In determining who qualifies as a
limited incumbent carrier, the definition requires that we exclude
international slots, Essential Air Service Program slots, or slots
allocated at DCA between the local hours of 2200 and 0659. A carrier
that holds or operates 12 or more slots at an airport is an incumbent
carrier.
There are two carriers requesting to participate in the lottery
that do not hold slots at DCA, but have a presence at the airport, and
in fact, conduct operations at DCA. Chautauqua and Atlantic Coast
Airlines operate slots, which are actually held by larger, incumbent
carriers, through codeshare arrangements or by lease and conduct these
operations on behalf of the incumbents.
The definitions cited do create something of an anomaly in that a
carrier that holds no slots but operates more than 12 cannot be a
``limited incumbent'' under the lottery rule but could be a ``new
entrant.'' Similarly, a carrier could be both a limited incumbent and a
new entrant if it operates fewer than 12 slots but holds none. ATA and
Air Canada urge the FAA to apply the term ``new entrant'' as plainly
defined and argue that any carrier that does not hold slots in its own
right at DCA should be included in the new entrant category regardless
of its operations at the airport. ACAA argues that Air Canada and Mesa
should not be allowed to participate either as a ``new entrant'' or
``limited incumbent'' given that both operate more than 12 slots at the
airport. ACAA argues if the regulations preclude a carrier from being a
limited incumbent, the carrier logically cannot be a new entrant.
In making the argument that the FAA should veer from the plain
language of the regulation, ACAA selects a phrase from section
93.225(e), the provision which sets out the lottery procedures and
provides that ``any U.S. carrier or foreign carrier where provided for
by bilateral agreement, that is not operating scheduled service at the
airport * * * but wishes to initiate scheduled passenger service at the
airport, shall be included in the lottery if it notifies the FAA.''
(Emphasis added.) ACAA contends that because this provision
distinguishes carriers operating at the airport from those who do not,
a ``new entrant'' must mean a carrier that is not already operating at
the airport.
A significant difference between a new entrant carrier and a
limited incumbent carrier is that slots allocated under the Essential
Air Service Program, for international operation or in the low-demand
hours at DCA (2200-0659) are counted in determining whether a
[[Page 50585]]
carrier is a new entrant. Air Canada and ATA Airlines both hold slots
in the low-demand hours. Mesa previously has held EAS slots at DCA.
Consequently, Air Canada and Mesa are incumbents and ATA Airlines is a
limited incumbent.
For several reason we conclude that the definition of ``new
entrant'' should be applied as written, with the result that carriers
who do not hold any slots at the airport according to the FAA's records
will be considered new entrants for purposes of this lottery,
regardless of whether they also operate any slots at the airport.
First, in 1985, when the definition of ``new entrant'' was promulgated
as part of the ``buy/sell'' rule, (50 FR 52189; December 20, 1985), the
industry operated much differently than today. At that time, most
commuter service was provided by independent companies who held their
own slots and entered into feeder or marketing relationships with the
larger carriers. The Department did not want to define ``new entrant''
in such a way as to create a disincentive toward such arrangements by
making it more difficult for carriers to conduct operations at the
airport through leased slots to obtain permanent slots of their own.
Chautauqua, and Atlantic Coast's access to DCA is a result of lease
arrangements and neither of these carriers hold slots outright. The
underlying policy goal that was the basis for first defining a new
entrant in this way remains a valid consideration today.
Second, leasing a slot that is necessary to enter competition is a
far cry from holding the slot outright. Both air carriers who would be
adversely affected by an interpretation that equated ``operations''
with ``holdings'' are independent companies who have entered into
codeshare arrangements with larger carriers to operate commuter
flights. We have no information to suggest that these carriers cannot
conduct operations on their own, outside of their codeshare
arrangements, competing against incumbents.\1\ ACAA's proposed
interpretation of our rules would potentially inhibit competition.
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\1\ Indeed, very recently one of these carriers--Atlantic Coast
announced it anticipates that its longstanding relationship with
United Airlines will end, and that it will establish a new,
independent low-fare airline. See http://www.atlanticcoast.com/pressreleasearchive/2003/july/728.htm
.
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Lastly, interpreting the definition of ``new entrant'' in the
manner suggested by ACAA--that is, against its literal language--would
necessitate a lengthier proceeding that we believe is warranted. It may
well be that a review of this definition along with other important
questions is justified in view of the changes that have occurred in the
industry since 1985, and the plethora of arrangements by which slots
are made available under the rule (common ownership, contracts, leases
and multiple codeshare arrangements). For now, however, the FAA finds
that the public interest lies in allocating these slots promptly.
Therefore, the new entrant definition will be applied in its present
form.
2. New Entrant Preference
ATA claims that the FAA's intended procedure, by which we will
permit the first ranked new entrant carrier to select four of the
available six air carrier slots, is inconsistent with the regulatory
requirements and fundamentally unfair. ATA contends that the original
rationale for our rule allowing new entrants to select four slots in
the first sequence of the lottery--i.e., that four slots are minimally
necessary for an economically viable operation--is clearly no longer
justified. ATA would prefer that we remake the procedures so as to
maximize the number of carriers who receive slots in the lottery, by
allowing three new entrant carriers to select two slots each.
The regulation governing slot lotteries establishes two preferences
for new entrant carriers: (1) In the first selection sequence, 25
percent of the slots available in the lottery, or no less than 2, are
reserved for new entrants (``new entrant set-aside''); and (2) new
entrant carriers may select four slots, if available in the first
sequence. (See 14 CFR 93.225(h) and (f) respectively.)
The upcoming lottery offers six slots in the air carrier category.
A rank order of all carriers eligible to participate in the lottery
will be established at the start of the lottery. Incumbent carriers may
only select after all new entrant and limited incumbent carriers have
made their selections. After the rank order is established, the first
new entrant may select two slots. This will complete the new entrant
set-aside. The lottery continues with the first selection sequence by
starting at the top of the established rank order and moving to the
first new entrant or limited incumbent carrier. If the first carrier in
the rank order is a new entrant (that also selected two slots in the
new entrant set-aside), that this new entrant is eligible to select
only two additional slots, which completes its selection of four slots
in the first selection sequence, as provided for in the regulation.
Alternatively, after completing the new entrant set-aside selections,
if the first non-incumbent carrier in the rank order is a limited
incumbent carrier, then that carrier may select two slots. Following
the rank order to the next new entrant or limited incumbent carrier,
that carrier would in this case select the remaining two slots.
ATA asks the FAA to disregard the governing regulatory provisions
referenced above and instead adopt an ad hoc allocation approach that
ATA argues will better achieve the policy goal of maximizing
competitive services at DCA. In promulgating the lottery procedures,
the FAA and the Department of Transportation specifically found that
the two articulated preferences for new entrants were warranted to
further policies enunciated in the Airline Deregulation Act of 1978 (50
FR 52193; December 20, 1985). The resulting lottery provision is quite
specific in this regard and the FAA does not find that it has the
latitude suggested by ATA to arbitrarily change this provision, or
ignore it. Given the limited number of slots available in this lottery
relative to the number of participants, it may be that only a few
carriers will get to select slots. As discussed below, the FAA and the
Department are neither amending nor abandoning the agencies' position
that the opportunity for a new entrant carrier to select four slots is
preferable in meeting the stated goals.
ATA also argues that all the new entrants already have some slots
(or slot exemptions) and that four slots are not economically necessary
for new entrants to establish service at the airport. ATA points to
service conducted by Alaska Airlines and Frontier Airlines, which have
both been successful conducting a single roundtrip at DCA. In recent
FAA and Department proceedings however, several new entrant carriers
have argued the opposite, contending that even four slots during peak
hours are not enough today to launch viable service.
We recognize that ATA successfully operates at DCA using only four
peak hour AIR-21 exemption slots and two off-peak hour slots. Likewise,
both Alaska Airlines and Frontier Airlines are the recipients of AIR-21
slot exemptions by the Department for beyond the perimeter service at
DCA. Frontier Airlines provides the only nonstop DCA/Denver service
(Order 2000-7-1) and Alaska Airlines (Order 2001-6-20) provides the
only nonstop DCA/Seattle service. That nonstop service from DCA to
these markets can be operated successfully in the absence of other non-
stop competition is not surprising; new entrant carriers seeking to
provide competitive alternatives on city-pairs already served by other
[[Page 50586]]
carriers on a nonstop basis is a different situation.
US Airways objects to any lottery, characterizes the lottery
mechanism as ``anti-incumbent'' and argues that ``redistributive
lotteries'' are not appropriate.
One of the primary purposes of the lottery provision was to enhance
competition by affording new entrant and limited incumbent carriers
greater access to slot-controlled airports. Thus, the Department
believed that allowing incumbent carriers to participate on equal terms
with new entrants in seeking permanent allocation of slots would reduce
the opportunities for new entrants or limited incumbents to introduce
competitive service (57 FR 37309; August 18, 1992). Therefore, in
promulgating this rule, the FAA and the Department restricted the
permanent allocation of slots to incumbent carriers. Whether or not
that policy should be revisited today, in light of the economic
condition of incumbent carriers, the FAA is clearly bound to give it
its full force and effect and to carry out the intent of our
regulations.
US Airways complains that the lottery provision is ``anti-
incumbent'' in that airlines that hold a substantial number of slots
may only receive a temporary allocation through the lottery after all
new entrant and limited incumbent carriers have finished their
selections. However, incumbent carriers such as US Airways received a
large base level of slots at the time the allocation rules were adopted
in 1985; as a whole, arguably, the provisions benefited incumbents.
Today, US Airways and its wholly owned subsidiaries hold 43 percent of
the slots at DCA. the next largest slot holder at the airport is Delta
and its wholly owned subsidiaries with approximately 14 percent of the
slots. Thus, two carrier groups account for nearly 60 percent of the
slots at the airport. Despite the buy-sell rule, the lottery provision
in the regulations is the only mechanism that specifically addresses
competitive access to slot-controlled airports such as DCA.
The need for a lottery also stems from other aspects of our rules.
The slots in question have never been allocated permanently, and the
lottery allocation provision is the only means of allocating these peak
hour slots on a permanent basis. US Airways and other carriers were
allocated slots during peak hours on a temporary basis subject to
recall by the FAA and distribution by lottery in accordance with the
regulations. Consequently, this process is entirely appropriate to
allocate available slots.
3. Lottery Allocation in Light of Other Related Proceedings
Spirit Airlines points to the variety of pending proceedings
concerning slots and slot exemptions and asks the FAA and the
Department to end the practice of allocating slots on a piecemeal
basis, saying this practice makes it difficult for any new entrant
carrier to evaluate the true economics of potential operations at the
airport. Spirit would defer the lottery until other agency actions on
slots exemptions and/or the potential exemptions in pending
legislation, in particular, H.R. 2115 ``Aviation Investment and
Revitalization Vision Act,'' are allocated. Conversely, ATA argues that
the public interest requires that slots be allocated whenever they
become available and says that slots should be used once allocated. ATA
and MWAA also oppose a delay of the lottery to wait for the potential
allocation of slot exemptions currently under consideration by
Congress. US Airways again questions the basis for any lottery and
forecasts that it is likely that slots will become available after the
current slot usage waiver terminates and that a lottery should be
conducted at that time.
The FAA has discretion to conduct a lottery when it determines that
there are sufficient slots available for allocation. The fifteen slots
that are available for allocation in this lottery are slots that were
previously returned to the FAA or were allocated temporarily to
carriers on a first-come, first-served basis on the express condition
that they would be recalled when the FAA determines that it is
necessary to allocate the slots permanently. Over the past many months
the FAA received numerous inquiries and requests for slots at DCA by
new entrant carriers. In light of the expressed demand for permanent
allocation of the available slots at the airport, we believe that the
spirit of our regulations require that we allocate whatever capacity is
available at the earliest practical time. As indicted by the number of
carriers that filed requests to participate in the lottery and by the
comments submitted to the docket, it is evident that there is demand by
many carriers for even this limited number of slots.
We have no indication that slots at DCA will be returned to the FAA
after the expiration of the slot usage waiver period, instituted in
April 2003. (Temporary return of peak-hour slots for non-use during
this waiver period has been minimal.) Some AIR-21 slot exemptions were
recalled for non-use, however, their reallocation process is not done
by lottery. We find it would be inconsistent with the regulatory
allocation regime to indefinitely postpone the lottery. Consequently,
the FAA will proceed with the lottery on August 12, 2003.
4. Use of Commuter Equipment in Air Carrier Slots
MWAA and the ACAA express concern over the increasing incidence
with which air carrier slots are operated by carriers using commuter
type aircraft that qualify for commuter slots. These parties argue that
this practice has resulted in a decline of passenger activity at DCA
even as the number of overall operations at the airport has remained
relatively constant. MWAA asks that we require air carriers
participating in the lottery not only to have aircraft that meet the
definition of the equipment that may be operated in this category of
slots, but also to have the stated intention to use these slots for
operations with the larger aircraft.
A carrier that wishes to participate in a lottery for either air
carrier or commuter slots must hold the appropriate FAA operating
authority for the slots the operator seeks to select (14 CFR
93.225a(g)). The FAA has interpreted the existing provisions of Sec.
93.225 to limit participation in air carrier lotteries to carriers
capable of operating air carrier equipment within the meaning of 14 CFR
93.123(c) (51 FR 21706; June 13, 1986). After air carrier slots have
been allocated, a carrier may use smaller aircraft in air carrier slots
in accordance with 14 CFR 93.221(c). While we are sympathetic to MWAA's
position, the FAA cannot limit or condition approval on participation
in the air carrier lottery in the manner suggested by MWAA, without
amending the regulation.
5. ``Mandatory Participation''
ATA complains that the FAA plans to include all carriers that
currently operate at DCA in the lottery, even if those carriers did not
actually notify the FAA that they want to participate in the lottery.
ATA says this plan constitutes a ``mandatory participation'' regime
that is not in accordance with either the regulations or the lottery
notice.
This argument reflects a misunderstanding of the rule. The rule
expressly provides that ``participation in a lottery is open to each
U.S. air carrier or commuter operating at the airport * * * as well as
where provided for by bilateral agreement'' (14 CFR 93.225(e) (emphasis
added). Participation is not mandatory. As a matter of procedure, the
FAA includes every carrier at the airport as eligible to participate
and each carrier receives a rank order. These
[[Page 50587]]
carriers also are not required to submit notice to the FAA of their
intention to participate in the lottery; carriers that do not conduct
scheduled service at the airport are required to submit notice to the
FAA of intention to participate in the lottery no later than the date
specified in the Federal Register notice, which was July 16. However,
it is up each carrier as to whether it ultimately chooses to
participate or select slots in the lottery. A carrier may advise the
FAA at any time that it does not want to participate or it may simply
pass at the lottery by not selecting available slots.
List of Carriers Eligible to Participate in the Lottery by Category
The lottery for the air carrier slots will be conducted first and
the lottery for the commuter slots will follow.
Air Carrier Slot Lottery Category
Air Canada................................ Incumbent
AirTran Airway............................ New Entrant
Alaska Airlines........................... New Entrant
ATA Airlines.............................. Limited Incumbent
Frontier Airlines......................... New Entrant
Mesa Air Group (Air Midwest, Freedom, Incumbent
Mesa).
Spirit Airlines........................... New Entrant
America West Airlines..................... Limited Incumbent
American Airlines......................... Incumbent
Continental Airlines...................... Incumbent
Delta Air Lines........................... Incumbent
Midwest Airlines.......................... Incumbent
Northwest Airlines........................ Incumbent
United Airlines........................... Incumbent
US Airways................................ Incumbent
Commuter Slot Lottery Category
Air Canada................................ Incumbent
Atlantic Coast Airlines................... New Entrant
Chautauqua Airlines/Shuttle America....... New Entrant
Colgan Air................................ New Entrant
Corporate Airlines........................ New Entrant
Mesa Air Group (Air Midwest, Freedom, Incumbent
Mesa).
Allegheny Airlines/Piedmont Airlines/PSA Incumbent
Airlines (US Airways Express).
American Eagle............................ Incumbent
Atlantic Southwest/Comair (Delta Incumbent
Connection).
Midway Airlines........................... Incumbent
Skyway Airlines........................... Incumbent
Trans States Airlines..................... Incumbent
Issued on August 11, 2003 in Washington, DC.
Andrew B. Steinberg,
Chief Counsel.
[FR Doc. 03-21456 Filed 8-20-03; 8:45 am]
BILLING CODE 4910-13-M