DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 93

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

RIN 2120–AI51

Congestion and Delay Reduction at Chicago O’Hare International Airport

AGENCY:	Federal Aviation Administration (FAA), DOT.

ACTION:	Final rule.

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

DATES:  This amendment becomes effective October 29, 2006.  Affected
parties, however, do not have to comply with the information collection
requirements in 

§§ 93.23, 93.25, 93.27, 93.28, 93.29, 93.30, 93.31, and 93.32 until
the FAA publishes in the Federal Register the control number assigned by
the Office of Management and Budget (OMB) for this information
collection requirement.  Publication of the control number notifies the
public that OMB has approved this information collection requirement
under the Paperwork Reduction Act of 1995.

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

SUPPLEMENTARY INFORMATION:

Availability of Rulemaking Documents

	You can get an electronic copy using the Internet by:

	(1)	Searching the Department of Transportation's electronic Docket
Management System (DMS) web page (http://dms.dot.gov/search);

Visiting the Office of Rulemaking’s web page at
http://www.faa.gov/avr/arm/index.cfm; or

Accessing the Government Printing Office’s web page at
http://www.gpoaccess.gov/fr/index.html.

	You can also get a copy by sending a request to the Federal Aviation
Administration, Office of Rulemaking, ARM-1, 800 Independence Avenue
S.W., Washington, DC  20591, or by calling (202) 267-9680.  Make sure
to identify the amendment number or docket number of this rulemaking.

	Anyone is able to search the electronic form of all comments received
into any of our dockets by the name of the individual submitting the
comment (or signing the comment, if submitted on behalf of an
association, business, labor union, etc.).  You may review DOT’s
complete Privacy Act statement in the Federal Register published on
April 11, 2000 (Volume 65, Number 70; Pages 19477-78) or you may visit
http://dms.dot.gov.

Small Business Regulatory Enforcement Fairness Act

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

Authority for this Rulemaking 

The FAA has broad authority under 49 U.S.C. 40103 to regulate the use of
the navigable airspace of the United States.  This section authorizes
the FAA to develop plans and policies for the use of navigable airspace
and to assign the use we deem necessary to its safe and efficient
utilization.  It further directs the FAA to prescribe air traffic rules
and regulations governing the efficient utilization of the navigable
airspace.  The FAA interprets this broad statutory authority to
encompass management of the nationwide system of air commerce and air
traffic control. 

In addition to the FAA’s authority and responsibilities with respect
to the efficient use of airspace, the Secretary of Transportation is
required to consider several other objectives as being in the public
interest, including:  keeping available a variety of adequate, economic,
efficient, and low-priced air services; placing maximum reliance on
competitive market forces and on actual and potential competition;
avoiding airline industry conditions that would tend to allow at least
one air carrier unreasonably to increase prices, reduce services, or
exclude competition in air transportation; encouraging, developing, and
maintaining an air transportation system relying on actual and potential
competition; encouraging entry into air transportation markets by new
and existing air carriers and the continued strengthening of small air
carriers to ensure a more effective and competitive airline industry;
maintaining a complete and convenient system of scheduled air
transportation for small communities; ensuring that consumers in all
regions of the United States, including those in small communities and
rural and remote areas, have access to affordable, regularly scheduled
air service; and acting consistently with obligations of the U.S.
Government under international agreements.  See 49 U.S.C. 40101(a)(4),
(6), (10)-(13) and (16), and 40105(b).

Background

On March 25, 2005, the FAA published a notice of proposed rulemaking
(NPRM) (70 FR 15521) which would limit the number of scheduled arrivals
at O’Hare during peak operating hours and establish an allocation
system, including transfer and usage requirements.  

	 Since publishing the NPRM in March 2005, the FAA twice has extended
the Order published in August 2004 that set operation limits on domestic
and Canadian scheduled arrivals into O’Hare International Airport. 
The Order most recently was extended to October 29, 2006, which
coincides with the effective date of this rule (71 FR 16405; March 31,
2006).  

History 

The High Density Traffic Airports Rule at O’Hare

Until July 2002, the FAA managed congestion and delay at O’Hare by
means of the High Density Rule (HDR), which was codified in 14 C.F.R.
part 93, subpart K.  The FAA adopted the HDR under its broad authority
to ensure the efficient use of the nation’s navigable airspace (49
U.S.C. 40103).  The HDR took effect in 1969, and while it originally was
a temporary rule, it became permanent in 1973.

The HDR established limits on the number of all take-offs and landings
during certain hours at five airports, including O’Hare.  In order to
operate a flight during the restricted hours, an airline needed a
reservation, commonly known as a slot.  Slots were initially allocated
through scheduling committees, operating under then-authorized antitrust
immunity, where all the airlines would agree to the allocation.  After
the Airline Deregulation Act in 1978, new entrant airlines formed and
the pre-existing, or legacy carriers, sought to expand.  This increased
competition made it increasingly difficult for airlines to reach
agreement, and the scheduling committees began to deadlock.

	In 1984, the FAA amended the HDR to increase the hours in which
limitations at O’Hare would apply and to increase the number of
take-offs and landings permitted at that airport (49 FR 8237, March 6,
1984).  The next year, a new Subpart S was added to Part 93 that
established allocation procedures for slots including use-or-lose
provisions and permission to buy and sell slots in a secondary market
(50 FR 52195, December 20, 1985).  These procedures replaced the
scheduling committees.

Statutory Changes Ending the High Density Rule at O’Hare

	In 2000 Congress relaxed the slot rules at the high density airports
and phased out the specific regulations then in place at three of them,
including O’Hare (49 U.S.C. 41715, 41717).  With respect to O’Hare,
Congress directed that:

beginning May 1, 2000, exemptions be granted to airlines to provide air
service to small airports with 70-seat or smaller aircraft;

30 slot exemptions be granted to new entrant or limited incumbent air
carriers;

after May 1, 2000, slots no longer be required to provide international
air service; 

beginning July 1, 2001, the slot control restrictions be limited to the
period between 2:45 p.m. and 8:14 p.m.; and

slot restrictions be lifted entirely after July 1, 2002.

In phasing out the HDR, however, Congress recognized the possibility
that there could be an increase in congestion and delays at the affected
airports.  Therefore, in the section that phased out the rule, it made
clear that “[n]othing in this section . . . shall be construed . . .
as affecting the Federal Aviation Administration’s authority for
safety and the movement of air traffic.” (49 U.S.C. 41715(b).

Resurgence of Unacceptable Levels of Congestion

As a result of the 2000 legislation, the slot restrictions of the HDR
lapsed at O’Hare as of July 1, 2002.  The absence of these
restrictions allowed airlines operating at the airport to add flights,
which over time led to a dramatic increase in airline delays.  These
delays reverberated throughout the national air transportation system.  

Initially, lifting the HDR had a minimal impact on delays due to the
lingering effects of the 9/11 terrorist attacks on airline passenger
traffic.  But by 2003, the two air carriers operating hubs at O’Hare,
American Airlines (“American”) and United Airlines (“United”),
had added a large number of operations and retimed other flights,
resulting in congestion during peak hours of the day.  From April 2000
through November 2003, American increased its scheduled operations at
O’Hare between the hours of 12:00 p.m. and 7:59 p.m. by nearly 10.5
percent.  Over the same period, United increased its scheduled
operations at O’Hare by over 41 percent.  

The increases in operations by American and United did not result in a
corresponding increase in seat capacity.  During the peak period, these
two carriers added 375 regional jet operations per day.  Overall,
American and United added over 600 regional jet operations per day.  At
the same time as they added regional jet operations, they reduced
mainline jet operations.  The result was actually a decrease in seat
capacity by each carrier at O’Hare of more than 5.5 percent from April
2000 to November 2003 while flights increased by an average of 150 per
day.  In November 2003, more than 40 percent of American’s and
United’s O’Hare flights were operated with regional jets, many to
large and medium hubs.  The significant increases in scheduled
operations during this time period resulted in excessive delays and
congestion at O’Hare.

By November 2003, O’Hare had the worst on-time performance of any
major airport.  O’Hare arrivals were on time only 57 percent of the
time, well below the FAA goal of 82 percent.  Departures were little
better.  They were on time only 67 percent of the time, well below the
average of 85 percent at other major airports.  These delays averaged
about an hour in duration.  Published schedules for February 2004
indicated that the problem would be exacerbated by the addition of even
more flights.  

Recognizing congestion was again becoming a significant issue, Congress
enacted legislation that included a mechanism to help reduce delays and
improve the movement of air traffic at congested airports (49 U.S.C.
41722).  That statutory provision authorized the Secretary of
Transportation (Secretary) to request that scheduled air carriers meet
with the FAA to discuss flight reductions at severely congested airports
to reduce over-scheduling and flight delays during hours of peak
operation, if the Administrator determines that it is necessary to
convene such a meeting and the Secretary determines that the meeting is
necessary to meet a serious transportation need or achieve an important
public benefit.

In early 2004, the Secretary and the FAA Administrator determined that a
schedule reduction meeting was necessary to deal with congestion-related
delays at O’Hare.  Before such a meeting could be convened, however,
United and American each agreed in separate discussions with agency
officials to reduce their scheduled flights voluntarily.  Accordingly,
the schedule reduction meeting was deferred.  Instead, the FAA issued an
order implementing the voluntary agreement of the two air carriers,
Docket FAA-2004-16944-55; 69 FR 5650 (2004). The FAA order required a 5
percent reduction in the two carriers’ scheduled operations.  This
reduction was to be effective between 1:00 p.m. and 8:00 p.m. for
six-months, beginning no later than March 4, 2004.

The FAA again reviewed O’Hare’s on-time performance in March 2004 in
light of the ordered schedule reductions.  That review showed that the
total delay minutes would have been as much as 30 percent higher without
the reductions but that delays still remained more than double the level
of a year earlier and represented more than a third of the total delays
in the national airspace system.  

In light of the continued problems at O’Hare, the agency officials
again discussed the situation with American and United to consider
additional flight reductions to improve on-time performance at the
airport.  As a result, on April 21, 2004, the FAA issued an amendment to
the previous order in Docket FAA-2004-16944.  This amendment required
additional flight reductions.  Specifically, beginning no later than
June 10, 2004, it required (1) an additional schedule reduction of 2.5
percent of each carrier’s total operations in the 1:00 p.m. through
7:59 p.m. hours including arrival reductions during specific times; (2)
a reduction in the number of scheduled arrivals in the 12:00 p.m. hour;
and (3) reductions to continue through October 30, 2004.

Prior to the implementation of the June flight reductions, delays at
O’Hare continued.  In May, there were a record 14,495 total delays.  
While the numbers in June and July improved, as the last round of
cutbacks by American and United took effect, the FAA determined that the
overall trend of delays remained unacceptably high.  

Meanwhile, some airlines that were not party to the agreement involving
American and United continued to add flights, making it unlikely that
the those two carriers would extend their voluntary schedule reductions
without similar commitments by other carriers.  Published schedules for
November indicated that during several times of the day scheduled
arrivals would approach or exceed the airport’s highest arrival
capacity.  Accordingly, in July, the Secretary and FAA Administrator
determined that the scheduling reduction meeting that had previously
been deferred now needed to be held (69 FR 46201, August 2, 2004).

The meeting between DOT and the carriers convened on August 4, 2004, and
was followed by meetings between Federal officials and individual
airlines.  As a result, United and American agreed to reschedule and
further reduce scheduled arrivals by about 5 percent during peak hours
and other airlines agreed to some flight re-timings and not to increase
the number of their scheduled arrivals.  New entrants and limited
incumbents were permitted to add a small number of scheduled flights. 
Based on the information provided through the meetings and submissions
filed in the docket, the FAA issued a comprehensive order on scheduled
arrivals at O’Hare on August 18, 2004, limiting scheduled arrivals by
U.S. and Canadian air carriers to 88 during most hours of the day and
implementing the above agreement (August 2004 Order).  The Order took
effect November 1, 2004, and was to expire on April 30, 2005.  The FAA
extended this Order on three separate occasions to permit full
consideration of the issues and comment on the NPRM.  On each occasion
the agency sought the views of interested persons on the advisability of
extending the August 2004 Order in Docket FAA-2004-16944.  As indicated
in the October 2, 2005, extension of the Order, significant operational
benefit has been achieved since the voluntary schedule reductions took
effect on November 1, 2004.  The subsequent extensions of the Order were
necessary to maintain the scheduling limits set in August 2004 and
achieve delay –reduction and operational benefits pending completion
of this rulemaking.  

Related Activity

	On July 8, 2005, the FAA published in the Federal Register Special
Federal Aviation Regulation (SFAR) 105, “Reservation System for
Unscheduled Operations at Chicago’s O’Hare International Airport,”
(70 FR 39610).  This SFAR limits unscheduled arrivals at the airport to
four per hour and provides an allocation mechanism for operators to
obtain reservations for those operations.  SFAR 105 was extended through
March 31, 2006 (70 FR 66253). 

On September 30, 2005, the FAA issued the Record of Decision for
O’Hare Modernization providing final agency determinations and
unconditional approval of the revised Airport Layout Plan and other
certain Federal actions by the FAA necessary for the proposed
improvement of O’Hare, as provided in Alternative C presented to the
agency (the O’Hare Modernization Plan and other components of the
City’s Airport Master Plan.).  The O’Hare Modernization Plan (OMP)
provides for certain capacity enhancement actions to result in new
capacity by 2008.  

Phased implementation of the OMP will provide incrementally increasing
operational benefits.  The FAA's analysis projects that the addition of
the first new OMP runway will, by 2008, allow the airfield to
accommodate over 50,000 additional forecast operations with an average
annual delay per aircraft no higher than exists today.  With the
completion of Phase 1 of the OMP, the FAA's analysis projects that the
airfield will accommodate, by the 2010 time frame, approximately 90,000
additional forecast operations (over today's activity level) with a
decrease in average annual delay per aircraft of approximately 33% below
today's delay per aircraft at O'Hare.  Finally, with the completion of
OMP Phase 2 in 2013, the FAA's analysis projects that the airfield will
accommodate approximately 1.12 million annual forecast operations (an
increase of more than 140,000 annual operation over today's activity
level) with an average annual delay per aircraft nearly 70% below
today's delay per aircraft.

Summary of Comments  

The FAA published the NPRM, “Congestion and Delay Reduction at Chicago
O’Hare International Airport,” on March 25, 2005.  The comment
period closed on May 24, 2005.  During that period, we received 22
comments from interested parties including airlines, industry
organizations, individuals, members of Congress and the City of Chicago
(City).  We also received five additional comments after the close of
the comment period.    

In the NPRM, we requested comment on several specific aspects of the
proposed rule, as well as any general comments.  Comments to the NPRM
are addressed below by topic.  Only one commenter supported the proposal
entirely; he is a student and pilot.  

Overall, most commenters agreed that before the recent schedule
reductions at O’Hare, congestion and delays had become intolerable. 
Some clearly disliked the proposal and questioned whether less intrusive
methods were available to address short-term congestion and delay. 
Nearly all commenters agreed that governmental limits on flights are not
the preferred approach and increasing air traffic capacity at O’Hare
is the best way to solve the problem of congestion and delays.  Some
commenters suggested that the Order only accomplished what market forces
ultimately would have dictated carriers to do if given appropriate time.
   

Comments expressing concern that the NPRM amounted to a reimposition of
the HDR were received from Senators Richard Durbin and Barack Obama, and
Representatives Dennis Hastert, Jesse Jackson, Jerry Costello, John
Shimkus, Jerry Weller, Melissa Beam, Danny K. Davis, Henry Hyde, Judy
Biggert, Timothy Johnson, Daniel Lipinski, Luis V. Gutierrez, Lane
Evans, Bobby L. Rush, Rahm Emanuel, Mark Kirk, and Donald A. Manzullo
(Members of Congress).  The Members did not oppose a short-term limit on
flights, with certain modifications, provided that the rule sunset (as
proposed) no later than April 2008.   

Expiration of the August 2004 Order (no further governmental action) 

We questioned in the NPRM whether the limitations established in the
August 2004 Order should be allowed to expire of their own accord with
no governmental intervention to address the operational environment at
the airport.  Under this approach, carriers would be free to determine
the number and timing of flights at O’Hare.  

The Department of Justice (DOJ) and the Air Carrier Association of
America (ACAA) objected to allowing the Order to expire with no
mechanism in place to manage demand at O’Hare.  DOJ argued that
allowing the Order to expire with no plan in place to deal with the
airport’s limited capacity would lead to more congestion and
significant delays for passengers throughout the country.  ACAA
contended that both American and United would add flights to block
competition at any cost and that smaller carriers have fewer options to
cancel flights or re-route passengers through other airports and
consequently suffer disproportionate delays.  

The City argued the opposite.  The City requested that the FAA
accelerate the OMP approval process, allow the Order to expire, and let
free market forces manage flight levels.  The City also countered that
the airlines have learned their lesson from past over scheduling and are
not likely to repeat that practice.  However, if delays were to reach
unacceptable levels again, the City suggested that the FAA negotiate a
new temporary scheduling agreement like the one that resulted in the
August 2004 Order.  The Airports Council International-North America
(ACI-NA) supported the comments filed by the City.  

	The FAA has determined that a rule limiting arrivals at O’Hare is
necessary.  After the phase-out of the HDR at O’Hare, carriers had the
opportunity to add flights and adjust schedules as they saw appropriate,
which resulted in extensive delays for all operators at O’Hare and
wide-ranging effects on the NAS.   In contrast, since the limits on
scheduled and unscheduled arrivals took effect on November 1, 2004, air
traffic delays have decreased and on-time arrival performance has
increased.  Through October 2005, the average minutes of arrival delay
at O’Hare decreased by approximately 24 percent when compared to the
same 12-month period the year before.  The longest arrival delays
lasting more than one hour have decreased by 28 percent.  Overall, the
on-time arrival performance at O’Hare has increased by almost 7
percentage points.  As a result, O’Hare is now performing near the
average of the rest of the major airports in the NAS, a dramatic
improvement from the airport’s bottom-tier performance during much of
2004.

	The FAA could permit the current scheduling limits to expire and allow
carriers to individually determine the number and timing of their
flights at O’Hare as advocated by some of the commenters.  Safety
would be maintained through air traffic control (ATC) procedures and
congestion would be managed as needed through various traffic management
initiatives.  However, based on the history of scheduled demand, we
forecast that flights would increase and that delays, cancellations, and
disruptions at O’Hare and other airports are likely and would be
unacceptable to the industry and the flying public.  As indicated by the
previous statistics, the limits imposed by the August 2004 Order have
resulted in measurable reductions in delay.  We are mindful that other
factors have contributed to the decrease in delay, including additional
flight reductions by some carriers beyond those specified in the Order,
and increased operational capacity in some periods due to improved
weather and other system efficiency gains.  

	We are not persuaded by the City’s argument that the carriers at
O’Hare will be able to resist the short-term marketplace incentives to
add flights during peak hours, particularly if one or more of the hub
carriers significantly changes its schedule or the other carriers
introduce new service to O’Hare.  Carriers typically respond to
competition by matching frequency and/or fares.  At O’Hare, the
hubbing carriers have reduced flights significantly since November 2003,
and if the Order expired, might resume previous flight frequencies or
enter new markets to respond to other carriers’ schedules.  

	 In the event that flights were added and delays increased
significantly, we could initiate schedule discussion meetings similar to
the August 2004 discussions while continuing to manage delays on a daily
basis.  This process, however, would be counter-productive to our
mandate to manage the use of the navigable airspace efficiently,
particularly since it is very likely that carriers would launch new
operations once the August 2004 Order expired.  Furthermore, our ability
to secure a new voluntary schedule reduction agreement is at best
uncertain in view of the comments submitted in this rulemaking. 
Consequently, we dismissed this option as a feasible solution. 

	American noted that other airports experience more delay than O’Hare
and that the FAA has not intervened there.  American questions why
O’Hare was singled out for such action.  United commented that the
operational limits at O’Hare, which is its primary hub, limit its
ability to increase operations for new market opportunities or high
passenger load factors.     

	The agency is addressing congestion at other delay prone airports.  A
single approach to manage congestion and delay at all airports cannot be
realistically achieved at present.  As articulated previously and
elsewhere in the document, the deteriorating situation at O’Hare had
impacts far beyond that airport.  Delays at other airports on the other
hand, generally do not lead to delays throughout the nation’s air
transportation system.  Given the competitive stance of the major
carriers, we believe that it was unlikely to be solved without
government intervention.  Our preference is to use whichever methods for
addressing congestion are best suited for a particular airport.  These
methods may include increasing airport capacity and system efficiencies,
or in the case at O’Hare, addressing through regulatory limits the
impact of schedule adjustments by the largest operators at the airport. 


Extend the August 2004 Order

	No commenter specifically recommended that we simply extend the August
2004 Order until 2008.  The City did suggest this action as an
alternative if the current Order were allowed to expire and operations
grew causing the airport to return to a critical state.  DOJ stated that
this option would be better than doing nothing; but it would lead to
inefficient use of the airport’s limited capacity and is not likely to
result in any significant new entry or expansion by smaller carriers.  

   	After considering this option, we concluded that it would be
difficult to maintain the current agreement or negotiate yet another
voluntary schedule reduction agreement that would limit operations until
new airport capacity is in place.  We agree with DOJ that while the
continuation of the Order would achieve the objective of limiting
overall operations at the airport, it would not necessarily result in
any new entry by smaller carriers for the duration of the proposal. 
Also, this option would not necessarily promote the most efficient use
of the operating authorities at O’Hare, given that the existing Order
does not include provisions for usage, allocation, or market-based
transfer mechanisms.    

	Any future scheduling discussions would start with current operational
levels and the FAA’s scheduling targets proposed for those discussions
would apply.  As indicated in the comments, carriers of all sizes have
expressed a desire to expand their operations at O’Hare, or at least
preserve their option to grow.   A scheduling meeting would confront us
with complex and controversial determinations as to which carriers would
have access to new capacity as it became available and how any new
capacity would therefore be allocated.  This is a complicated obstacle
to overcome in the context of attempting to obtain a voluntary agreement
from competing air carriers.

	The FAA and the Office of the Secretary of Transportation are
continuing the evaluation of market-based mechanisms, such as auctions
or congestion pricing that may improve on prior methods of allocating
available capacity at constrained airports.  This evaluation includes an
assessment of the research conducted by the Department’s contractor,
National Center of Excellence for Aviation Operations Research (NEXTOR),
in conjunction with various air carriers and the Port Authority of New
York and New Jersey, on options to manage demand at LaGuardia upon the
expiration of the HDR at that airport.  A market-based approach
represents a much longer-term option that is not needed at this point in
time at O’Hare, given the expectation of capacity improvement through
the OMP.  

	As it would be unwise to let the limits simply expire, we find it
necessary to invoke our authority to manage the efficient use of the
navigable airspace and to impose peak hour scheduling limits at O’Hare
so as to prevent overscheduling given the airport’s current capacity. 
 Even with the FAA approval of the OMP, there are no viable capacity
enhancement efforts (procedural or technological) expected during the
effective period of this rule that will result in sufficient capacity
gains to completely meet the airport demand experienced during 2003 and
2004.  Moreover, the uniqueness of O’Hare (as a major, dual hub
airport) and its critical role in the National Airspace System (NAS)
warrant special attention and careful measures to manage operations at
that airport until new capacity comes on-line. 

	We stress that as a policy matter the Department promotes the efficient
utilization of existing system capacity and the development of new
capacity to meet aviation demand.  We also prefer to address operational
and airport congestion issues on a local level with airport operators
and customers to the greatest extent practicable.  This rule provides a
temporary regulatory solution necessary to maintain an acceptable level
of operations at O’Hare without congestion and delay impacting the
entire NAS.   

Authority to cap arrivals at the airport

America West and Continental opposed all government-imposed restrictions
on airport access.  These carriers, along with others, argued that the
NPRM is contrary to Congressional intent in the Wendell H. Ford Aviation
Investment and Reform Act for the 21st Century (AIR-21), which phased
out the slot regulations at O’Hare.  They also argue that as the HDR
has been eliminated at O’Hare, the FAA may not implement a rule that
is substantially similar to the HDR.  

	In carrying out our plenary authority to manage the safe and efficient
use of the navigable airspace, we properly may impose limits on flights
at O’Hare to reduce delays and congestion. The HDR, which was also
promulgated under this authority, addressed delays and congestion at
five main airports.  While AIR-21 provided for the termination of the
HDR at O’Hare and the New York airports, it also included a proviso
that the FAA’s “authority for safety and the movement of air
traffic” was not to be affected by the phase out and termination of
the HDR at O’Hare or other HDR airports.  There is no indication that
Congress intended to narrow the FAA’s authority to manage the use of
the navigable airspace or to prohibit its use of this authority at
O’Hare.  AIR-21 by its terms only terminated the HDR then in place and
did not restrict the FAA’s authority to regulate the use of the
airspace.  The legislative history to the House version of AIR-21 (H.R.
1000), 106th Cong., Rpt. 106-167 indicates Congress’ intent simply to
place O’Hare on the same “playing field” as other airports.    

	Since AIR-21 the FAA has exercised its authority to manage the
efficient use of the navigable airspace by capping the flood of AIR-21
slot exemptions filed for LaGuardia Airport (in November 2000), and by
ordering schedule reductions in August 2004 at O’Hare.    In Vision
100--Century of Aviation Reauthorization Act (Public Law 108-176),
Congress gave the Secretary and Administrator new authority to convene
industry-wide scheduling meetings at O’Hare and elsewhere; these
meetings, however, can only result in effective action if implemented
through orders limiting flight operations.  This basis for this new
authority would not make sense if Congress had intended to take away the
Administrator’s authority to restrict operations at O’Hare.  In all
of these matters, as with the HDR in 1969, the agency was faced with
delays at certain key airports that transcended those airports and
disrupted the efficiency of the NAS.  We conclude that the FAA retains
its full authority to adopt this rule limiting flights at O’Hare.  

Operational cap 

	The FAA proposed to limit the number of scheduled arrivals at O’Hare
to 88 per hour, between the hours of 7:00 a.m. and 7:59 p.m. Monday
through Friday and 12 p.m. and 7:59 p.m. Sunday.  The limit on scheduled
arrivals would increase to 98 arrivals per hour in the 8:00 p.m. hour,
Monday through Friday.  These are the same hourly quotas imposed by the
August 2004 Order.  In setting the hourly arrival cap under the Order
and proposing the same for the NPRM, the FAA relied on analyses of
actual, weekday, hourly arrivals and departures at O’Hare in late 2003
and in 2004.  (This is when scheduled demand at O’Hare was at its peak
and pressure on the ATC system to accommodate that demand is reflected
in actual airport hourly traffic counts.)  We also relied on analyses
preformed by MITRE Corporation’s Center for Advanced Aviation System
Development (CAASD), which ran computer modelling on behalf of the FAA
to simulate the effect of hypothetical schedule reductions on the level
of flight delays at O’Hare given the established air traffic control
procedures and airport capacity.  

	The models predicted that constraints used in the August 2004 Order and
the NPRM would reduce delays at the airport by approximately 20 percent
from the levels attributed to schedules in effect at the time the August
2004 Order was imposed.  MITRE/CAASD also simulated the results of a
completely unconstrained schedule, using the industry’s proposed
November 2004 schedules and calculated that delays under the Order would
be approximately 43 percent less than would be experienced if no action
were taken and schedules similar to the November 2003 schedules were
allowed to take effect.    

	The City commented that the proposed hourly limits do not take
advantage of present available capacity at the airport.  The City
contended that the airport could accommodate 92 scheduled arrivals per
hour and accommodate international and unscheduled arrivals above that
level.  ACI-NA supports the City’s comments.  

We have reviewed the operational performance of O’Hare, including the
percentage of flights arriving and departing the gate within 15 minutes
of scheduled time, the percentage of flights delayed for more than one
hour, recent actual arrival and departure rates, and have considered
whether there have been any material capacity enhancements that would
provide a basis for a higher hourly cap on scheduled arrivals.  Our
review indicated there have been variations in delay levels, airport
acceptance rates, and weather patterns since the Order took effect in
November 2004 but no significant capacity enhancement measures have been
realized.  

As stated, the City proposed a new cap of 92 scheduled domestic (and
Canadian arrivals) per hour and no limits on international arrivals of
either domestic or foreign air carriers.  The combined arrival demand
under such a scenario could be accommodated only under optimal weather
conditions and then, with some delays.  Such a proposal would
significantly increase delays over current levels in non-optimal
conditions.  

We noted in the NPRM that if during the pendency of this rulemaking, the
actual performance of O’Hare – as indicated in the cumulative delay
statistics and modeling results -- demonstrated that an increase in the
cap on operations would still allow for acceptable operational
performance, then the arrival cap might be raised in the final rule.  
The final rule, however, adopts the proposed limits of 88 scheduled
arrivals per hour and no more than 50 scheduled arrivals in each
half-hour period beginning at 7 a.m. The final rule also adopts the
higher limit of 98 arrivals during the 8 p.m. hour but amends the half
hour limit in that hour to be the same as in the other half-hours. 
Accordingly, in the 8:00 p.m. hour, each half hour cannot exceed 50
scheduled arrivals.  

The limits proposed in the NPRM mirror those reached during the August
2004 schedule discussions and incorporated in the August 19, 2004 Order,
as amended.  We accepted the higher limit in the 8 p.m. hour in the
negotiated agreement and in recognition that the following hour had
sufficient capacity to quickly absorb any potential delays.  The actual
flight schedules during the half-hour limits for 8 p.m. proposed in the
NPRM, however, were not balanced.  In reviewing the operational impact
of the compression of arrivals in the first part of the 8 p.m. hour, we
conclude that it is not appropriate to adopt the proposed higher,
half-hour limit for this hour.  While we will assign Arrival
Authorizations in accordance with the carrier limits established in the
Order, should any Arrival Authorizations in the 8 p.m. hour, or any
other hour, be returned or withdrawn, they will be reassigned but within
the half-hourly limit not to exceed 50 Arrival Authorizations.  

Some periods may have minor variations from the adopted hourly or
half-hourly limits based on the Arrival Authorizations initially
assigned.  Some periods may be slightly over the adopted limits, while
others are slightly under.  We do not expect any new, major operational
impacts, but we expect that some of these variations will be resolved
over time as we consider schedule adjustments by carriers.  

We are also adopting provisions to accommodate newly requested
international arrivals above the hourly limits,  and we will also assign
Arrival Authorizations for international arrivals, as described later. 
We have decided not to withdraw Arrival Authorizations from domestic
operations in order to accommodate new international arrivals, as the
Department expects the number of new international arrivals to be
minimal during the life of this rule.  The FAA intends to work with
operators of international flights to minimize any potential impacts
during peak hours but ultimately expects to accommodate these new
flights even if there may be some operational or delay impacts.  
Additional discussion on the adopted rules that apply to international
arrivals appears in a later section.

Although overall performance of the airport has exceeded the modeled
results, several hours have scheduled arrivals below the levels
permitted by the Order.  Some carriers are not utilizing all their
authorized scheduled arrival times, resulting in periods when the
airport could accommodate additional flights.  This rule adopts a usage
provision in addition to a blind buy/sell/lease provision, which we
expect to increase the actual utilization of the Authorizations (because
carriers will either use them for their own flights or sell/lease them
to other carriers).  Some Arrival Authorizations are available and will
be assigned at the time of initial assignment under this rule.  Requests
for Arrival Authorizations for new international service will be
accommodated first and any remaining Arrival Authorizations will then be
assigned using a preferred lottery.  Both of these assignment mechanisms
and our rationale supporting the use of these mechanisms are fully
described further in this document.  

In the third extension of the Order, the FAA specifically addressed the
ten Arrival Authorizations previously operated by Independence Air and
explained why those operations are not excess capacity.  Independence
Air ceased operations all operations on January 6, and because Arrival
Authorizations cannot be sold, leased, or transferred except on a
one-for-one basis under the August 2005 order, they have been unused
since that date.  We concluded that all the subject Arrival
Authorizations may not be available for reallocation because when
negotiating scheduled reductions in anticipation of the August 2004
order, the FAA had to allocate Arrival Authorization in some peak
afternoon and evening hours at levels that exceed the peak-hour target
of 88 scheduled arrivals per hour.  Furthermore, foreign carriers whose
operations were not affected by the Order, have adjusted their schedules
from August 2004 resulting in increased scheduled arrivals during
certain hours.  The Arrival Authorizations assigned to Independence Air,
particularly in the peak afternoon and evening hours will offset these
periods of continued scheduling over the operational target.  We expect
that approximately four Arrival Authorizations that were operated by
Independence Air will be available in the morning hours for assignment
under this rule.  

	As proposed, the FAA will semi-annually review the operational
performance metrics for O’Hare, as well as any new, procedural or
other capacity enhancement measures, to determine if additional Arrival
Authorizations may be assigned.  The FAA intends to increase the cap on
operations when doing so is supported by the operational analyses
performed in these reviews and our delay reduction objectives.  We
believe that various provisions of this rule discussed above adequately
address the City’s concern about utilizing existing capacity at the
airport.

	This rule adopts a caveat in the provisions governing the initial
assignment of Arrival Authorizations that was not proposed in the
notice.  The NPRM proposed that carriers conducting scheduled service to
O’Hare under the August 2004 Order would receive corresponding Arrival
Authorizations for that service.  Recent events have required that we
contemplate a situation for which a carrier was operating at ORD under
the Order but has since terminated all service at O’Hare prior to our
concluding this rulemaking.  In such a case, we conclude such carrier(s)
should not be entitled to corresponding Arrival Authorizations under
this rule.  Arrival Authorizations are not property and in view of such,
the agency has expressly limited opportunities to monetize and
collateralize this authority under the rule adopted here.  In the above
situation, permitting a carrier to “retain” this authority under the
rule would provide the carrier with the ability to unfairly monetize its
operating authority at the expense of other carriers seeking to operate
at O’Hare or increase service.  We do not find it fair or in the
public interest to provide a carrier that is not serving the airport
with the opportunity to monetize and collateralize the authority under
the rule adopted here.  Consequently, we have included a provision to
require that for a carrier to receive an initial assignment of Arrival
Authorizations, the carrier must be conducting some level of service at
the airport as of October 29, 2006.   

New entrant/limited incumbent preference for new capacity 

	The proposal contemplated initially assigning all of the Arrival
Authorizations based on the airport’s existing scheduling limits and
according to the carriers’ existing operations.  This assignment would
benefit all of the incumbent carriers, especially United and American,
which would hold the vast majority of Arrival Authorizations.  

	The Notice proposed that any Arrival Authorizations withdrawn or
returned to the FAA would be reallocated by lottery to new entrants and
to carriers with few operations (“ limited incumbents”).  In
addition, the Notice proposed that, with respect to additional capacity
created by an increase in operational caps from 88 to 89 or 90 arrivals
per hour, the resulting additional Arrival Authorizations also be
assigned by lottery to new entrants and limited incumbents.  Under both
scenarios, those Arrival Authorizations remaining after lottery would be
assigned to incumbent carriers and then on an interim basis until the
next lottery.  Under the proposal, with respect to additional capacity
created by an increase in operational caps above 90 arrivals per hour,
the additional Arrival Authorizations would be assigned by lottery with
no preference based on carrier identity.  

We invited comments on whether the preference for new entrants and
limited incumbents would promote competition.  Specifically, we asked
whether the service benefits potentially obtainable from incumbent
carriers’ networks argue against use of a lottery that prefers new
entrant and limited incumbent carriers. 

We first address our authority to adopt such a preference and then
address the policy considerations supporting the preference.  Lastly, we
address arguments relating to allegations of an unconstitutional taking
of property or deprivation of due process.

	1.  Authority to impose a preference for new entrants/limited
incumbents 

	American and United challenged the FAA’s authority to impose a
preference and argued that the FAA cannot engage in economic regulation
by favoring some carriers over others to “promote competition.”  

	

Any scheme to limit flights at O’Hare must allocate those operating
authorities according to some criteria.  We expect that any set of
criteria adopted would benefit certain carriers to the detriment of
others and no one formula would be universally acceptable to all
affected carriers.  The FAA’s statutory authority to regulate the
navigable airspace does not expressly direct the agency to consider any
specific factor in allocating airspace rights.  Absent such expression,
we must look to the public interest in determining criteria for
assignment of these Arrival Authorizations. In considering the public
interest, we are guided by the policy goals prescribed for the Secretary
and the pro-competition policies followed by Congress in adopting
legislation on matters such as slot exemptions and airport grant
programs.  See, e.g., Delta Air Lines v. CAB, 674 F.2d 1 (D.C. Cir.
1982).   The courts have approved the Secretary’s reliance on the
pro-competition polices in allocating slots under the HDR.  Northwest
Airlines v. Goldschmidt, 645 F.2d 1309, 1315 (8th Cir. 1980).

As we articulated in the August 2004 Order, Congress has set forth a
policy of promoting deregulation and competition in the airline industry
by means of the Airline Deregulation Act of 1978 and subsequent
legislation.  In AIR-21, Congress authorized the award of slot
exemptions at the HDR airports to new entrants and limited incumbents
– i.e., those carriers that have little or no presence at the
slot-controlled airports.  (See 49 U.S.C. §§ 41714(c), (h), 41716(b),
41717(c), 41718(b)(1).)  Congress also included similar provisions in
statutes governing airport grants and passenger facilities charges,
designed to encourage airports to adopt policies that will promote
competition.  (See 49 U.S.C. §§ 40117(k), 47106(f), and 47107(s).) 

The Department’s prior pronouncements and decisions on the efficient
use of the airspace have frequently cited concerns about airport access
and competition.  For example, under the HDR, we established a
regulatory framework that included a buy/sell provision to address the
goals of access, competition and small community service.  Also, under
the HDR, the Department sought to alleviate the advantage that incumbent
carriers gained under the initial allocation of the HDR -- which
“grandfathered” hundreds of slots for existing operations) -- and to
afford new entry at the slot-controlled airports.  We did so by
withdrawing up to 5 percent of the air carrier slots at LaGuardia,
O’Hare and Washington National Airport to allocate by lottery to new
entrants and limited incumbents.  More recently, in response to the
escalating number of AIR-21 slot exemptions filed for LaGuardia Airport
in December 2000, the FAA issued orders governing the allocation of
those slot exemptions that took into account the need to promote
competition.  

	2. Policy considerations concerning the new entrant/limited incumbent
preference

	This part of the proposal received the most comment.  Support for the
preference came from those air carriers or their representatives that
could benefit from the proposal, such as Alaska Airlines, America West,
Independence Air, and ACAA.  Those opposed to the preference include
American, Delta Air Lines (Delta), US Airways, United, LECG LLC (in
coordination with United), Regional Airline Association (RAA), the City,
and Members of Congress. 

	Alaska Airlines strongly supported our reliance on competition
considerations and argued that the preference is fair, appropriate and
supports a key public interest objective.  America West urged the FAA to
establish a system by which Arrival Authorizations are withdrawn from
incumbent carriers if any new entrant or limited incumbent requests one
and none are available.  America West further commented that new
entrants and limited incumbents should have first access to all new
Arrival Authorizations even if they exceed 90 per hour.  ACAA supported
preferential treatment for new entrants and limited incumbents and asked
that Arrival Authorizations held by American and United be withdrawn and
redistributed at the rate of 2 additional Arrival Authorizations per
hour.  Additionally, ACAA asked that 5% of those Arrival Authorizations
held by American and United be withdrawn and redistributed to new
entrants and limited incumbents each year the rule is in place.  

	The City argued, in contrast, that the FAA should not discriminate
among types of carriers and noted that O’Hare is one of the most
competitive markets in the nation.  The City also was concerned that the
proposed preference would discourage incumbent carriers from working on
meaningful delay reduction (that is, capacity enhancing) technological,
and/or procedural changes at O’Hare, given that any resulting new
capacity would initially benefit its competitors.  The City also noted
that allocation by random lottery may not result in the highest and best
use of a limited resource.  

	Members of Congress commented that the proposal treats foreign
carriers, new entrants, and limited incumbents preferentially and
severely disadvantages the hub carriers, who have invested heavily in
O’Hare. They also commented that Chicago is a highly competitive
marketplace and all but four of the major U.S. carriers are represented
in this region.  

	American commented that it and United had both reduced operations
throughout 2004 while other carriers were allowed to increase operations
without any constraint.  American refuted the assertion in the NPRM that
it can shift flights in response to consumer demand stating that, as
O’Hare is its hub airport, the timing of flights is critically
important to creating the maximum number of potential connecting
opportunities.  American contended that it reduced its schedule to meet
the agency’s scheduling target under the August 2004 Order and that
Arrival Authorizations in excess of 88 per hour do not realistically
represent “new” capacity.   

	Delta commented that the preference for allocating capacity does not
place “maximum reliance upon competitive market forces and
competition” as stated in the NPRM.  Delta argued that the proposal
undermines competition by favoring some carriers over others, and that
future capacity should be distributed using the same public auction
procedure proposed for buy/sell transactions, with all carriers
permitted to compete equally for those rights.    

	US Airways commented that it is uniquely disadvantaged by the
preference for new entrants and limited incumbents. US Airways argues
that new entrants and limited incumbents could get new capacity and
large incumbent carriers could operate flexibly with their larger
holdings, but it could not respond competitively because it is neither a
limited incumbent nor a large carrier at O’Hare.  US Airways noted
that the NPRM did not provide any analysis indicating new entrant and
limited incumbent carriers would, in fact, offer the travelling public
more benefits than the network carriers or any analysis assessing the
impact of Midway Airport.  US Airways would prefer that all additional
Arrival Authorizations be allocated through a no-preference lottery
available to all carriers.  US Airways claimed the stated policy
directive to rely on competitive market forces and the pro-competition
policies in the Airline Deregulation Act are not served by the proposed
preferred lottery because it favors certain types of competitors at the
expense of others.  

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

United also expressed concern that the inability to obtain new Arrival
Authorizations could put it at a competitive disadvantage while demand
for international service grows and that it would have to decrease its
service to small and mid-size communities in order to compete
internationally.

	We have decided to retain the proposed lottery preference.  The rule
will give new entrants and limited incumbents a relatively small
advantage in obtaining additional Arrival Authorizations from a pool
that, at most, will be 30 Arrival Authorizations per day -- out of the
more than 1,200 scheduled peak hour arrivals at O’Hare.  By way of
contrast, American and United each operate more than 400 arrivals per
day.   Additionally, both carriers conduct international operations and
might benefit by receiving Authorizations for those flights outside the
operational cap.  (See discussion on international allocation in this
document.)  Unlike airlines with only a few flights at O’Hare, these
carriers also have the ability to maintain their market presence by
substituting larger jets for regional jets on some of their flights.  

	New entrants and limited incumbents will receive a preference in the
reassignment of available Arrival Authorizations created by any increase
in the hourly limitation from 88 to 89 or 90 authorizations per hour. 
In addition, we are adopting a “blind” buy/sell mechanism for
transactions involving Arrival Authorizations by shielding the identity
of parties to proposed transactions.  This process should give a greater
opportunity for smaller carriers to purchase or lease necessary arrival
privileges.  In this regard, we are influenced by the views of DOJ and
others criticizing the lack of a robust secondary market under the HDR
and urging us to adopt procedures that will result in an efficient
allocation of slots and competitive entry at constrained airports.    At
the same time, however, by leaving the current assignment of arrival
privileges essentially unchanged from our existing orders, the vast
majority of operating privileges will be held by the two largest
carriers at the airport.   

	Entry, particularly by low-fare airlines, is an essential ingredient
for airline competition.  Studies of airline industry competition under
deregulation have concluded that low-fare entry has a substantial impact
on price and service.  For instance, Southwest initiated service into
Philadelphia in May 2004, and since that time the fares in Philadelphia
have shifted from being 19 percent higher to 2 percent lower than fares
in comparable domestic markets (comparing the Fourth Quarter 2003 to the
Fourth Quarter 2004).   A policy that fails to provide any special
treatment for new entry, the approach recommended by United and other
larger incumbents, would curtail competition that leads to substantial
fare reductions, increased service, and enables more people to travel.  


The final rule also differs from our proposal in two other respects: 
First, we are not adopting the provision that would have required a new
entrant or limited incumbent carrier to forfeit Arrival Authorizations
obtained in a preferred lottery upon an agreement providing for the
sale, merger, or acquisition by another person of more than 50 percent
ownership or control of that carrier.  The final rule provides for a
12-month limitation on the sale and lease of Arrival Authorizations
obtained in a preferred lottery and we do not believe it is necessary to
adopt further limitations, as doing so might interfere with normal
business decisions by a carrier.  Second, we are clarifying that an
incumbent carrier who obtains Arrival Authorizations on an interim basis
may use them for at least a year before the Authorizations would again
be made available to new entrant and limited incumbent carriers in
another lottery.  This should provide some schedule stability without
creating a material obstacle to potential new entry.

	3. Takings Clause and Due Process Claims

	United has claimed that the FAA would be violating the carrier’s
substantive due process rights by limiting its operations and giving
competitors preferential access to Arrival Authorizations.  United also
argues that its flight schedules and operating rights at O’Hare are
intangible property that the FAA confiscated without due process of law.
 US Airways also argued that the proposal could violate the takings
clause of the Constitution, because “an economically unsupported
government policy is undermining the value of years of investment and
business planning that was premised on the ability to compete at ORD on
a national and international basis.”

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

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

The second element of the Court's standard involves the rule’s
economic impact.  There is no evidence that restricting O’Hare flights
for a limited period of time will have an unduly harmful impact on any
air carrier.  To the extent there is an economic impact by virtue of
this rule, it may be mitigated and moderated by the reduced operating
costs resulting from prior congestion and the potential opportunities
for limited growth during the life of this rule.   

	The third element of the Court's standard concerns whether the rule
will interfere with a firm’s investment expectations.  That is not the
case here.  We have repeatedly used our authority to manage the
efficient use of the airspace to administer the HDR at O’Hare and
three other major airports and done so over many years.  More recently,
we imposed additional restrictions at LaGuardia because of increased
delays at that airport, and from time to time have taken other steps to
cause airlines to reduce flights in order to prevent unacceptable levels
of delays.  Further, even though the Airline Deregulation Act of 1978
terminated the Government’s regulation of air carriers’ rates,
routes, and services, the Department and the FAA nonetheless have
extensive regulatory authority over domestic airline operations.  The
Department and the FAA, for example, regulate in the areas of
certificates, compliance, handicapped discrimination, records on the
movement of traffic, carrier management, unfair and deceptive practices,
unfair methods of competition, and airline safety.  The Department and
the FAA’s regulation of airport development and noise also affect an
airline’s investment expectations.  

As we stated in the August 2004 Order, no airline owns the airspace at
O’Hare and no airline has a license to operate a specific number of
flights at the airport.  The circumstances at O’Hare do not indicate
that any carrier holds a cognizable “property interest” in
maintaining its schedules at the airport.  O’Hare has long been
subject to slot rules, it has never had unlimited capacity, and carriers
should have known that large increases in service could lead to new
controls on the use of the airport’s capacity.  Therefore, United and
US Airways could not have reasonably believed they would be able to add
or operate all the flights they wanted in perpetuity.  

	In any event, United’s argument that the regulation is tantamount to
a taking without just compensation is contrary to Takings Clause
precedent.  Continental Air Lines v. Dole, 784 F.2d 1245 (5th Cir.
1986).  The Continental decision quoted Justice Holmes’ statement,
“Government hardly could go on if to some extent values incident to
property could not be diminished without paying for every such change in
the general law.”  784 F. 2d at 1252 (quoting Pennsylvania Coal Co. v.
Mahon, 260 U.S. 393, 413 (1922))

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

Limited incumbent carriers

	The NPRM proposed to define a limited incumbent carrier as a carrier
that operates eight or fewer Arrival Authorizations at O’Hare and has
never sold or given up an Arrival Authorization.  In the proposed rule
we stated our belief that this approach represented a fair approach to
carriers that are not new entrants but should be afforded some
additional consideration due to their limited presence at the airport. 
We also noted that the proposed term is consistent with the August 2004
Order. 

	America West commented that a cap of eight Arrival Authorizations for
limited incumbents would be inadequate to generate sustained price
competition at O’Hare.  Furthermore, the carrier argued that the
proposal does not satisfy Congress’ objective to promote competition,
because Congress (in AIR-21) capped limited incumbents at 20 slot
exemptions at LaGuardia, which is a smaller airport than O’Hare. 
America West then argued that Arrival Authorizations should be withdrawn
from incumbents to fulfill requests from new entrants and limited
incumbents.  

	Conversely, American argued that the definition of limited incumbent
should be consistent with the International Air Transport Association
(IATA) Worldwide Scheduling Guidelines and the European Union’s slot
regulation (EU 793/2004), which define a new entrant carrier as a
carrier that holds fewer than five slots at an airport on the day for
which they are requested.

	Independence Air and Alaska Airlines requested that the definition be
expanded to include a carrier that operates 10 or fewer flights. 
Independence Air pointed out that the modest increase of two arrivals
would bring that carrier into the scope of the definition of this
category.  The carrier also argued that this small change supports the
public interest of fostering competition by affording the carrier a
preference in a lottery to counter the vast number of Arrival
Authorizations held by the two dominant carriers.  	

	We proposed eight Arrival Authorizations as the threshold for
determining limited incumbent status, as that was the number set forth
in the August 2004 Order.  There is no bright line test for limited
incumbency and the initial selection of eight Arrival Authorizations was
consistent with the pro-competition goals of AIR-21.  We do not view it
necessary to create a more generous exception for such carriers, nor are
we persuaded by the arguments of the carriers to increase this number to
10.  Had we proposed 10 Arrival Authorizations in the notice, it is
likely that carriers (other than Independence Air) would have sought a
higher number.  We note that although AIR-21 changed the definition of a
“new entrant/limited incumbent” carrier to a carrier that holds 20
slots and slot exemptions; it was very different in its provisions for
slot exemptions for new entrants at O’Hare.  At O’Hare, AIR-21 slot
exemptions for new entrants were limited to 30 in total, in contrast to
the statutory provisions for LaGuardia and JFK, which capped new
entrants at 20 slot exemptions each.  Consequently, we reiterate the
rationale behind our test for limited incumbency as proposed in the NPRM
and in the August 2004 Order and, with minor edits for clarity, we adopt
the definition of limited incumbent as proposed.  

Alaska Airlines supported the proposal, as stated in the NPRM, to
allocate flights initially to the carrier actually operating the flight,
except where the operating carrier does not market its service
independently and in its own name.  Alaska stated that it has full
control over the flights it operates at O’Hare and it should not be
penalized because some flights also carry the American code.      

	Alaska’s comment is consistent with how we proposed to treat code
share arrangements in the NPRM.  We proposed that, with limited
exception, Arrival Authorizations would be allocated solely to the
carrier that actually operated the flight, regardless of any code
sharing agreements.  We further proposed that in making our initial
Arrival Authorization determinations, we do not intend to assign Arrival
Authorizations to a carrier that is essentially operating its service as
a contractor for another carrier and does not market its service
independently and in its own name.   We have been presented with no
information that would suggest this distinction is invalid.  Therefore,
this rule adopts our proposal that where the operating carrier conducts
the flight solely under the control of another carrier, the carrier
controlling the inventory of the flight will receive the Arrival
Authorization.  

	We also find it necessary to adopt some minor edits to the definition
for clarity. In defining this term, we resort to using the phrase
“U.S. or Canadian air carrier that holds or operates, on its own
behalf, 8 or fewer Arrival Authorizations…”  As this rule also
permits leasing, it is critical to characterize a carrier’s rights
respective to the operating authority accurately.  In addition, the rule
clarifies that for an Arrival Authorization held or operated by a U.S.
or Canadian carrier to count towards limited incumbent status, the
relevant carrier must hold or operate that authorization on its own
behalf.  This will not penalize a carrier that conducts service at
O’Hare primarily as a contractor for another carrier and does not
market its service independently and in its own name from the ability to
obtain authorizations in its own name in a lottery.  

Blind buy/sell market 

Under the proposed rule, we provided that the purchase and sale of
Arrival Authorizations would be allowed to promote maximum reliance on
market forces and efficient utilization of the Arrival Authorizations. 
To ensure that all carriers have a chance to obtain these valuable
privileges, sales of Arrival Authorizations would be permitted only
through a “blind market” overseen by the FAA in which the only
consideration for transactions would be monetary.  Thus, under the
proposal, the identity of the bidder would be confidential and the
transaction could not involve real property, such as gates, non-monetary
assets, or other services in lieu of cash.  In the NPRM, we did not
propose specific regulatory text to permit the leasing of Arrival
Authorizations but put out the concept for comment.

The majority of commenters did not object to use of a blind secondary
market as proposed for the buying and selling of Arrival Authorizations.
 A majority of commenters did, however, object to the prohibition on
using non-monetary assets as payment and the proposed limits on the use
of Arrival Authorizations as collateral for loans.  

DOJ urged the Department to move aggressively to adopt either congestion
pricing or an auction to allocate scarce airport/airspace capacity at
O’Hare, cautioning that anything short would lead to an inefficient
allocation.  DOJ also stated that while the “blind” aspect of the
secondary market may remedy problems associated with the bidding
process, this proposal does nothing to encourage the two largest
carriers to sell Arrival Authorizations.  According to DOJ, other
carriers that also have a presence at O’Hare, generally use that
access to connect their hubs with Chicago and therefore, place high
value on those Arrival Authorizations and thus are unlikely to sell. 
Consequently, DOJ does not see that this rule would result in many
sales.  

American supported the concept of a market for Arrival Authorizations
but opposed the proposal to regulate and govern the operation of that
market, arguing for an independent, free, and competitive market similar
to the HDR.  US Airways, United and Delta argued that under the HDR,
carriers selling slots in the secondary market of necessity evaluated
the total compensation package being offered before choosing the
successful bid.  Moreover, US Airways believed that given the
industry’s liquidity problems and the operational needs of carriers at
various airports, an airline selling or buying an Arrival Authorization
ought to be able to accept or offer non-monetary consideration (i.e.
services, ground handling) as part of the bid.  

United suggested a revised approach to conducting the secondary market
and alternatively proposed that the FAA serve as the clearinghouse
through which sales of Arrival Authorizations are completed.  In this
alternative, a carrier wishing to sell (or to buy) an Arrival
Authorization would notify the FAA of the relevant details and the FAA
would post such notice to potentially interested air carriers.   United
suggested a similar process for carriers seeking to obtain Arrival
Authorizations.  United also commented that restricting the sale to an
all-cash-basis unnecessarily limits the flexibility of buyers and
sellers and could effectively freeze some buyers out of the bidding
entirely.  Under United’s proposal, sellers would be presented with
all bids that are received by FAA, but the identity of the bidders would
not be disclosed.  Once the seller selected the offer it deems most
attractive, the identity of the bidder would be disclosed to the seller
and the transaction could be completed.  United similarly urged the FAA
to permit leasing/subleasing because it would allow carriers to adjust
their schedules based on seasonal and market fluctuations.  Lastly,
United submitted that the secondary market will not be robust as long as
new entrants, limited incumbents, and foreign carriers get Arrival
Authorizations free of charge from the government.  

RAA commented that the current system of buying, selling, leasing, and
sub-leasing slots at HDR airports has worked effectively and does not
warrant any change for the limited duration of this proposed rule.  At
the very least, RAA suggested that if sales are to be blind, there is no
reason to preclude non-cash considerations for Arrival Authorizations.

Independence Air contended that buyers will “undoubtedly wish to
negotiate terms, including but not limited to, the terms of any
warranties, the definition of what constitutes a default under the
purchase agreement, limitations of liability, customary representations
as to corporate authorization, approval and agreement enforceability,
and damages for any breach of the agreement and other commercially and
legally important matters prudently included in any significant purchase
and sale agreement.”  Independence Air suggested that the FAA is not
in a position to broker the details of a commercial arrangement and
should not adopt a rule that cannot be readily enforced and that can so
easily be manipulated by carriers.  Independence Air also did not
support the proposed cash only basis for transactions.   

The ACAA supported the blind market system and stated that this market
mechanism is reasonable and available to all carriers.  ACAA further
argued that American and United should be blocked from acquiring
additional Arrival Authorizations if any other carrier submits a bid in
any sale so that these two carriers cannot bid higher to block entry of
low-fare carriers.  

The City supported the buying and selling of Arrival Authorizations, but
requested that as airport operator it be given a consultative role with
the airlines in the process of a significant sale or lease of Arrival
Authorizations (or at least advance notice of such a sale or lease),
with a portion of the funds reserved for the airport.  

America West also supported the proposed secondary market but commented
that the FAA, not the selling carrier, should keep the proceeds of sales
on the blind secondary market.  America West explained that proceeds
from the sale of Arrival Authorizations could be directed to enhancing
capacity at O’Hare.  Alternatively, if proceeds from the sale went to
the selling carrier(s), America West said there would be a perverse
incentive for airlines to resist expansion of airports because such
expansion would eliminate the “paper value” of their Arrival
Authorizations.  

A constant criticism of the HDR buy/sell provision was that it did not
ensure a “fair” distribution of slots across the industry because
the largest slot-holders (typically, legacy carriers) could consider the
identity of would-be buyers or lessees and choose not to provide them
with slots – so as to deprive potential new entrants of airport
access.  Smaller carriers informed us that they were not even made aware
when slots were available for sale or lease.   The blind aspect of the
buy/sell provision established by this rule should ameliorate this
problem, at least to some degree, by making it more difficult for slot
holders to consider the would-be buyer/lessee’s likely use of Arrival
Authorizations.   

We acknowledge that our proposal to restrict the use of non-monetary
considerations in transactions involving Arrival Authorizations (i.e.,
the “cash-only” aspect of our rule) was unpopular among the
commenters.  Most of the comments suggested that each air carrier should
be allowed to consider the value of specific gates, baggage handling,
marketing arrangements, and other potential offers in lieu of cash. 
(Under our proposal carriers may, of course, continue to pursue business
opportunities in the ordinary course so as to exchange services or
facilities at O’Hare or other airports, but they cannot use Arrival
Authorizations as part of any such discussions.)  Although there is
merit to this position, nevertheless we continue to be concerned that
the uniqueness of non-monetary assets, proposed as consideration in
potential transactions, would effectively undermine the “blind”
nature of the secondary market.   The inclusion of such non-monetary
assets would make it virtually impossible to hide identities during the
bid evaluation process unless the FAA chose to ascribe a monetary value
to non-monetary assets, a difficult and protracted exercise that would
not be useful given the short duration of this rule.   Therefore, the
“cash-only” aspect of our proposal is unchanged in the final rule.  

We reject United’s suggested approach for similar reasons.  Under
United’s approach, all bids would be forwarded to the selling carrier
for review and selection.  Once the selling carrier selected a bid, the
identity of the selected bid would be released and the affected carriers
would be free to consummate the transaction.  United’s approach only
makes sense if non-monetary assets are permitted in the bidding package.
 If, however, the bids are strictly limited to money, nothing is gained
by receiving all the bids because the only relevant bid is the highest
one. 

United also suggested that the FAA establish a corresponding process
that would allow a carrier seeking to purchase or lease an Arrival
Authorization to advise the FAA with that information to be made public
in a similar (blind) manner.  We accept this suggestion and provide for
such notification in this rule.  As in the case for sales or leases, we
will not disclose the identity of the carrier but will include
information such as time and frequency desired, effective date, reserve
price, or other pertinent information.  This information will be posted
within two business days and for a period of at least 10 days.  All
offers of Arrival Authorizations for sale or lease will be processed in
accordance with the adopted rules.

America West recommended that the FAA retain all proceeds from the sale
of Arrival Authorizations for use in capacity expansion projects at the
airport.  While this proposal has appeal, the FAA is currently
prohibited by statute from promulgating rules that result in the agency
collecting user-fees and accepting revenue for the sale of Arrival
Authorizations.  

With respect to the City’s requests, the required public posting of
the available Arrival Authorizations will provide all interested
parties, including the City, with notice of transactions.  The City may
exercise its proprietary powers as airport operator with respect to
managing the efficient utilization of gates and related facilities,
including directing sharing of unused gate space, overseeing subleasing
requests, and otherwise negotiating gate assignments or conversions to
common-use, where practicable.  Requiring advance airline-airport
consultations otherwise would interfere with the efficient assignment
mechanism we anticipate to occur in the blind market.  Given our limited
options, a lottery system provides the fairest and most unbiased process
for allocating new capacity while the blind buy-sell market provides
potential opportunities for carriers that value the Arrival
Authorizations the most.  

Leasing of Arrival Authorizations 

The comments supported allowing leasing of Arrival Authorizations and
cited positive experiences with leasing arrangements under the HDR. 
Delta argued that if leasing is prohibited, incumbent carriers facing
temporary market conditions or seasonal fluctuations in demand for their
service at the airport would be forced to operate sub-optimal service
patterns to preserve their airport access rights until conditions
improved.  Furthermore, Delta commented that the opportunity to lease
Arrival Authorizations gives carriers the flexibility to test marginal
new markets without committing the potentially significant capital
investment that a purchase-only rule would impose.  

RAA commented that leasing and sub-leasing should be permitted as they
play a crucial role in allowing carriers to adopt seasonal changes in
demand.  

Independence Air echoed other carriers and urged the agency to permit
leasing as it is a logical and necessary means to make an efficient
market and urged the FAA to allow leasing in the final rule.  However,
Independence Air did not believe the FAA can effectively match lessors
and lessees simply on the basis of which lessee is willing to pay the
most for the Arrival Authorization.  As with buying/selling Arrival
Authorizations, Independence Air contended that there are many
commercial and legal considerations that impact a lessor’s motivation
to enter into an Arrival Authorization lease agreement.  

As discussed in the NPRM, leasing of arrival privileges would allow the
carriers to accommodate seasonality and market fluctuations inherent in
airline operations.  Leasing permits access to the airport that some
carriers may not otherwise have.  Leasing also can result in higher
efficiencies and lower costs to the carriers holding the Arrival
Authorizations.  Allowing leases and sub-leases of Arrival
Authorizations also makes sense given the minimum usage requirement.    


As specified in the adopted regulations, leasing will be permitted
subject to the same conditions as the buying or selling of Arrival
Authorizations.  A carrier seeking to lease Arrival Authorizations must
notify the FAA, and the agency will post the solicitation (including
relevant information) and accept all timely-filed bids.   Only the
highest bid will be forwarded to the potential seller or lessor, and the
only permitted consideration is monetary.  If the relevant carriers
agree to negotiate or contract other details of the transaction that do
not violate or infringe upon the applicable regulations, they may do so
without FAA involvement.  

In addition, we adopt several modifications in this section.  

First, carriers that have Arrival Authorizations available for sale or
lease may submit a base reserve price for Arrival Authorizations to the
FAA for posting on the website along with other relevant information. 
Including a base reserve price provides a floor for the bids and
facilitates the process.    

Second, we have deleted the requirement that a carrier must notify the
FAA 30 days before the planned sale date.  Upon review, we concluded
that the 30 day requirement could be unduly restrictive, particularly
for carriers that may want to lease an Arrival Authorization and, for
scheduling reasons, may not be in a position to provide 30 days notice. 


Third, as a usage requirement is also adopted in this rule, carriers may
need to shorten the duration of the bidding/selection process. 
Therefore, we have included two modifications: (1) the FAA will post
notice of available Arrival Authorizations within two business days; and
(2) the bidding period will be open for 10 business days.  The NPRM did
not specify the timeframe for bids to be submitted.  We chose 10
business days, which should allow carriers sufficient time to assimilate
data and make decisions.  The 10 business-day period is not excessive
and is intended to expedite the transaction process.  

Fourth and as discussed earlier, carriers may advise the FAA of their
interest in obtaining Arrival Authorizations in the market and request
that the agency post the information that a carrier is seeking Arrival
Authorizations  

The FAA will post listings of Arrival Authorizations for sale or lease
through the blind market at www.Demand-Management-Airports.faa.gov. 
Users may register with the website to receive immediate notification of
information posted on this site.  

Pledging of Arrival Authorizations

United, Delta, US Airways, and JP Morgan Chase & Co. (JP Morgan) all
commented unfavourably on the proposal’s prohibition on the pledging
of Authorizations as collateral.   They argued that preventing the
collateralization of these “assets” will not reduce barriers to
entry but rather contribute to the barriers.  They contended that
carriers may need access to this financing option in order to purchase
Authorizations under the rule and that this prohibition eliminates this
option for affected carriers.  

We have withdrawn the prohibition on pledging Arrival Authorizations as
collateral in this rule.  We do not seek to eliminate options available
to carriers to secure needed financing.  Arrival Authorizations are an
operating privilege and we recognize that the buying, selling and
leasing of these privileges may be advantageous to facilitate the
carriers’ efficient use of these privileges.  

As proposed, the final rule permits Arrival Authorizations to be
assigned only to eligible air carriers and not other entities.  Since
collateralization arrangements are strictly a matter of contract between
the affected carriers and other parties, we will not record changes to
the holder/operator status to reflect any pledging of these Arrival
Authorizations.  Carriers are free to structure the pledging of these
Authorizations, subject to other requirements of this rule.  

International arrivals

	In the NPRM, we proposed the following two options for assigning
Arrival Authorizations to foreign air carriers:

Administrative Option---The FAA would accommodate requests by foreign
air carriers for new or additional access administratively.  If an
Arrival Authorization was not available within the time period requested
by a foreign carrier, an Arrival Authorization would be withdrawn from a
domestic carrier to accommodate that request.  

Elective Option---Foreign air carriers seeking additional Arrival
Authorizations above the initial assignment of Arrival Authorizations
could elect: (1) to obtain Arrival Authorizations as described above
under the Administrative Option; or (2) or obtain Arrival Authorizations
in the same manner prescribed to U.S. and Canadian air carriers, which
is through the blind market and the lottery mechanisms.  

Operations by Canadian air carriers were excluded from these proposed
options because Annex II of the 1995 bilateral aviation agreement
between the U.S. and Canadian governments provides that Canadian air
carriers be treated in the same manner as U.S. air carriers under
airport access rules for domestic operations at O’Hare.  Therefore,
arrivals at O’Hare from Canada by U.S. and Canadian air carriers are
assigned under the same procedures that apply to domestic and
transborder flights.

	The proposal treated foreign air carriers differently than U.S. and
Canadian air carriers for several reasons.  First, air service
agreements between U.S. and foreign governments obligate both parties to
ensure fair and equal opportunity to compete in a market.  Second,
foreign air carrier operations have remained relatively constant over
the last several years while at the same time, domestic operations have
increased significantly.  Third, U.S. air carriers have the ability to
make international service decisions based on their allocated base of
total Arrival Authorizations if additional Arrival Authorizations were
not available for assignment by the FAA.  This is not an option for
foreign air carriers that have a limited presence at O’Hare.  For most
international operations, Chicago’s Midway Airport is not a practical
alternative airport for serving Chicago since Midway’s runways could
not accommodate the wide body aircraft serving many of the international
points from O’Hare.  

	Other elements of the NPRM applicable to Arrival Authorizations
assigned to foreign air carriers, irrespective of the option, were: (1)
initial Arrival Authorizations would be assigned to foreign air carriers
based on historical seasonal schedules; (2) Arrival Authorizations could
not be bought, sold, or leased; (3) Arrival Authorizations would not be
subject to a minimum usage requirement.  However, if they are not used
for more than a 15-day period, under the proposal they must be returned
to the FAA.  

	The Department faced this issue previously under the HDR.  At O’Hare,
foreign and domestic carriers were initially treated equally in that
slots were withdrawn to accommodate international requests from both
foreign and domestic carriers if not otherwise available.  We
subsequently amended the HDR to limit withdrawals for international
operations for the benefit of carriers with 100 or more slots at
O’Hare.  Congress later capped the total number of domestic slots that
could be withdrawn and reallocated for international service. 
Concurrently, Congress also authorized the Secretary of Transportation
to grant exemptions from the HDR for foreign air carriers serving
O’Hare.  The Secretary exercised this authority as needed and until
May 2000, when the slot requirements for international flights were
eliminated at O’Hare.  

	Several commenters supported preferences or exemptions from the
established cap for international arrivals without distinguishing
between operations conducted by U.S. carriers and foreign air carriers.

KLM Royal Dutch Airlines, as one of two foreign carriers to comment, did
not favor any particular allocation option for foreign carriers.  KLM
did, however, support the August 2004 Order and suggested that the FAA
follow IATA Worldwide Scheduling Guidelines, which most countries follow
in allocating slots at constrained airports throughout the world.  IATA
expressed concern that the proposals could discriminate between U.S. and
foreign air carriers.  

	The other foreign air carrier to comment was Air France, who strongly
supported an administrative assignment for new Arrival Authorizations
and acknowledged that this could be accomplished under either Option 1
or 2.  Air France currently operates one daily passenger flight between
O’Hare and Paris, but has offered two such flights in the past.  Air
France stated that initiating international service requires significant
investment and that foreign carriers may hesitate to make such an
investment if they are unsure they can obtain an Arrival Authorization
at O’Hare under the market or lottery systems.  Air France argued that
it is necessary to guarantee foreign carriers access to an Arrival
Authorization at O’Hare should they decide to expand service there. 
Air France did not oppose the proposed prohibition on buying/selling, or
leasing assigned Arrival Authorizations; nor did it oppose the return of
Arrival Authorizations to the FAA if not used for more than 15
consecutive days.  

	American and United agreed that the allocation provisions should not
discriminate against foreign carriers, but argued that the proposed
administrative option unduly rewards foreign carriers at the expense of
U.S. carriers.  Furthermore, they complained that they would be
restricted from adding new international services unless they reduced
domestic flights.  They submitted that foreign air carriers providing
similar international services would continue to receive preferred
treatment, which places U.S. carriers at a competitive disadvantage.  

	United also pointed out that Congress had previously prohibited the
Secretary of Transportation from withdrawing slots from domestic
carriers to accommodate international operations while O’Hare was
limited under the HDR.  (See 49 U.S.C. § 41714(b)(2)).  United disputed
our reliance on international air services agreements as a rationale for
the proposed Administrative Option, observing that other countries do
not interpret the bilateral agreements as requiring them to make slots
available for U.S. air carriers.  United commented that this proposal is
not in the national interest because it weakens an already unfavorable
trade balance by shifting carriage of international passengers (and
their revenue) from U.S. carriers to foreign corporations.  United
prefers exempting all international arrivals, which would not arguably
violate any international air service agreement.  Lastly, United noted
that U.S. carriers have been denied access to foreign airports when
capacity is limited.   

	The City also argued for exempting all international flights because
international operations are a small portion of the total flights at
O’Hare and that the gate, immigration and terminal facilities at
Terminal 5 would provide a natural limit to these flights.    

	We have reviewed the number of international arrivals conducted by
foreign air carriers and domestic carriers during the peak hours. 
Together, these arrivals account for six percent of total arrivals at
O’Hare.  This six percent is almost equally divided between foreign
air carrier arrivals and U.S. air carriers.  We note that while some
foreign air carriers have periodically dropped service, other foreign
air carriers have added service, such that the overall level has
remained constant for several scheduling seasons.  International
operations by U.S. air carriers have also been relatively constant over
the past several years.  

We do not agree with United’s assertion that our reliance on
international air service agreements was erroneous and misguided.  We
are bound by our agreements with foreign governments to ensure that the
flag carriers of each party have a fair and equal opportunity to compete
in the market.  In particular, as the Department seeks to expand Open
Skies agreements, we do not want to adopt limits that might preclude
either domestic or foreign air carriers from taking advantage of new
opportunities.  At the same time, we are mindful that U.S. carriers are
also constrained by facilities or slot constraints at some foreign
airports and do not always get to operate their preferred schedules.  We
prefer to address those issues on a case-by-case basis rather than set
up a regulatory framework that makes U.S.-constrained airports more
difficult to access.  

	In view of the comments, we are adopting a revised approach that treats
all international arrivals the same, regardless of whether operated by a
foreign or domestic air carrier, a position which is also consistent
with international air service agreements.  An Arrival Authorization
will be required for any international arrival at O’Hare and will be
assigned at the requested time or in the adjacent hour if one is not
otherwise available.  Under the rule we may also assign a time for new
or rescheduled international arrivals within an hour of the requested
time if needed to address operational efficiencies and facilitate
schedule de-peaking.   

As this approach does not involve any withdrawal of Arrival
Authorizations from domestic carriers to accommodate new international
arrivals, it may result in operations exceeding the adopted hourly
limits.  In adopting this approach, we weighed the public interest in
maintaining our international obligations under various air service
agreements with our congestion and delay reduction goals of this rule. 
Given the relative stability in the number of international arrivals
since 2002 and the limited duration of this rule, we do not expect a
dramatic increase in requests for Arrival Authorizations.  As this rule
is an interim measure, it is expected that new airport capacity will
address this issue for the longer-term.  We acknowledge that this
approach may have some impact on the congestion and delay reduction
goals of this rule.  However, we believe that the public interest
supports the offset of our delay reduction goals to accommodate our
international obligations.  We will consider the effect of any
additional international arrivals as we conduct the semi-annual
operational performance and capacity review.  

	As a result of this new approach in addressing international arrivals,
we must modify how we proposed to initially assign Arrival
Authorizations for domestic use and for international use initially
under this rule.  In calculating the proposed cap of 88 arrivals per
hour, we included all international operations scheduled for August 2004
during the O’Hare schedule reduction meeting.  Foreign air carriers,
except Canadian air carriers, were not affected by the FAA’s Order,
and subsequently have added new flights and adjusted schedule times that
will be reflected in the initial assignment under this rule. 
International operations by U.S. carriers were included in the August
2004 Order as part of the overall carrier limits, and each carrier could
choose the international market, domestic market, or transborder
Canadian market to serve within those limits. Consequently, we will
review each U.S. air carrier’s operations under the August 2004 Order
and assign Arrival Authorizations as either domestic or international,
as appropriate.  New international arrivals by U.S. carriers after the
effective date of this rule will be eligible for assignment above the
operational limits.  The combined total of each U.S. air carriers’
(initially assigned) Arrival Authorizations (domestic and international)
will not exceed the total authorized for that carrier under the Order. 
We will make a similar determination to assign Arrival Authorizations
for foreign air carrier operations using published schedules or other
information available to the FAA for the base for the Summer 2006 and
Winter 2006 scheduling seasons.  

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

As proposed, we adopt the provision that the Secretary of Transportation
may withhold the assignment of an Arrival Authorization to any foreign
air carrier of a country that does not provide equivalent rights of
access to its airports for U.S. air carriers.

	As proposed, Arrival Authorizations assigned for international use may
not be bought, sold, leased or otherwise transferred.  Carriers may,
however, trade these Arrival Authorizations assigned for international
use on a one-for-one basis.  We clarify that domestic Arrival
Authorizations may be traded within the carrier’s base subject to FAA
approval.  Arrival Authorizations assigned for international arrivals
must be returned if not used for a 15-day period. 

Lastly, we revise the definition of the scheduling seasons to recognize
the change in U.S. daylight saving time start and end dates beginning in
March 2007 (Energy Policy Act of 2005, P.L. 109-58).

 Minimum usage requirements

In the NPRM, we sought comment on whether a minimum usage requirement
would be necessary, and if so, whether an 80 percent or 90 percent usage
requirement over a bimonthly reporting period would be appropriate.  As
an alternative to the above usage requirement, we proposed a periodic
withdrawal of the least used Arrival Authorizations for redistribution. 

The majority of commenters objected to having no usage requirement.  The
City argued that the landing rights represent scarce and valuable assets
under this rule and that it is not prudent to omit a usage requirement. 
Delta commented that this option presented the risk that carriers that
have more Arrival Authorizations than they can profitably use will
simply hoard them and waste valuable capacity. 

DOJ agreed that a usage requirement could prevent Arrival Authorizations
from going totally unused, but argued that a usage requirement was
unlikely to prevent the hoarding of Arrival Authorizations to deprive
competitors of these assets.  DOJ also maintained that a usage
requirement does nothing to increase the liquidity in the market and
allow entry by more efficient carriers.

 Most commenters responded that a usage requirement in the 80-90 percent
range is appropriate.  US Airways, American, Delta and Independence Air
supported the 80 percent requirement.  The City, RAA and America West
supported a 90 percent standard.   United supported a usage requirement
of 85 percent. 

American contended that the rule should conform to international minimum
usage standards and seasonality.  American supported an 80 percent usage
standard, which is used by IATA and the European Union (EU) slot
regulations on a seasonal basis.  American also argued that since the
FAA conceded in the NPRM that most slots (under the HDR) were operated
90 percent of the time, it is nonsensical to use a new standard over one
that is already universally known and accepted.  In addition, the usage
period should be consistent with the IATA designated summer (seven
months) and winter (five months) scheduling seasons.  American stated
that domestic service patterns now follow the seasonality patterns for
international operations and that failure to recognize this is not
efficient or equitable.  Consequently, under American’s suggestion, it
would be logical to lose an Arrival Authorization for a season, if a
carrier is not using it for that period, rather than force the carrier
to inefficiently schedule a flight just to avoid losing the Arrival
Authorization.  

While American’s suggestion to adopt a usage period similar to the
IATA bi-annual scheduling season may be of some benefit, no other
carrier has indicated that a two-month reporting period was unworkable. 
We also believe that the adoption of leasing provisions will assist
carriers that experience some seasonal fluctuations in that they may
choose to lease the Arrival Authorizations for the relevant period.  

We conclude that a minimum usage requirement is necessary, as these
Arrival Authorizations will represent a scarce resource and our desire
is to ensure the efficient utilization of these privileges for the
duration of this rule.  Our experience at O’Hare under the August 2004
Order is that some carriers did not utilize their authorities and this
resulted in unused capacity.  Moreover, adoption of a minimum usage
standard complements the ability to lease Arrival Authorizations, which
is adopted in this rule and previously discussed. 

There is not a marked difference in projected slot utilization at a 90
percent versus an 80 percent usage requirement over a two-month
reporting period.  We reviewed scenarios of an Arrival Authorization
held Monday through Friday over a two-month reporting cycle and found
that the difference in usage from 80 to 90 percent resulted in
approximately 3-4 additional operations over the reporting period. 
Carriers, both domestic and foreign, have a lot of experience with an 80
percent usage requirement, as provided under the HDR and
internationally.  As American argued, most carriers exceed the 80
percent usage standard under the HDR, and we do not see that increasing
the standard will result in a more efficient utilization record that
warrants deviation from the present industry standard.  Consequently,
this rule adopts an 80 percent minimum usage requirement over a
two-month reporting period.   

There was no support in the comments for the alternative of periodically
withdrawing the least utilized Arrival Authorizations.   Comments viewed
this option as disruptive to their businesses.  Also, the City pointed
out that even with the one percent withdrawal, there may still be
“inefficiently” utilized Arrival Authorizations that are not
withdrawn because they are not in the bottom one percent.  

	In the NPRM, we proposed that those Arrival Authorizations assigned to
new entrants and limited incumbents via lottery would not be subject to
the usage requirement for the first 90 days after assignment.  For
Arrival Authorizations assigned to incumbent carriers via lottery, the
usage requirement would be waived only for the first 60 days.  United
argued all carriers experience the same issues in starting new service,
including the publishing, promotion and selling of that service and that
incumbents should not be afforded less time to deal with similar issues.
 Furthermore, United argued that this waiver period should apply to
Arrival Authorizations obtained via purchase, not just via lottery.   

	We agree with United that different waiver periods are not warranted
and that  the 90-day waiver period should apply to Arrival
Authorizations received by lottery and by purchase.  We have determined
not to extend this waiver to Arrival Authorizations involved in a lease
because carriers involved in the lease transaction can determine the
transaction effective date to include this issue.  	

Arrival Authorizations assigned for international use are not subject to
the usage requirement. Arrival Authorizations assigned for international
use are allocated seasonally and must be returned to the FAA if not used
for more than a two-week period.  We think that this approach adequately
addresses usage for these operations. 

In addition, we proposed two methods for reassigning Arrival
Authorizations that do not meet a usage minimum, if adopted.  Under the
first method, the agency would conduct a lottery consisting of two
rounds.  In the first round, only new entrants and limited incumbents
would be permitted to participate.  In the second round, any remaining
Arrival Authorizations would be assigned by lottery to incumbent
carriers at the airport.   

Under the second method, carriers losing Arrival Authorizations for
failing to meet the usage requirement would be required to sell them
using the blind market process.  New entrants and limited incumbents
would have preference in purchasing the subject Arrival Authorizations
and the proceeds of a sale would go to the air carrier that lost the
Arrival Authorizations.  Any unsold Arrival Authorizations would be
returned to the carrier that lost them. 

Both Delta and United preferred the option that would permit carriers to
be compensated for the loss of the Arrival Authorization, particularly
if the Arrival Authorization was purchased on the market, rather than
have the Arrival Authorizations withdrawn by the FAA.  Furthermore,
Delta contended that the mandatory sale will ensure that the Arrival
Authorizations go to the highest bidder—a lottery makes no such
assurance.  

	We have reviewed this proposal in light of the other amendments adopted
in this rule and conclude that neither option is necessary.  Since this
rule adopts a provision that permits leasing, carriers have an option
that will result in compensation, and that can address market
fluctuations, seasonality, and simple usage issues.   Carriers are far
more likely to lease Arrival Authorizations, rather than entertain a
forced sale and loss of the them.  Therefore, this rule provides that
Arrival Authorizations not meeting the usage requirement will be
withdrawn by the FAA for reassignment.  

America West also commented that carriers may circumvent a usage
requirement by using Arrival Authorizations originally allocated for
large aircraft operations with small aircraft.  Consequently, America
West requested that the rule provide that an Arrival Authorization will
be withdrawn if its use is converted from large aircraft to small
aircraft.  

ACAA supported a 90 percent usage requirement for air carriers with more
than 50 Arrival Authorizations because large carriers have too many
options to protect Arrival Authorizations if the usage requirement is
lower.  

We do not support America West’s suggestion that Arrival
Authorizations for larger aircraft should receive different treatment
under our usage requirements..  This rule does not divide Arrival
Authorizations into separate categories based on aircraft size. 
Furthermore, the initial assignment and subsequent reassignment of
Arrival Authorizations does not contemplate aircraft size for the
particular operation.   Unlike the HDR, carriers have complete
discretion under this rule to operate the aircraft they see fit for the
service using the Arrival Authorizations.  Regulating the aircraft size
to use these Arrival Authorizations is unnecessary at this airport to
meet the stated objectives of this rulemaking.

	Likewise, we have not adopted ACAA’s suggestion that the 90 percent
usage requirement apply to air carriers with more than 50 Arrival
Authorizations.   The purpose of the usage requirement is to ensure that
these resources are being used efficiently, consistently and
universally.   The rule offers some opportunity to new entrants and
limited incumbents to gain new or additional access to O’Hare. 
ACAA’s proposal could undermine the efficiency goal of the universal
usage requirement, and would not necessarily result in additional
Authorizations being available for new entrant and limited incumbents. 

The City stated that given their fluidity, scheduled cargo operations,
in comparison to schedule passenger operations, merit a lower usage
minimum.   We disagree.  As discussed above, if cargo operators find
that their scheduled operation cannot use the frequencies for which they
hold the Arrival Authorization, the carriers are encouraged to make the
frequencies available to other carriers via leasing.  We do not see a
need to establish a separate usage requirement for these flights. 

In the NPRM, we proposed to waive the usage requirement for a specific
carrier in the event of a strike or labor dispute.  Although we did not
receive any comments on this provision, upon reconsideration, we have
decided to withdraw this part of the proposal as the term, “labor
dispute” was so broad that it could apply to the filing of a
grievance, a stop work action or other events that may or may not result
in a strike.  By including the provision that permits waiver in the
event of a highly unusual and unpredictable condition that exceeds 5
consecutive days, the rule provides carriers with latitude and
flexibility to deal with unpredictable conditions, while maintaining the
integrity and purpose of the usage requirement.  

Finally, we will waive the usage requirement for all carriers through
December 31, 2006, which covers the first two months reporting period
under the rule.  The August 2004 Order does not contain any usage
requirement and some carriers are not fully utilizing their permitted
number of arrivals.  Carriers typically complete their schedule planning
process several months in advance of actual operations and most carriers
have already finalized their November /December 2006 schedules.  While
it is possible that some flights might be added to meet the usage rules,
other carriers may decide to use the sale/lease options under the rule. 
We conclude that a limited waiver of the usage requirement is warranted
to provide for minimal disruption of carrier schedules during the
transition from the August 2004 Order and the rule adopted here. 
Therefore, the first report detailing usage of the Arrival
Authorizations will be for the January-February 2007 period.  

Sunset date

	We proposed to terminate this rule on April 6, 2008.  This date was
selected for several reasons: (1) the City had proposed an O’Hare
Modernization Program (OMP) that would increase the airport capacity and
reduce the level of delays at the airport and the first phase would come
on-line by the beginning of 2008 (the proposal was subsequently approved
in the FAA’s Record of Decision for the OMP dated September 30, 2005);
(2) improvements in the Instrument Landing System for runways 27L and
27R are expected to improve the performance of the airport in adverse
weather conditions; and (3) the proposed date in 2008 would allow
regulation to address the present conditions at the airport until the
benefits of these capacity enhancements are realized at the airport. 
Alternatively, if the OMP does not move forward in a timely manner, the
proposed date would allow the FAA time to develop an alternative to this
rulemaking.  

	Some carriers questioned whether the rule would really be temporary. 
The City opposed the sunset date and argued that the date is too long
for “an invasive rule to constrain operations at O’Hare.”  The
City preferred termination of the rule after one year of the rule’s
effective date and argued that the sunset provision should include a
contingency on changes in operating conditions at O’Hare, i.e., if
operations significantly decrease, the rule would sunset.  

	As stated in the Notice, the agency’s preferred approach to reducing
delay and congestion is to enhance airport infrastructure, so that
capacity meets demand.  See, 49 U.S.C. 47101(a)(9).  If the desired
capacity does not materialize within the timeframe of this rule, we may
consider other congestion management techniques to replace this rule. 
We are also open to revisiting this date if changes to the airline
industry obviate the need for a congestion management rule at O’Hare. 
  

	We cannot support a one-year rule at this point, as there will not be
any measurable increase in capacity in such a short period.  We find it
appropriate to extend the termination date of this rule through October
31, 2008, to reflect the current schedule for commissioning of the first
runway (Runway 9L/27R).  This date coordinates the rule with end of the
summer scheduling season and U.S. daylight savings time, as amended by
Public Law 109-58.   Therefore, we adopt October 31, 2008 at 9:00 p.m.,
as the sunset date for this rule.  

Paperwork Reduction Act 

	As required by the Paperwork Reduction Act of 1995
(44 U.S.C. 3507(d)), the FAA submitted a copy of the new information
collection requirements(s) in this final rule to the Office of
Management and Budget (OMB) for its review.  OMB is still reviewing the
submission and will provide an OMB Control Number when the review is
complete.  

	An agency may not collect or sponsor the collection of information, nor
may it impose an information collection requirement unless it displays a
currently valid OMB control number.

International Compatibility 

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

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

Changes to Federal regulations must undergo several economic analyses. 
First, Executive Order 12866 directs that each Federal agency shall
propose or adopt a regulation only upon a reasoned determination that
the benefits of the intended regulation justify its costs.  Second, the
Regulatory Flexibility Act of 1980 (5 U.S.C. 5601, et seq) requires
agencies to analyze the economic im    pact of regulatory changes on
small entities.  Third, the Trade Agreements Act (19 U.S.C. 4 §§
2531-2533) prohibits agencies from setting standards that create
unnecessary obstacles to the foreign commerce of the United States.  In
developing U.S. standards, this Trade Act requires agencies to consider
international standards and, where appropriate, to be the basis of U.S.
standards.  Fourth, the Unfunded Mandate Reform Act of 1995 (Public Law
104-4) requires agencies to prepare a written assessment of the costs,
benefits, and other effects of proposed or final rules that include a
Federal mandate likely to result in the expenditure by State, local, or
tribal governments, in the aggregate, or by the private sector, of $100
million or more annually (adjusted for inflation).  

In conducting these analyses, FAA has determined this final rule (1) has
benefits that justify its costs; is not an economically significant
regulatory action as defined by Executive Order 12866; and is
"significant" as defined in DOT's Regulatory Policies and Procedures;
(2) will not have a significant economic impact on a substantial number
of small entities; (3) will not adversely affect international trade;
and (4) will not impose an unfunded mandate on State, local, or tribal
governments, or on the private sector.  These analyses, set forth in
this document, are summarized below.

TOTAL COSTS AND BENEFITS OF THIS RULEMAKING

FAA estimates that this final rule will result in a 32% reduction in
delay at O’Hare, generating present value benefits of $475.6 million
relative to November 2003 delays.

The estimated present value cost of this final rule is less than $1.0
million.  

Who Is Potentially Affected By This Rulemaking

Operators of scheduled, domestic and Canadian flights at O’Hare

Domestic and foreign air carriers 

All communities, including small communities with air service to
O’Hare

Passengers of scheduled, domestic and Canadian flights to O’Hare

Chicago Department of Aviation 

FAA Air Traffic Control

Key Assumptions 

Baseline Flight Operations -Official Airline Guide (OAG) Schedule
November 20, 2003 of 1,464 daily arrival flights (OAG plus 96
unscheduled).

Daily Flight Completion Factor: 97%/Daily Flight Cancellation Factor: 
3%

No lost revenue due to cancelled flights -- All Passengers are rebooked
or rerouted to their destination.

Delay improvements are 9.6 minutes per flight and equivalent to a 32%
improvement in delay. We derive delay improvements from MITRE’s
Queuing Delay Model, which measures queuing delays against the OAG
flight schedule.

For this evaluation, the effective date is 10/29/06 and the sunset date
is 10/31/08. We adjust annual estimates to reflect the 1.5 days per week
when the limits are not in effect (all-day Saturday and until noon on
Sunday).

Other Important Assumptions

Discount Rate - 7%

Assumes 2005 Current Year Dollars

Final rule will sunset October 31, 2008

Ground and Airborne average cost per hour -- $1,935 

Passenger Value of Time -- $28.60 per hour 

Alternatives We Have Considered

Alternative #1-This alternative would have let the August 18, 2004,
order expire on April 30, 2005.  Based on history, FAA expects that
operators would most likely continue to expand operations, further
increasing airport delays.

Alternative #2- The FAA is continuing to explore the feasibility of a
market-based solution such as an auction or congestion pricing. 

Alternative #3-The FAA implements this final rule providing an interim
solution while capacity enhancement measures and market-based mechanisms
are reviewed.  

BENEFITS OF THIS RULEMAKING

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

Table 1 Total Present Value Benefits of Final Rule

	Airline Delay Cost Savings	Passenger Delay Cost Savings	Total Benefits

2006	 $19,094,170 	$ 21,212,339 	$ 40,306,510 

2007	$ 111,337,400 	$ 124,436,227 	$ 235,773,627 

2008	 $82,300,269	$ 117,219,790 	$ 199,520,059 

TOTAL	$ 212,731,839 	 $262,868,357 	$ 475,600,196



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

Table 2 Airline Delay Cost Saving

	Avg Total Delay (Minutes) per day	 Avg Total Delay (Hours) per Day 	
Avg Variable Cost per Hour 	Prorated Annual Airline Delay Cost  Savings	
Prorated Present Value of Airline Delay Cost  Saving 



2006	13,772	                                                            
         230 	                          $1,935 	                        
       $20,430,762 	                                                    
     $19,094,170 



2007	13,772	                                                            
         230 	                          $1,935 	                        
    $127,470,189 	                                                      
 $111,337,400 



2008	13,772	                                                            
         230 	                          $1,935 	                        
    $100,821,369 	                                                      
   $82,300,269 



Total



                             $248,722,320 	                             
                          $212,731,839 



Table 3 Passenger Delay Cost Savings

	Total Daily Arrivals	Average 

AC Seats	Average AC Load Factor	Passengers Per Flight	Passengers Per Day
Avg Delay Arrival	Total Delay Minutes	Total Delay Hours	Annual Daily
Hours (prorated days rule is in effect)	Pax Value of Time	Daily Pax
Delay Costs 	Prorated Annual  Pax Passenger Delay Reduction	Prorated  PV
of Pax Delay Reduction



2006	1,420	104.3	0.728	75	107,827	9.6	1,035,142	17,252	3,864,528	$28.60 
$493,417 	$22,697,203	$21,212,339

2007	1,420	104.5	0.731	76	108,479	9.6	1,041,400	17,357	4,981,365	$28.60 
$496,401 	$142,467,037	$124,436,227

2008	1,420	104.9	0.734	76	109,341	9.6	1,049,677	17,495	1,399,569	$28.60 
$500,346 	$143,599,283	$117,219,790













$308,763,523	$262,868,357



COSTS OF THIS RULEMAKING

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

Table 4 Present Values of Total Annual Costs 

	FAA E-Bid Develop. Costs	E-Bid System Operating Costs	FAA E-Bid Admin.
Costs	Other Admin. Costs	Reporting Costs	Total Costs

2006	$147,196 	$23,364 	$25,037 	$125,183 	         $29,684 	$350,464 

2007	$0 	$43,672 	$46,797 	$233,987 	         $15,734 	$340,189 

2008	$0 	$20,407 	$21,868 	$109,339 	         $12,254 	$163,868 

Total	$147,196 	$87,444	$93,702	$468,509 	          $57,672 	$854,522 



 REGULATORY FLEXIBILITY DETERMINATION

The Regulatory Flexibility Act of 1980 (RFA) establishes "as a principle
of regulatory issuance that agencies shall endeavor, consistent with the
objective of the rule and of applicable statutes, to fit regulatory and
informational requirements to the scale of the business, organizations,
and governmental jurisdictions subject to regulation”.  To achieve
that principle, the RFA requires agencies to solicit and consider
flexible regulatory proposals and to explain the rationale for their
actions.  The RFA covers a wide-range of small entities, including small
businesses, not-for-profit organizations, and small governmental
jurisdictions.    

Agencies must perform a review to determine whether a proposed or final
rule will have a significant economic impact on a substantial number of
small entities.  If the agency determines that it will, the agency must
prepare a regulatory flexibility analysis as described in the Act.

However, if an agency determines that a proposed or final rule is not
expected to have a significant economic impact on a substantial number
of small entities, section 605(b) of the 1980 RFA provides that the head
of the agency may so certify and a regulatory flexibility analysis is
not required.  The certification must include a statement providing the
factual basis for this determination, and the reasoning should be clear.
 The basis for such FAA determination follows.  

The final rule affects all scheduled operators at O’Hare, more than
just a few of which are small entities (where “small entities” are
firms with 1,500 or fewer employees).  The arrivals of all carriers
currently providing service at O’Hare will be accommodated, thereby
minimizing the impact on their schedules.  For their given schedules,
this final rule will lower their fuel burn costs substantially by
reducing the number and magnitude of delays below those experienced
prior to the August 2004 Order.  

If Arrival Authorizations are returned or withdrawn for nonuse, new
entrants and limited incumbents (many of which are likely to be small
entities) receive a preference in the reassignment of those authorities.
 If additional (new) capacity becomes available during the duration of
this final rule, new entrants, limited incumbents and incumbents have
equal opportunity to receive additional Arrival Authorizations through a
lottery.   Carriers with a limited number of operations at O’Hare are
also protected from withdrawal of Arrival Authorizations if the FAA
determines it is operationally necessary to reduce the number of flights
at the airport.  Therefore, this rule affords limited preference to
small entity operators for the assignment of available capacity and
again favors these small entity operators if airport operations are
reduced.  

In “grandfathering” the air carriers’ existing schedules, the
final rule enables airlines to continue operating all existing air
service to airports of communities with populations less than 50,000. 
Consequently, we do not expect this final rule to negatively impact
airports in small communities.  

Therefore, the FAA certifies that this final rule will not have a
significant economic impact on a substantial number of small entities.

INTERNATIONAL TRADE IMPACT ASSESSMENT

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

UNFUNDED MANDATES ASSESSMENT

The Unfunded Mandates Reform Act of 1995 (the Act) is intended, among
other things, to curb the practice of imposing unfunded Federal mandates
on State, local, and tribal governments.  Title II of the Act requires
each Federal agency to prepare a written statement assessing the effects
of any Federal mandate in a proposed or final agency rule that may
result in an expenditure of $100 million or more (adjusted annually for
inflation) in any one year by State, local, and tribal governments, in
the aggregate, or by the private sector; such a mandate is deemed to be
a "significant regulatory action.”  The FAA currently uses an
inflation-adjusted value of $128.1 million in lieu of $100 million.

This final rule does not contain such a mandate.  Therefore,
the-requirements of Title II of the Unfunded Mandate Reform Act of 1995
do not apply.

Executive Order 13132, Federalism

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

Environmental Analysis 

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

Regulations that Significantly Affect Energy Supply, Distribution, or
Use 

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

List of Subjects in 14 CFR Part 93

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

The Amendment

	In consideration of the foregoing, the Federal Aviation Administration
adds Subpart B to part 93 of Chapter II of Title 14, Code of Federal
Regulations, as follows: 

	1.  The authority citation for this amendment continues to read as
follows:

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

2.  Subpart B is added to read as follows:

SUBPART B – CONGESTION AND DELAY REDUCTION AT CHICAGO O’HARE
INTERNATIONAL AIRPORT

SEC.

Applicability

Definitions

Arrival Authorizations

Reserved

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

Reversion and Withdrawal of Arrival Authorizations

Sale and Lease of Arrival Authorizations

One-for-one trade of Arrival Authorizations

International Arrival Authorizations

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

Minimum usage requirement

Administrative Provisions

Reserved

SUBPART B – CONGESTION AND DELAY REDUCTION AT CHICAGO O’HARE
INTERNATIONAL AIRPORT

§ 93.21  Applicability.

(a)  This subpart prescribes the air traffic rules for the arrival of
aircraft used for scheduled service, other than helicopters, at
Chicago’s O’Hare International Airport (O’Hare).  

(b)  This subpart also prescribes procedures for the assignment,
transfer, sale, lease, and withdrawal of Arrival Authorizations issued
by the FAA for scheduled operations by U.S. and foreign air carriers at
O’Hare.  

(c)  The provisions of this subpart apply to O’Hare during the hours
of 7:00 a.m. through 8:59 p.m. Central Time, Monday through Friday, and
12:00 p.m. through 8:59 p.m. Central Time on Sunday.  No person shall
operate any scheduled arrival into O’Hare during such hours without
first obtaining an Arrival Authorization in accordance with this
subpart.  

(d)  Carriers that have Common Ownership shall be considered to be a
single U.S. air carrier or foreign air carrier for purposes of this
rule.

(e)  The provisions of this subpart are applicable beginning October 29,
2006, and ending at 9:00 pm on October 31, 2008.  

§ 93.22  Definitions.

	For the purposes of this subpart, the following definitions apply:  

Arrival Authorization is the operational authority assigned by the FAA
to a U.S. or foreign air carrier to conduct one scheduled arrival
operation on a specific day of the week during a specific 30-minute
period at O’Hare. 

Carrier is a U.S. air carrier, Canadian air carrier or foreign air
carrier with authority to conduct scheduled service at O’Hare under
Parts 121, 129, 135 of the Chapter and the appropriate economic
authority for scheduled service under Title 49 of the United States
Code.

Common Ownership with respect to two or more carriers means having in
common at least 50 percent beneficial ownership or control by the same
entity or entities.  

	Incumbent is any U.S. or Canadian air carrier that is not a New Entrant
or Limited Incumbent.  

International Arrival Authorization is the operational authority
assigned by the FAA to a Carrier to conduct one scheduled arrival
operation at O’Hare from a foreign point or a continuation of a flight
that began at a foreign point, except for arrivals at O’Hare from
Canada by U.S. and Canadian air carriers.

Limited Incumbent is any U.S. or Canadian air carrier that holds or
operates, on its own behalf, 8 or fewer Arrival Authorizations provided
that it has not sold or otherwise transferred Arrival Authorizations,
other than one-for-one transfers permitted in this subpart.  Any Limited
Incumbent that sells or otherwise transfers an Arrival Authorization
shall thereafter be treated as an Incumbent for purposes of this rule.  

New Entrant is any U.S. or Canadian air carrier that does not hold or
operate, and has never held or operated any Arrival Authorization at
O’Hare, on its own behalf.  

Preferred Lottery is a lottery conducted by the FAA to assign Arrival
Authorizations, with initial preference for New Entrants and Limited
Incumbents.

Scheduled Arrival is the arrival segment of any operation regularly
conducted by a carrier between O’Hare and another point regularly
served by that carrier.  

Summer Scheduling Season is the period of time from the first Sunday in
April until the last Sunday in October.  Beginning March 11, 2007, the
summer scheduling season is the period of time from the second Sunday in
March until the first Sunday in November.  

Winter Scheduling Season is the period of time from the last Sunday in
October until the first Sunday in April.  Beginning March 11, 2007, the
winter scheduling season is the first Sunday in November until the
second Sunday in March.  

§ 93.23  Arrival Authorizations 

(a) Except as otherwise established by the FAA under paragraph (d) of
this section and § 93.29 of this subpart, the number of Arrival
Authorizations shall be limited to: 

	(1)  88 per hour between the hours of 7:00 a.m. and 7:59 p.m. Monday
through Friday and 12:00 p.m. and 7:59 p.m. Sunday, 

(i) not to exceed 50 during each half-hour beginning at 7:00 a.m. and
ending at 7:59 p.m.

(ii) not to exceed 88 within any two consecutive 30-minute periods.

	(2) 98 between 8:00 p.m. and 8:59 p.m. Monday through Friday, and
Sunday, not to exceed 50 between 8:00 p.m. and 8:29 p.m. and 50 between
8:30 p.m and 8:59 p.m. 

(b) An Arrival Authorization is a temporary operating privilege subject
to FAA control.  Only Carriers may hold Arrival Authorizations.  Arrival
Authorizations may not be bought, sold, leased, or otherwise transferred
to another Carrier, except as provided in §§ 93.27 and 93.28 of this
subpart.

(c) Beginning six months from the effective date of this rule and on
each six-month anniversary thereafter, the FAA shall conduct a review of
existing capacity at O’Hare, to determine whether to increase the
number of Arrival Authorizations.  The FAA will consider the following
factors:

(1) The number of delays;

(2) The length of delays;

(3) Weather conditions;

(4) On-time arrivals and departures; 

(5) The number of actual arrival operations;

(6) Runway utilization and capacity plans; and 

(7) Other factors relating to the efficient management of the national
air space system. 

(d) Notwithstanding paragraph (a), the Administrator may increase the
number of Arrival Authorizations based on the review conducted in
paragraph (c) of this section.

§ 93.24  [Reserved]

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

(a) The FAA shall assign to each U.S. and Canadian air carrier,
conducting scheduled service at O’Hare, as of the effective date of
this rule, Arrival Authorizations for each scheduled arrival that it
published for either domestic or U.S./Canada transborder service for any
day during the 7-day period of November 1 through 7, 2004, as evidenced
by the FAA’s records, not to exceed the peak-day limits for each
carrier established under the August 18, 2004, “Order Limiting
Scheduled Operations at O’Hare International Airport.”  A
carrier’s total assignment under this paragraph will be reduced
accordingly by any international Arrival Authorizations assigned under
§ 93.29(a).

(b) If a U.S. or Canadian air carrier did not publish a scheduled
domestic or U.S./Canada transborder arrival during the period of time
referenced in paragraph (a) of this section, but was entitled to do so
under the August 18, 2004, “Order Limiting Scheduled Operations at
O’Hare International Airport,” and is conducting scheduled service
at O’Hare as of the effective date of this rule, a corresponding
Arrival Authorization shall be assigned for that arrival.

(c) Arrival Authorizations will be assigned to the U.S. or Canadian air
carrier that actually operated the flight regardless of any codeshare or
marketing arrangement unless such carrier did not market the flight
under its own code and the inventory of the flight was under the control
of another Carrier.  If the inventory was under the control of another
Carrier, the FAA shall assign the Arrival Authorization to that Carrier.
 Carriers may subsequently transfer Arrival Authorizations for use by
other Carriers under their marketing control in accordance with § 93.27
(m).

(d)  Any Arrival Authorization not assigned under paragraphs (a) or (b)
of this section will be assigned to carriers conducting scheduled
international service under § 93.29.  Any remaining Arrival
Authorizations will be assigned by preferred lottery under §93.30.

(e)  The FAA Vice President, System Operations Services, is the final
decision-maker for determinations under this section.

§ 93.26  Reversion and Withdrawal of Arrival Authorizations 

(a) A U.S. or Canadian air carrier’s Arrival Authorizations assigned
under §§ 93.25 or 93.27 revert automatically to the FAA 30 days after
the Carrier has ceased all operations at O’Hare for any reason other
than a strike.

(b) The FAA may withdraw or temporarily suspend Arrival Authorizations
at any time as a result of reduced airport capacity or to fulfill
operational needs.  Whenever Arrival Authorizations must be withdrawn,
they will be withdrawn in the required 30-minute Arrival Authorization
time periods in accordance with the priority list established under §
93.32 of this subpart.  

(c) Any Arrival Authorization that is withdrawn or temporarily suspended
under paragraph (b) will, if reassigned, be reassigned to the Carrier
from which it was taken, provided that the Carrier continues to conduct
scheduled operations at O’Hare. 

(d) The FAA shall not withdraw or temporarily suspend under paragraph
(b) any Arrival Authorizations if the result would be to reduce a
Carrier’s total number of Arrival Authorizations below eight.

(e) Except as otherwise provided in paragraph (a) of this section, the
FAA will notify the affected Carrier before withdrawing or temporarily
suspending any Arrival Authorization and specify the date by which
operations under the authorizations must cease.  The FAA will provide at
least 45 days’ notice unless otherwise required by operational needs. 


§ 93.27  Sale and Lease of Arrival Authorizations 

(a) No U.S. or Canadian air carriers may sell or lease its Arrival
Authorizations at O’Hare except in accordance with the procedures in
this section and in the manner prescribed by the FAA.  Carriers may not
buy, sell, lease or otherwise transfer control of Arrival Authorizations
assigned under § 93.29.   

(b) Only monetary consideration may be provided in any transaction
conducted under this section.  

(c) New Entrants and Limited Incumbents may not sell, lease, or
otherwise transfer control of any Arrival Authorizations assigned
through a Preferred Lottery within 12 months of such assignment, except
to another New Entrant or Limited Incumbent.  One-for-one trades to
other Carriers under § 93.28 are permitted.  

(d) A U.S. or Canadian air carrier seeking to sell or lease an Arrival
Authorization must provide the following information in writing to the
FAA:  

	(1)  Arrival Authorization number and time; 

	(2)  frequency;

	(3) planned effective date(s) of transfer; 

minimum reserve price, if established by the offering carrier;

other pertinent information, if applicable; and 

	(6) carrier’s authorized representative. 

(e) The FAA will post a notice of the available Arrival Authorization
and specific information concerning the proposed sale or lease
transaction on the FAA website at http://www.fly.faa.gov.   The website
will include information regarding registration to be advised of posted
transactions, and other relevant information pertaining to this section.
 The FAA will post the notice within two business days after receipt of
all required information from the U.S or Canadian air carrier offering
the Arrival Authorization for sale or lease.  The notice will provide
ten business days for bids to be received and will specify a bid closing
date and time.  Only U.S. and Canadian air carriers may bid on Arrival
Authorizations.  Information identifying the Carrier providing the
Arrival Authorization for sale or lease will not be posted or released
by the FAA until after the FAA has approved the transfer.  

(f) All bids must be sent to the FAA electronically, via the FAA
website, by the closing date and time, and no extensions of time will be
granted.  Late bids will not be considered.  All bids will be held
confidential, with each bidder certifying in a form acceptable to the
FAA that its bid has not been disclosed to any person not its agent.  

(g) The FAA will forward the highest qualifying bid to the selling or
leasing U.S. or Canadian air carrier without identifying the bidder. 
The selling or leasing Carrier will have up to three business days to
accept or reject the bid.  The selling or leasing Carrier must notify
the FAA via the website or in writing of its acceptance no later than
5:00 p.m. Eastern Time on the third business day.  If the selling or
leasing Carrier does not notify the FAA of its acceptance within the
allotted time, the transaction will terminate.  

(h) Upon acceptance, the FAA will notify the U. S. or Canadian air
carrier, who submitted the highest bid, and request that the
buyer/lessee and the seller/lessor submit to the FAA the information
(such as Arrival Authorization number, frequency and effective date(s)
of transfer) required to transfer the Arrival Authorization.   

(i) Each U.S. or Canadian air carrier must provide the FAA evidence of
its consent and each Carrier must certify that only monetary
consideration will be or has been exchanged.

(j) The FAA will approve requested transfers of Arrival Authorizations
that comply with these regulations.  The recipient U.S. or Canadian air
carrier of the transfer may not use the Arrival Authorization until the
conditions in paragraph (i) of this section have been met and the FAA
has approved the transfer.  

(k) The FAA will keep a record of all bids received and of each Arrival
Authorization transfer, including the identity of both Carriers and the
winning bid price, all of which will be made available to the public.

(l) U.S. or Canadian air carriers may request the FAA post notice that
it is seeking to lease or purchase an Arrival Authorization at O’Hare.
 The Carrier may submit information in writing or via the FAA’s
website.  This information may include the effective date, number or
timing of Arrival Authorizations sought, whether a Carrier is seeking to
purchase or lease, maximum price offered, or other pertinent
information.  The FAA may edit any submissions, or choose not to post
certain information, in order to ensure the integrity of the
solicitation process.  Information identifying the Carrier seeking an
Arrival Authorization for sale or lease will not be posted or released
by the FAA.  The FAA will post such requests within two business days of
receipt for a period of at least 30 days.  Any resulting offers to sell
or lease Arrival Authorizations shall be conducted in accordance with
this subsection.  

(m) A U.S. or Canadian air carrier may transfer an Arrival Authorization
to another U.S. or Canadian air carrier that conducts operations at
O’Hare solely under the transferring Carrier’s marketing control,
including the entire inventory of the flight.  Each Carrier must provide
written evidence of its consent to the transfer.  The FAA will approve
requested transfers that comply with these regulations.  The FAA Vice
President, System Operations Services, is the final decision-maker for
determinations under this subsection.  The recipient Carrier of the
transfer may not use the Arrival Authorization until the FAA has
provided written confirmation.  A record of each Arrival Authorization
will be kept on file by the FAA and made available to the public on
request.  

§ 93.28  One-for-one trade of Arrival Authorizations

(a) Except as otherwise provided in this subpart, any Carrier may
exchange an Arrival Authorization it has been assigned with another
Carrier on a one-for-one basis for the purpose of conducting that
operation in a different half-hour time period.  

(b) Written evidence of each Carrier’s consent to the transfer must be
provided to the FAA.

(c) The FAA will approve requested transfers of Arrival Authorizations
that comply with these regulations.  The recipient Carrier of the
transfer may not use the Arrival Authorization until written
confirmation has been received from the FAA.  

(d)  A U.S. or Canadian air carrier assigned Arrival Authorizations
under § 93.29 may trade on a one-for-one basis within its own base of
Arrival Authorizations subject to FAA approval, provided that the
purpose is to operate the arrival flight from a foreign point outside
Canada in a different half-hour time period than assigned.  The FAA must
confirm the transfer prior to operation.

(e) A record of each Arrival Authorization exchange will be kept on file
by the FAA and made available to the public upon request. 

(f) Carriers participating in a one-for-one transfer must certify to the
FAA that no other consideration will be or has been provided for the
exchange.   

§ 93.29  International Arrival Authorizations 

(a) Except as otherwise provided in paragraph (d) of this section, the
FAA shall make an initial assignment of Arrival Authorizations to U.S.
and Canadian carriers arriving from a foreign point, excluding Canada,
or any other foreign carrier arriving from a foreign point or the
continuation of a flight that begins at a foreign point for the winter
and summer scheduling seasons as follows. This section does not apply to
arrivals at O’Hare from Canada by U.S. or Canadian air carriers.  

(1) Winter Scheduling Season.  Upon request, the FAA shall assign to
each Carrier that published a scheduled arrival during the Winter 2006
Scheduling Season, as evidenced by the FAA’s records, a corresponding
Arrival Authorization for the Winter 2007 Scheduling Season.  

(2)  Summer Scheduling Season.  Upon request, the FAA shall assign to
each Carrier that published a scheduled arrival for the Summer 2006
Scheduling Season, as evidenced by the FAA’s records, a corresponding
Arrival Authorization for the Summer 2007 Scheduling Season.  

(3)  Arrival Authorizations will be assigned to the Carrier that
actually operated the flight regardless of any codeshare or marketing
arrangement unless the flight was predominately marketed, by contract,
under the control of another Carrier.  If the flight was under the
marketing control of another Carrier or the entire inventory was under
the control of another Carrier, the FAA shall assign the Arrival
Authorization to that Carrier. 

(4)  The FAA Vice President, System Operations Services, is the final
decision-maker for determinations under this subsection. 

(b)  Notwithstanding the limit on Arrival Authorization in § 93.23(a),
any U.S. or Canadian air carrier arriving at O’Hare from a foreign
point, excluding Canada, shall be assigned an Arrival Authorization
under this section for that flight.  

(c)  Notwithstanding the limit on Arrival Authorizations in § 93.23(a),
any non-Canadian, foreign air carrier conducting scheduled service and
arriving at O’Hare shall be assigned an Arrival Authorization under
this section for that flight.    

(d)  The Department of Transportation reserves the right to withhold the
assignment of an Arrival Authorization to any foreign air carrier of a
country that does not provide equivalent rights of access to its
airports for U.S. air carriers, as determined by the Secretary of
Transportation.

(e) For each scheduling season, Carriers must request Arrival
Authorizations under this section in accordance with the procedures
announced by the FAA in the Federal Register.  A Carrier may request to
operate more flights from foreign points than the number for which it
received Arrival Authorizations under § 93.29(a) or to operate historic
arrivals in a different half-hour than initially assigned for the
previous corresponding scheduling season.  The Arrival Authorizations
will be assigned at the time requested unless: 

(1)  An Arrival Authorization is available within one hour of the
requested time, in which case, the unassigned Arrival Authorization will
be used to satisfy the request; or 

(2)  Operational efficiencies support assignment within one hour of the
requested period.  The FAA Vice President, System Operations Services,
is the final decision-maker for determinations under this subsection.  

(f) Each request for Arrival Authorizations under this section shall
specify the complete flight information including the carrier
identifier, flight number, complete flight itinerary, frequency,
scheduled arrival time, aircraft and service type, effective dates and
whether the Arrival Authorization is for a new or historic flight.  

(g) Arrival Authorizations assigned under this section cannot be bought,
sold, leased or transferred under § 93.27 but subject to FAA approval
may be traded on a one-for-one basis under § 93.28 to meet the
Carrier’s operational needs.  

	(h) Arrival Authorizations assigned under this section are not subject
to minimum usage requirements of § 93.31 of this subpart but will
revert to the FAA if not used for 15 consecutive days.  Arrival
Authorizations assigned under this section may only be used for a flight
arriving from a foreign point or for non-Canadian, foreign air carriers,
the continuation of a flight that begins at a foreign point.  

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

(a)  Whenever the FAA has determined that sufficient Arrival
Authorizations are available, they will be assigned by lottery in
accordance with this section.  Only U.S. and Canadian air carriers are
eligible to participate in a lottery.  U.S. and Canadian air carriers
must hold appropriate economic authority for scheduled service under
Title 49 of the U.S.C. and FAA operating authority under parts 121, 129,
or 135 of this chapter to select Arrival Authorizations in a lottery. 

(b)  Arrival Authorizations not assigned under § 93.25, or returned to
the FAA under §§ 93.26(a) or 93.31 for reassignment shall be assigned
by a Preferred Lottery.  

	(c)  Any Arrival Authorization available as the result of an increase
in the hourly limits under § 93.23(a) of this part from 88 Arrival
Authorizations to 89 or 90 shall be assigned by Preferred Lottery.  

(d) Any Arrival Authorizations available as the result of an increase
above 90 in the hourly limits specified in § 93.23(a) of this subpart
shall be assigned by lottery that is open to all U.S. and Canadian air
carriers eligible to participate.  

(e) The FAA will publish a notice in the Federal Register announcing the
lottery dates and any special procedures for the lotteries.  

(f) Any U.S. or Canadian air carrier seeking to participate in any
lottery must notify the FAA in writing, and such notification must be
received by the FAA 15 days prior to the lottery date.  The U.S. or
Canadian air carrier must specify if it is requesting to participate in
a lottery as a New Entrant or Limited Incumbent.  The U.S. or Canadian
air carrier must also disclose in its notification whether it has Common
Ownership with any other Carrier and, if so, identify such Carrier.

(g) A random lottery shall be held to determine the order in which
participating Carriers shall select an Arrival Authorization.

(h) In any Preferred Lottery, each New Entrant and Limited Incumbent
will have the opportunity to select Arrival Authorizations, if available
as provided in paragraph (i) of this section, until it holds a total of
eight Arrival Authorizations.  Arrival Authorizations remaining after
all New Entrants and Limited Incumbents have been accommodated may be
assigned to any other Carrier participating in the lottery.  Arrival
Authorizations remaining after all New Entrants and Limited Incumbents
have been accommodated may be assigned to any U.S. or Canadian air
carrier participating in the lottery for a minimum of 12 months, and
then until the next lottery, when such Arrival Authorizations would
again be available on a preferred basis to New Entrants and Limited
Incumbents.     

(i) At the lottery, each Carrier must make its selection within 5
minutes after being called or it shall lose its turn.  If Arrival
Authorizations still remain after each Carrier has had an opportunity to
select Arrival Authorizations, the assignment sequence will be repeated
in the same order.  A Carrier may select one Arrival Authorization
during each sequence, except that New Entrants may select two Arrival
Authorizations, if available, in the first sequence of a Preferred
Lottery.  

(j) If there are available Arrival Authorizations for a temporary
period, for example, Arrival Authorizations pending assignment in a
lottery or international arrivals that are temporarily returned, the FAA
may assign these Authorizations on a non-permanent, first-come,
first-served basis.  

§ 93.31  Minimum usage requirement

(a) Except as provided in § 93.29 and paragraphs (b) and (c) of this
section, any Arrival Authorizations not used at least 80 percent of the
time over a two-month period shall be withdrawn by the FAA.  

(b) Paragraph (a) of this section does not apply to Arrival
Authorizations obtained under § 93.30 or bought under § 93.27 during
the first 90 days after assignment.  

(c)  Paragraph (a) of this section does not apply to Arrival
Authorizations of U.S. or Canadian air carrier forced by a strike to
cease operations using those Arrival Authorizations. 

(d)  Every U.S. and Canadian air carrier holding Arrival Authorizations
shall forward in writing to the FAA Slot Administration Office in a
format specified by the FAA a list of all Arrival Authorizations held by
the Carrier along with a listing of the Arrival Authorizations actually
operated for each day of the 2-month reporting period within 14 days
after the last day of the 2-month reporting period beginning January 1
and every 2 months thereafter.  The report shall identify for each
assigned Arrival Authorization the withdrawal priority number and
half-hour period, the flight number, 3-letter identifier of the
operating Carrier used for air traffic control communications, scheduled
time of operation, origin airport, and whether a scheduled arrival was
actually operated by the Carrier on a specified day.  The report shall
identify any Common Ownership or control of, by, or with any other
carrier.  A senior official of the Carrier shall sign the report.  

(e) The Administrator may waive the requirements of paragraph (a) of
this section in the event of a highly unusual and unpredictable
condition which is beyond the control of the Carrier and which exists
for a period of 5 consecutive days or more.  Examples of conditions that
could justify waiver under this paragraph are weather conditions that
result in the restricted operation of an airport for an extended period
of time or the grounding of any aircraft type.  

(f) The FAA will treat as used any Arrival Authorization held by a
carrier on Thanksgiving Day, the Friday following Thanksgiving Day, and
the period from December 24 through the first Sunday in January.      

§ 93.32  Administrative Provisions

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

(b) All transactions regarding Arrival Authorizations under this subpart
must be in a written or electronic format approved by the FAA.   

§ 93.33  Reserved

	Issued in Washington, DC, on August 21, 2006

      /S/

Marion C. Blakey

Administrator

 See 71 FR 16405, March 31, 2006; 70 FR 59798, October 13, 2005; and 70
FR 15540, March 25,2005.

 The City comments that each carrier could be returned to November 2004
flight levels to ensure that there are not incentives for carriers to
over schedule.  However, if the August 2004 Order expires, we expect the
target and the base schedules would be issues during the negotiations.  

 NEXTOR is a consortium of universities contracted by the FAA to
research various aviation issues.

 49 U.S.C. § 40103

 33 FR 17896; December 3, 1968

 49 U.S.C. § 41715(b)(1)

 The schedule reduction meeting was convened under 49 U.S.C. § 41722.  

 During this period, scheduled arrivals are not to exceed 50 during each
half-hour beginning at 7:00 a.m. and ending at 7:59 p.m.  Scheduled
arrivals are not to exceed 88 within any two consecutive 30-minute
periods.  

 There were 89 arrivals modeled during the 1:00 p.m., 3:00 p.m., and
6:00 p.m. hours and 98 arrivals in the 8:00 p.m. hour.  Four arrivals
per hour were added for unscheduled flights.  The modeled results also
included the impact of schedule agreements based on a 15-minute
distribution.  While that limitation was not incorporated as a condition
in the August 2004 Order, it largely has been maintained by air carriers
through on-going consultation with FAA on proposals to move arrivals
between 15 minute periods.  

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

 The NPRM proposed no more than 67 arrival authorizations between 8:00
and 8:30 p.m. 

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


 Third extension of the Order dated March 27, 2006.

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

 See FAA’s “Special Slot Withdrawal and Reallocation Procedures,”
51 FR 8632 (1986).)   

   See High Density Airports; Notice of Extension for the Lottery
Allocation and Notice of Lottery for Limited Slot Exemptions at
LaGuardia Airport 66 Fed. Reg. 41294 (Aug. 7, 2001)(expanding the scope
of new entrants eligible to participate in the lottery to those that did
not participate in the Dec. 4, 2000 lottery and those that had not
applied for the AIR-21 slot exemptions by Dec. 4, 2000); High Density
Airports, 67 Fed. Reg. 65826 (Oct. 28, 2002)(adopting the new entrant
preference procedure for reallocating by lottery withdrawn or returned
exemption slots at LaGuardia).  

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

   Hub cities included in the LECG analysis include:  New York, Chicago,
Denver, Philadelphia, Houston, Dallas, Charlotte, Detroit, Minneapolis,
Atlanta, and Cincinnati. 

   According to the LECG analysis, “In 2004 Midway offered non-stop
service to all but two of the 25 large hubs with non-stop service from
O’Hare (Honolulu and Salt Lake City).”  

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

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

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

Connolly, 475 U.S. at 225.   

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

 FCC v. Beach Communications, Inc., 508 U.S. 307, 313 (1993).  

 Lingle v. Chevron U.S.A. Inc., S. Ct. No. 04-163, slip op. at 12
(2005).  

 Consolidated Appropriations Act, 2005, Pub. L. No. 108-447, Federal
Aviation Administration, Operations, Title I, Division H, 118 Stat.
2809, 3201 (2204)

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

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

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

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