This rule establishes procedures to address congestion in the New York City area by assigning slots at John F. Kennedy (JFK) and Newark Liberty (Newark) International Airports in a way that allows carriers to respond to market forces to drive efficient airline behavior. The rule also extends the caps on the operations at the two airports, assigns to existing operators the majority of slots at the airports, and develops a robust secondary market by annually auctioning off a limited number of slots in each of the first five years of this rule. Auction proceeds will be used to mitigate congestion and delay in the New York City area. The rule also contains provisions for minimum usage, capping unscheduled operations, and withdrawal for operational need. The rule will sunset in ten years after going into effect on Nov. 9, 2008.
The FAA has determined that the allocation of a relatively small number of slots via the auction of a leasehold best effectuates the efficient allocation of slots, both through the initial allocation and through the development of a robust secondary market. An auction is intended simply to distribute slots to the air carriers who value them the most, thus encouraging their most efficient use. An auction also satisfies the direction of Congress to “place maximum reliance on competitive market forces and on actual and potential competition ... to provide the needed air transportation system ...”
The Air Transport Association of America (ATA), the International Air Transport Association (IATA), the Port Authority, American, Delta and United Airlines (United) asserted that the FAA’s proposed methods of allocating slots are not lawful for several reasons including: prior statements by Government officials indicating that the FAA would need additional legislation to be able to auction slots; the FAA cannot create property by exercising its regulatory power to regulate the use of navigable airspace; slots are not property when created and held by the Government but only become property when transferred to a carrier; the proposed lease of slots for fair market value would be a new user fee in violation of an appropriations restriction on using a particular appropriation to finalize or implement a regulation to establish a new user fee and in violation of the Independent Offices Appropriations Act (IOAA) (the latter of which it is asserted is the FAA’s only authority to charge for the lease of slots); the leases would be an unconstitutional usurpation of Congress’ authority to levy taxes; the return of slots to the Government at the end of the term of their leases would constitute an unconstitutional taking of property; the Federal Grants and Cooperative Agreements Act does not provide authority for the FAA to give slots to carriers through cooperative agreements; and the FAA lacks authority to retain the proceeds from the lease of slots and use those proceeds to improve capacity in the New York airspace area.
In contrast to the criticisms to the proposed auctions, Virgin America Inc. agreed with the FAA that it possess legal authority to conduct auctions and to lease the slots to carriers. Virgin America asserted that the FAA may rely on its exclusive sovereignty over the airspace of the United States, under 49 U.S.C. § 40103, to withdraw and reallocate slots. The carriers have no current vested property interest in the slots. Virgin America further maintained that the FAA’s exclusive sovereignty over navigable airspace, coupled with its authority to lease property or dispose of an interest in property for adequate compensation, under 49 U.S.C. § 40110(a)(2), enables it to lease the slots and maintain the proceeds.
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