
[Federal Register: October 10, 2008 (Volume 73, Number 198)]
[Rules and Regulations]               
[Page 60573-60601]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10oc08-18]                         


[[Page 60573]]

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Part VIII





Department of Transportation





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Federal Aviation Administration



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14 CFR Part 93



Congestion Management Rule for LaGuardia Airport; Final Rule


[[Page 60574]]


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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 93

[Docket No. FAA-2006-25709; Amendment No. 93-87]
RIN 2120-AI70

 
Congestion Management Rule for LaGuardia Airport

AGENCY: Federal Aviation Administration (FAA).

ACTION: Final rule.

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SUMMARY: Today the FAA is publishing a final rule to address congestion 
at New York's LaGuardia Airport (LaGuardia). The rule grandfathers the 
majority of operations at the airport and will develop a robust 
secondary market by annually auctioning off a limited number of slots; 
the FAA plans to use the proceeds from the auctions to mitigate 
congestion and delay in the New York City area. In addition, the hourly 
cap on scheduled operations will be reduced to 71 per hour during the 
regulated hours. This reduction will lead to an estimated 41 percent 
reduction in modeled delay at the airport. This rule also contains 
provisions for use-or-lose, unscheduled operations, and withdrawal for 
operational need. The rule will sunset in ten years.

DATES: This rule becomes effective December 9, 2008.

FOR FURTHER INFORMATION CONTACT: For technical questions regarding this 
rulemaking, contact: Nan Shellabarger, Office of Aviation Policy and 
Plans, APO-200, Federal Aviation Administration, 800 Independence 
Avenue, SW., Washington, DC 20591; telephone (202) 267-7294; e-mail 
nan.shellabarger@faa.gov. For legal questions concerning this 
rulemaking, contact: Rebecca MacPherson, FAA Office of the Chief 
Counsel, 800 Independence Ave., SW., Washington, DC 20591; telephone 
(202) 267-3073; e-mail rebecca.macpherson@faa.gov.

SUPPLEMENTARY INFORMATION:

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 policy for the use of navigable 
airspace and to assign the use that the FAA deems necessary for 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.

Table of Contents

I. Background
II. Summary of the Final Rule
III. Authority To Retire and Reallocate Capacity
    A. The FAA Is Legally Authorized To Allocate Slots Through an 
Auction Mechanism
    1. Slots Are a Form of Property That May Be Leased by the FAA to 
Others
    2. FAA Leases Are Not Covered by IOAA and This Rule Is Not in 
Violation of Any Current Appropriations Restrictions
    3. Leases Are Not Taxes
    4. The FAA's Authority To Give Slots to Air Carriers Through 
Cooperative Agreements
    5. Leases That Terminate by Their Own Terms Are Not a ``Taking'' 
of Property
    6. The Draft Lease Terms Included in the NPRM Were for 
Illustrative Rather Than Probative Purposes
    B. The FAA Has Authority To Retain the Amounts Received From the 
Lease and Disposal of Property and To Use Those Proceeds for 
Congressionally Authorized Purposes
    C. The Auction of Slots Does Not Affect the Proprietary Rights 
of the Port Authority
    D. The FAA Has Complied With the Administrative Procedure Act
    1. The Docket Contained Adequate Information for Meaningful 
Comment on the Rulemaking Proposal
    2. The Discussion of the Auction Process Provided Sufficient 
Detail for Meaningful Comment on the Rulemaking Proposal
    3. The FAA Adequately Considered Alternatives
IV. Discussion of the Final Rule
    A. Allocation of Slots at LaGuardia
    1. Proposed Options
    2. Categories of Slots
    3. Initial Allocation of Slots
    4. Retirement of Slots
    5. Market-Based Reallocation of Slots
    a. Network Effects of Auctions
    b. Impacts of Auctions on Competition
    c. Alternatives to Reallocation
    B. Secondary Trading
    C. Usage Requirements
    D. Unscheduled Operations
    E. Sunset Provision
    F. Other Issues
    1. Withdrawal for Operational Need and for Future Reductions in 
the Cap
    2. Limit on Arrivals and Departures
    3. Common Ownership
    4. Impact of the Final Rule on the Port Authority's Ability To 
Run Its Airport
    V. Potential Loss of Service to Small Communities
    VI. Regulatory Notices and Analyses
    VII. Regulatory Text

I. Background

    This final rule is the latest action in a long history of 
congestion management at one of the most delayed airports in the United 
States. Although service at LaGuardia is almost exclusively domestic, 
access to the airport is highly sought after. These two factors have 
forced the FAA to address a dilemma: how can the agency reduce delays 
while providing some measure of access to carriers wishing to operate 
at the airport, thus ensuring competition? While there are many factors 
contributing to the delays and congestion at LaGuardia, demand for the 
associated airspace has long out-stripped capacity.
    The FAA managed congestion at LaGuardia under the High Density Rule 
(HDR) from 1969 through 2006. 14 CFR part 93 subparts K and S. However, 
not until deregulation of the airline industry did the FAA need to step 
in and provide for air carrier access to the airspace immediately 
surrounding the airport. Prior to 1985 the carriers at the airport, 
operating under antitrust immunity, determined who would be allowed to 
operate and when. The FAA's role was limited to determining how many 
operations air traffic control could reasonably handle during congested 
periods and enforcing operator compliance with the rules. The HDR 
divided the allowable operation (slots) by categories of users (i.e., 
air carriers other than air taxis, scheduled air taxis, and others). 33 
FR 17896 (December 3, 1968). In 1982, the FAA imposed a minimum usage 
requirement for the first time. 47 FR 7816 (February 22, 1982). Also in 
1982, the FAA implemented an experimental buy-sell rule, under which 
approximately 190 slots were transferred among carriers over six weeks 
of the program. 47 FR 29814 (July 8, 1982).\1\
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    \1\ This slot program was not implemented under the HDR, but 
rather under SFAR 44 and was related to the limitations on air 
traffic control services resulting from the controller's strike.
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    The FAA established more permanent allocation procedures for slots 
under the HDR in 1985 when it adopted the Buy/Sell Rule. 50 FR 52195, 
December 20, 1985. In a companion rulemaking to the Buy/Sell Rule (SFAR 
88), the FAA provided for the withdrawal of up to five percent of the 
slots at the slot-constrained airports through a reverse lottery so as 
to provide a pool of slots for new entrants and limited incumbents. 
SFAR 88, 51 FR 8630 (March 12, 1986). \2\ The Buy/Sell Rule included 
use-or-lose provisions and, while explicitly stating that the slots 
were not the carriers' property and did not constitute a proprietary 
right, the FAA allowed carriers to buy, sell or lease the slots on the 
secondary market.

[[Page 60575]]

For the next 15 years the agency relied primarily on the secondary 
market authorized by the Buy/Sell Rule to address access issues at the 
airport. However, the Buy/Sell Rule created market distortions by 
creating categories of carriers entitled to preferential treatment 
under an administrative reallocation mechanism which severely limited 
these carriers' access to slot-controlled airports other than on the 
open market. Affected carriers complained to the FAA that by 
grandfathering 95 percent of the slots at the slot-controlled airports 
to incumbent carriers, there was insufficient capacity available for 
reallocation. The Buy/Sell Rule also failed to foster a robust 
secondary market because it did not require any transparency. 
Accordingly, carriers were able to keep out competitors by arranging 
private transactions. This resulted in carriers interested in 
initiating or expanding service at the airports often being unaware 
that slots were potentially available for sale or lease. Some carriers 
also complained that they were effectively being denied access to the 
airport because their competitors refused to sell slots or provide 
meaningful lease terms.
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    \2\ Commenters appear to have forgotten this rulemaking action 
when arguing that the withdrawal of slots for reallocation is 
unprecedented.
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    On April 5, 2000, Congress enacted the Wendell H. Ford Aviation and 
Investment Reform Act of the 21st Century (AIR-21 or the Act). The Act 
phased out the HDR at LaGuardia effective January 1, 2007. In addition 
to phasing out the HDR, AIR-21 directed the Secretary of Transportation 
to grant two types of exemption from the HDR's flight restrictions. The 
first type of exemption was designed to promote more competition at 
slot-constrained airports and required the Secretary to grant 
exemptions to a new entrant or limited incumbent for 20 flights per 
carrier. The second type of exemption was aimed at improving service to 
small communities and required the Secretary to grant exemptions to a 
carrier operating an aircraft with less than 71 seats to Small-Hub or 
Non-Hub airports for an unrestricted number of flights. The Act also 
preserved the FAA's authority to impose flight restrictions by stating 
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).
    Although the slot exemptions mandated by Congress under AIR-21 
opened up access to LaGuardia; they also resulted in a significant 
increase in delays at the airport as the number of small community 
exempted operations soared throughout 2000. Using its authority in 49 
U.S.C. 40103, the FAA capped AIR-21 slot exemptions at LaGuardia. While 
the number of allowable scheduled operations under the HDR remained 
constant at 62 per hour, the actual number of scheduled operations rose 
to 75 per hour \3\ even though there were no significant increases in 
the airspace or airport capacity. Thus, Congress' actions to improve 
access resulted in significantly higher delays at LaGuardia than there 
were before 2000.
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    \3\ There are two hours during the day when scheduled operations 
exceed 75. At 9 a.m. there are a total of 76 scheduled operations, 
and at 5 p.m. there are a total of 77.
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    Slots allocated under the HDR at LaGuardia were scheduled to expire 
on January 1, 2007. Based on its experience in 2000, the FAA determined 
that simply lifting the HDR at LaGuardia would result in a significant 
increase in delays and adversely impact the airspace around New York 
City and on the National Airspace System (NAS) as a whole. Accordingly, 
on August 29, 2006, the FAA published a notice of proposed rulemaking 
(NPRM) proposing continuation of the existing cap of 75 scheduled and 
six unscheduled hourly operations as well as a new method of allocating 
capacity (71 FR 51360). In addition to retaining the existing cap, the 
FAA proposed to impose an average minimum aircraft size requirement for 
much of the fleet serving the airport. By incentivizing carriers to use 
larger aircraft, the proposal would have maximized passenger throughput 
consistent with the airport's physical constraints. The FAA also 
proposed to implement a limit on the duration of the slots that would 
assure ten percent of the capacity at the airport would be available 
annually for reallocation based on an undetermined market mechanism 
that the FAA intended to administer via regulation.
    The FAA recognized that it did not have clear statutory authority 
to implement a wide array of market-based mechanisms and that, absent 
authority beyond that contained in 49 U.S.C. 40103, any reallocation 
via a market-based mechanism could lead to a challenge that the FAA had 
violated the ``user fee prohibition'' attached to the agency's annual 
appropriations legislation since 1998. The FAA did not address the 
agency's authority to dispose of interests in property, as provided in 
the Air Traffic Management System Performance Improvement Act of 1996. 
Public Law No. 104-264, codified at 49 U.S.C. 106(l)(6). However, it 
did refer to its statutory reauthorization proposal, which was part of 
a comprehensive change to how the FAA would be financed. The FAA's 
proposed reauthorization package, the Next Generation Air 
Transportation System Financing Reform Act of 2007, would substitute 
new user fees for passenger ticket taxes, would permit the airport 
operators (such as the Port Authority of New York and New Jersey (Port 
Authority)) at constrained and delayed airports to assess market-based 
fees, and would also allow the FAA, under certain circumstances, to 
impose market-based mechanisms. This legislative proposal, in giving 
authority directly to airport proprietors to assess and use market-
based fees, was profoundly different from the terms of this final rule. 
Rather, this rule recognizes the property interest the FAA acquires or 
constructs in the navigable airspace for scheduled flight operation and 
provides for the assignment of this property interest through lease 
agreements with the carriers. The FAA's reauthorization legislation has 
been held up for reasons unrelated to this rulemaking, and the proposed 
legislation was never adopted.
    The FAA recognized that it would be unable to complete its 
rulemaking by January 1, 2007, when the HDR was scheduled to expire. 
Indeed, since the agency had extended the comment period at the request 
of several interested parties, the comment period for the NPRM did not 
close until December 29, 2006. On December 27, 2006, after providing 
for notice and comment, the agency published an FAA Order Operating 
Limitations at New York LaGuardia Airport (LaGuardia Order) (71FR 
77854).\4\ The LaGuardia Order retained the existing cap at the airport 
of 75 scheduled operations and imposed a reservation system for 
unscheduled operations that permitted six unscheduled operations per 
hour. The LaGuardia Order did not distinguish between operations 
conducted pursuant to HDR slots and AIR-21 slot exemptions; rather, 
flights conducted pursuant to the exemptions were rolled into the 
hourly cap without restriction. The slots and exemptions were 
grandfathered to the current holder as ``Operating Authorizations''. 
The Order also explicitly linked its duration to the publication of a 
final rule and noted that no rights to Operating Authorizations 
allocated under the Order would survive beyond the Order. No one 
challenged the FAA's authority to re-impose caps at the airport

[[Page 60576]]

following the expiration of the HDR or the terms of the Order.
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    \4\ The LaGuardia Order was amended on November 8, 2007 (72 FR 
63224) and again on August 19, 2008 (73 FR 48248).
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    In 2007 flight delays in the New York City metropolitan area 
soared. Delays impacted all three major commercial airports and 
cascaded throughout the NAS. The summer of 2007 became the second worst 
on record nationally for flight delays. On September 27, 2007, the 
Secretary of Transportation announced the formation of the New York 
Aviation Rulemaking Committee (NYARC) to help the Department of 
Transportation (Department) and the FAA explore available options for 
congestion management and how changes to current policy at all three 
major commercial New York City airports would affect the airlines and 
the airports.
    By design, the NYARC provided ample opportunity for extensive input 
by aviation stakeholders, having members from every major air carrier 
in the United States as well as foreign carriers, passenger groups, and 
the Port Authority. Through the ARC process, these stakeholders played 
a key role in exploring ideas to address congestion and ensuring that 
any actions contemplated by the Department and the FAA would be fully 
informed. In addition to holding weekly meetings of the full NYARC, 
five working groups regularly met to explore ways to address both 
congestion and allocation of the available airspace. The NYARC worked 
throughout the fall and submitted a report to the Secretary, dated 
December 13, 2007, discussing its findings. A copy of the NYARC Report 
may be found at http://www.dot.gov/affairs/FinalARCReport.pdf.
    After evaluating the comments received to the 2006 NPRM and the 
input of the NYARC, the FAA moved forward with its rulemaking action to 
address congestion at LaGuardia. Rather than pursue its earlier 
proposal to require upgauging and reallocate ten percent of the 
existing capacity each year, the FAA published a supplemental notice of 
proposed rulemaking (SNPRM) on April 16, 2008 proposing to lease the 
majority of operations at the airport to the historic operators for 
non-monetary consideration under its cooperative agreement authority. 
The agency also proposed to develop a robust market and induce 
competition by annually auctioning off leases for a limited number of 
slots during the first five years of the rule. The FAA proposed two 
different options. Under the first option, the FAA, after retiring a 
small portion of the slots, would auction off eight percent of the 
slots to any carrier serving or wishing to serve LaGuardia and would 
use the proceeds to mitigate congestion and delay in the New York City 
area (after the FAA recouped the cost of the auction). Under the second 
option, the FAA would not retire any slots and would conduct an auction 
of twenty percent of the slots. The proceeds would go to the carrier 
holding the slot after the FAA recouped the cost of the auction. The 
SNPRM also contained provisions for use-or-lose, unscheduled 
operations, and withdrawal for operational need. The FAA proposed to 
sunset the rule in ten years.
    The comment period for the SNPRM closed June 16, 2008. Despite 
numerous requests, the FAA decided against extending the comment 
period, although it noted that it historically has considered comments 
filed after the end of a comment period as long as such consideration 
did not lead to delay. In denying these requests, the FAA provided 
draft copies of the lease agreements that would result from the initial 
allocation and reallocation of slots in the final rule. The FAA 
reiterated that any auction would be conducted under the agency's 
acquisition authority. The agency also reiterated that interested 
parties to the auction would be afforded the opportunity to comment on 
any proposed auction procedures within the context of the agency's 
Acquisition Management System.
    Twenty-six interested parties filed comments to the docket 
addressing the SNPRM. The majority of comments were consistent in 
rejecting the proposal. Many commenters said that the FAA had failed to 
demonstrate how the proposal would achieve any significant relief from 
congestion. Rather, according to the commenters, the SNPRM would impose 
an untested and unproven auction process on airlines that would not 
address the fundamental airspace congestion issues in the New York 
metro area. While other commenters did not completely object to an 
auction mechanism, they did note that the timing was not right or that 
the auction procedures needed to be fully developed prior to conducting 
any auction.
    Effective August 28, 2008, the FAA reduced the number of 
reservations available for unscheduled operations from six to three. 73 
FR 48428.
    On September 30, 2008 the FAA's Office of Dispute Resolution for 
Acquisition (ODRA) issued a decision responding to protests that had 
been filed by air carriers, the ATA, the Port Authority, and the New 
York Aviation Management Association challenging the FAA's legal 
authority to conduct a proposed auction of two slots at Newark. ODRA 
concluded that the FAA's statutory authority and its Acquisition 
Management System authorized agency disposal of property rights by way 
of a lease as well as the use of a competitive auction process to 
determine who the lessee should be. ODRA did not, however, issue an 
opinion on whether the underlying slots constituted property.
    On the same day the General Accountability Office (GAO) released an 
opinion letter in response to a congressional request that concluded 
that the FAA currently lacks authority to auction slots under either 
its property disposition authority or its user fee authority. The 
issues involved represent novel legal issues upon which reasonable 
people, and agencies, acting in good faith, have disagreed. The FAA 
disagrees with the GAO conclusions because it does not believe the 
auction of a slot constitutes a user fee and because the GAO appeared 
to apply an exceptionally narrow definition of property that ignores 
expansive statutory provisions within the agency's various enabling 
statutes and the fact that carriers have treated slots as property for 
approximately 25 years. Accordingly, the FAA has decided to proceed 
with the adoption of this final rule.

II. Summary of the Final Rule

    Today's rule considers not only the concerns raised by commenters 
in response to the NPRM and SNPRM, but also takes into account the 
extensive discussions and issues raised by members of the NYARC. The 
FAA is imposing a cap on scheduled operations of 71 per hour from 6 
a.m. to 9:59 p.m., effective March 8, 2009. Until that date, the cap on 
scheduled operations will remain at 75 per hour. This reduction in the 
cap represents a five percent retirement of existing slots at the 
airport and should significantly improve delays at the airport. 
Unscheduled operations continue to be capped at three per hour, with 
additional flights authorized when conditions permit.
    In addition, approximately 85 percent \5\ of the total number of 
slots currently in use at the airport will be ``grandfathered'' to 
carriers who hold the corresponding Operating Authorization under the 
LaGuardia Order pursuant to cooperative lease agreements for a period 
of ten years. These slots are called ``Common Slots''.

[[Page 60577]]

Carriers will not pay any monetary consideration for these slots. Of 
the remaining 15 percent of slots, one-third (or five percent of 
existing capacity) will be retired at the end of the winter scheduling 
season. These slots are called ``Limited Slots'', as are the remaining 
approximately ten percent of the slots, which will be terminated and 
reallocated over a five year period, commencing March 8, 2009. The FAA 
intends to conduct the first auction of these slots in January 2009, 
and the affected carrier will be permitted to use the slot until the 
successful bidder acquires it in March. The reallocated slots, called 
``Unrestricted Slots'' after reallocation, will be awarded to the 
successful bidder(s) via lease agreements that will last until this 
rule expires, March 9, 2019.
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    \5\ This rule will withdraw 16.5 percent of carriers' existing 
Operating Authorizations above the base of operations. Currently 
unallocated capacity will also be available for auction or 
retirement. This represents approximately 15 percent of the total 
number of slots at the airport.
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    All slots may be transferred via a secondary market. Carriers may 
continue to engage in direct negotiations. To facilitate opportunities 
for participation in the secondary market, however, all available slot 
sub-leases must be advertised on an FAA-run bulletin board, and the 
Department will monitor transactions for anti-competitive behavior.
    As proposed, Limited and Common Slots will be subject to an 80 
percent usage requirement and may be withdrawn for operational need. In 
addition, Common Slots may be subject to reversion, following notice 
and an opportunity to comment, should the FAA determine the cap at the 
airport is too high.

III. Authority To Retire and Reallocate Capacity

    The Air Transport Association of America (ATA), the Port Authority, 
American Airlines, Delta Airlines and United Airlines asserted that the 
FAA's proposed methods of allocating slots are not lawful for several 
reasons including: Prior statements by Government officials indicating 
that the FAA would need additional legislation to be able to auction 
slots; the FAA cannot create property by exercising its regulatory 
power to regulate the use of navigable airspace; slots are not property 
when created and held by the Government but only become property when 
transferred to an air carrier; the proposed lease of slots for fair 
market value would be a new user fee in violation of an appropriations 
restriction on using a particular appropriation to finalize or 
implement a regulation to establish a new user fee and in violation of 
the Independent Offices Appropriations Act (IOAA) (the latter of which 
it is asserted is the FAA's only authority to charge for the lease of 
slots); the leases would be an unconstitutional usurpation of Congress' 
authority to levy taxes; the return of slots to the Government at the 
end of the term of their leases would constitute an unconstitutional 
taking of property; the Federal Grants and Cooperative Agreements Act 
does not provide authority for the FAA to give slots to air carriers 
through cooperative agreements; and the FAA lacks authority to retain 
the proceeds from the lease of slots and use those proceeds to improve 
capacity in the New York airspace area.
    The FAA has the authority to dispose of property interests under 49 
U.S.C. 40110(a)(2). The FAA also has the authority to ``enter into and 
perform such contracts, leases, cooperative agreements, or other 
transactions as may be necessary to carry out the functions of the 
Administrator and the Administration.'' 49 U.S.C. 106(l)(6).\6\ The FAA 
has determined that the allocation of a relatively small number of 
slots via the auction of a leasehold best effectuates the efficient 
allocation of slots, both through the initial allocation and through 
the development of a robust secondary market.
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    \6\ A federal agency's power to dispose of property includes the 
power to lease that property, even without express Congressional 
authority. Ashwander v. Tennessee Valley Authority, 297 U.S. 288, 
331 (1936).
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    An auction is intended simply to distribute slots to the air 
carriers who value them the most, thus encouraging their most efficient 
use. An auction also satisfies the direction of Congress to ``place 
maximum reliance on competitive market forces and on actual and 
potential competition * * * to provide the needed air transportation 
system * * * '' 49 U.S.C. 40101(a)(6)(A).\7\ This section of law 
describes the policies that the Department must take into consideration 
when issuing economic regulations. This rule is not an economic 
regulation. However, the statutory provision is a clear statement by 
Congress of a valid public policy aim that the FAA is permitted to take 
into consideration when issuing regulations under section 40103. The 
FAA does not intend to set a reserve price on slots so as to assure 
itself that it recovers its costs associated with either the auction or 
with providing air traffic services. The FAA instead aims to allocate 
all of the slots put up for auction, thus allowing for possible new 
entrants to compete with the incumbent air carriers at LaGuardia and to 
accommodate changes in the business strategies of air carriers using 
LaGuardia airport.
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    \7\ This section of law describes the policies that the 
Department of Transportation must take into consideration when 
carrying out its economic regulaory authority over the aviation 
industry. This section also is a clear statement by Congress of a 
valid public policy aim the FAA is permitted to take into 
consideration.
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A. The FAA Is Legally Authorized To Allocate Slots Through an Auction 
Mechanism

    Several commenters quote a statement made in 1985 that the FAA did 
not propose an auction mechanism because legislation would be required 
for the collection and disposition of the proceeds (50 FR 52183 
(December 20, 1985)), and a more recent statement in the NPRM that the 
FAA ``currently does not have the statutory authority to assess market-
clearing charges for a landing or departure authorization''. 71 FR 
51360, 51362, 51363 (August 29, 2006).
    In 1985, the FAA lacked clear authority to collect and dispose of 
the proceeds from an auction. Rather, any amounts collected by the 
agency would need to be deposited into the General Receipts account in 
accordance with 31 U.S.C. 3302. Additionally, while the FAA had 
authority to dispose of an interest in property, it was not clear that 
such interests included leaseholds.
    In the Air Traffic Management System Performance Improvement Act of 
1996, Public Law 104-264, the FAA gained express authority to lease 
property to others. 49 U.S.C. 106(l)(6), 106(n). The same law also gave 
the FAA an exemption from 31 U.S.C. 3302, and an account was 
established specifically for all amounts the FAA collects other than 
the insurance premiums and fees that it is required to deposit into the 
Aviation Insurance Revolving Fund. 49 U.S.C. 45303(c). This account is 
available not just for fees assessed under chapter 453, but for ``all 
amounts'' other than insurance premiums and fees.\8\ Thus, the 
statement made in 1985 is no longer correct.
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    \8\ The fact that Congress excluded insurance premiums and fees, 
which are not amounts assessed under chapter 453 of title 49, 
expresses Congress' plain and unambiguous intent for the FAA to 
deposit all amounts it collects into this account, not just the 
amounts assessed under the user fee provisions of chapter 453.
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    The circumstances surrounding the statement made in 2006,\9\ did 
not address the authorities conferred on the FAA by the Acquisition 
Management System Act. The FAA has authority to lease property to 
others, and to receive adequate compensation for this temporary 
disposal of property,

[[Page 60578]]

including the authority to lease the slots at LaGuardia.
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    \9\ Statements were also made in environmental assessments in 
2005 and 2007 that indicated that legislation might be needed to 
implement market-based approaches to congestion management. These 
statements are too vague to determine whether they are correct with 
respect to the issue at hand.
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    As briefly discussed in the SNPRM, the FAA initially believed that 
imposing a market-based reallocation mechanism as part of the 
regulation could be problematic. However, as delays soared in the 
region in 2007 and Congress failed to pass long-term reauthorization 
legislation, the FAA reevaluated its options. One option was to simply 
extend the existing LaGuardia Order indefinitely. The agency rejected 
this option because the Order was never intended to be a long-term 
solution and it perpetuates the inefficiencies contained within the 
HDR. Likewise, the FAA could have pursued a final rule that would 
establish an administrative reallocation mechanism, but the agency 
concluded that approach also failed to resolve the inefficiencies 
contained within the HDR. Finally, the FAA could revisit all of its 
statutory authorities and determine whether it had the ability to 
allocate slots under its existing legal authorities.
    This final approach was the one the agency pursued because the FAA 
believes it is both legal and best represents the interests of 
passengers flying in and out of the airport. The FAA also believes this 
approach best effectuates the FAA's mandate to provide for the 
efficient use of the NAS, coupled with the Department's mandate to 
consider competitive effects. The agency can either foster a market-
based allocation mechanism and develop a robust secondary market, or it 
can walk away from the airport after imposing a cap and providing for a 
very limited administrative reallocation mechanism. It has decided to 
follow the more free market approach.
    The commenters also refer to the fact that the FAA sought 
additional legislative authority to conduct auctions which it is has 
not yet received. The authority sought by the FAA was part of a 
comprehensive change to how the FAA would be financed and how market-
based mechanisms would be used by both the FAA and congested airports. 
This rule, however, relies on the FAA's Acquisition Management System 
authorities and does not require the FAA to use any of the proposed 
legislative provisions it sought.
1. Slots Are a Form of Property That May Be Leased by the FAA to Others
    Both the Port Authority and the ATA submit that the FAA has no 
property rights in the slots the FAA proposes to auction.\10\ While the 
ATA does not question that the slots are property (it disputes 
ownership), the Port Authority states that the slots are ``neither 
physical property, real property, intellectual property, nor an 
intangible property recognized in common law.'' \11\
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    \10\ The Regional Airline Association (RAA) makes a similar 
argument. In addition, RAA states that the FAA lacks the authority 
to regulate the types of aircraft and routes to be served in air 
transportation. The FAA disagrees with the premise of RAA's 
position, since the FAA may rely on a rational basis to allocate the 
use of navigable airspace under 49 U.S.C. 40103. Nevertheless, this 
rule does not attempt to regulate the type of aircraft or the routes 
served in any manner.
    \11\ The Port Authority also uses the language in the preamble 
to the SNPRM as evidence that the slots are not property because the 
FAA states that there was no Fifth Amendment Takings issue with the 
proposed slot auction. The FAA's statement, in context, went to the 
fact that the air carrieres have no property interests in the slots 
after expiration of the current Order until FAA provides them with 
new slots. It did not imply that the slots were not property; just 
that the air carriers possess no property interests beyond those 
accorded them under the Order.
---------------------------------------------------------------------------

    The Port Authority is incorrect; slots are an intangible form of 
property that may be leased. On December 27, 2006, the FAA issued an 
Order limiting operations at LaGuardia pursuant to its broad authority 
to regulate the use of navigable airspace under 49 U.S.C. 40103(b). 71 
FR 77854 (December 27, 2006). That Order defines an Operating 
Authorization \12\ as ``the operation authority assigned by the FAA to 
a carrier to conduct a scheduled arrival or departure operation. * * * 
.'' Id. at 77859. The Order expressly allows the trading and leasing of 
Operating Authorizations. Id. at 77860. Although the Order does not 
permit the permanent sale or purchase of Operating Authorizations, it 
permits any form of consideration to be used in the lease or trade of 
these Operating Authorizations. Id. at 7857. In addition, the Order 
states that it ``is not intended to prohibit an air carrier from 
contractually arranging to pledge an interest in an Operating 
Authorization to a person, for use as collateral or otherwise, for the 
duration of the Order.'' Id.
---------------------------------------------------------------------------

    \12\ As the preamble to the current SNPRM states, the earlier 
Order and NPRM used the ``Operating Authorizations'' to describe 
what are called slots under the SNPRM. Both Operating Authorizations 
and slots represent property interests, but the FAA has deferred to 
common usage by reverting to the term ``slots.''
---------------------------------------------------------------------------

    This Order reflects the FAA Administrator's determination that 
Operating Authorizations are a form of property that may be leased or 
traded for consideration, and used as collateral. Indeed, the ATA's own 
members have treated Operating Authorizations, and the HDR slots that 
predated them, as a form of at least intangible property: leasing and 
trading them for consideration; using them as a form of collateral; and 
disclosing them as assets on their balance sheets. Bankruptcy courts 
have held that slots are property.
    The Port Authority cites Executive Order 13132 for the proposition 
that the FAA is ignoring the traditional role of States as sovereigns 
that can create property and has not closely examined the effect the 
rulemaking would have on the State instrumentality. The creation of 
property rights, however, is not the sole responsibility of the states. 
Federal law determines what constitutes property for the purpose of 
applying federal statutes. Ross L. Blair, et al. v. United States, 
Docket 2007-5049 (Fed. Cir. 2008), citing United States v. Kimbell 
Foods, Inc., 440 U.S. 715, 726 (1979) and United States v. Craft, 535 
U.S. 274, 278-79 (2002). The United States Government, pursuant to 49 
U.S.C. 40103, has exclusive sovereignty over the navigable airspace, 
and the FAA exercises plenary powers over that airspace.
    Unlike the Port Authority, the ATA does not dispute that the slots 
constitute a property interest; rather it argues that the property 
interest is not the FAA's, because it is created at or after the 
transfer to an air carrier.\13\ Section 40110(a)(2) does not speak to 
whether the FAA actually owns property that is being disposed of. It 
only speaks to the disposal of a property interest. Only the FAA has 
authority to assign the use of navigable airspace under section 40103. 
Even assuming that the property interest is created at the time of 
transference, it is still a property interest that falls within the 
FAA's authority to dispose of under section 40110(a)(2).
---------------------------------------------------------------------------

    \13\ The airline commenters agree with ATA's assessment that the 
slots are property of the airlines not of the FAA. See, Comments of 
U.S. Airways Group, Inc. at 24. But see, Comments of American 
Airlines at 7 stating that the Port Authority holds the property 
interest.
---------------------------------------------------------------------------

    As with certain other valuable public property not expressly owned 
in fee by the U.S. Government, the Government may allow the use of 
public property and frequently does so using leases. In fact, the 
Government routinely ``licenses'' and ``permits'' the use of property 
over which it exercises exclusive sovereignty. In doing so, unless 
otherwise specified by law, the Government charges market rates in 
accordance with OMB Circular A-25. For example, under 36 CFR 251.53--
Authorities, the Chief of the Forest Service (USDA) issues special use 
authorizations (e.g., permits, term permits, leases) for National 
Forest System land. The USDA also issues grazing permits under the 
Taylor Grazing Act (TGA) of 1934 to allow the permit/lease holder to 
use publicly owned forage. The Federal

[[Page 60579]]

Communications Commission licenses portions of the broadcast spectrum, 
and since 1993 (four years before Congress mandated the use of 
auctions) has frequently done so using auctions.\14\ The General 
Services Administration issues licenses and permits for the use of its 
buildings and property, see, e.g., 41 CFR 101-47.901, 101-47.309; see 
also, GSA form 1582, ``Revocable License for Non-federal Use of Real 
Property.'' The FAA similarly uses ``licenses'' to, in effect, lease 
its real property to non-federal users. See, 1.3.7 of the FAA's Real 
Estate Guidance, http://fast.faa.gov/realestate/index.htm.
---------------------------------------------------------------------------

    \14\ The FCC, like the FAA, had a statutory preference for 
competition prior to the requirement that it conduct auctions.
---------------------------------------------------------------------------

    In short, licenses frequently are used to provide non-federal 
parties access to public property regardless of whether that property 
be real or personal (including intangible) \15\ and whether the 
Government owns the property in the traditional sense or is simply its 
guardian. The FAA selected the word ``lease'' rather than ``license'' 
to describe the documents that will transfer slots to air carriers 
because the FAA is conveying a longer term interest, with fewer rights 
by the Government to terminate that interest, than is usually done when 
the Government licenses a non-federal entity to use public property 
(licenses of property are usually terminable at will).
---------------------------------------------------------------------------

    \15\ Such as authorized access to particular radio frequencies 
and authorized use of intellectual property.
---------------------------------------------------------------------------

2. FAA Leases Are Not Covered by IOAA and This Rule Is Not in Violation 
of Any Current Appropriations Restriction
    The ATA argues that the only authority by which the FAA may charge 
for the lease of slots is as a user fee under the Independent Offices 
Appropriations Act (IOAA) and that the only amount that could be 
charged is the cost of administering the lease. The ATA is incorrect on 
both points, but the issue is not relevant because the FAA does not 
rely on IOAA authority to conduct auctions but on its other 
authorities.
    The ATA similarly argues that this regulation falls within the 
parameters of an appropriation provision that prohibits the FAA from 
using funds from its operations appropriation to finalize or implement 
a regulation that establishes a new user fee not specifically 
authorized by law.\16\ Consolidated Appropriations Act, 2008, Public 
Law 110-161. The ATA also suggests that the wording of 49 U.S.C. 
106(l)(6) \17\ means this authority may not be used because the FAA may 
only enter into leases using this authority if the leases ``may be 
necessary to carry out the functions of the Administrator and the 
Administration.'' 49 U.S.C. 106(l)(6). The ATA argues that the only 
necessary function is a regulatory function to assign airspace under 49 
U.S.C. 40103. However, there are several other statutory functions, 
such as using procedures that provide for an efficient air traffic 
system, 49 U.S.C. 44505, and the desirability of placing maximum 
reliance on competitive market forces and on actual and potential 
competition to provide the needed air transportation system, 49 U.S.C. 
40101(a)(6), that make the use of the FAA's commercial authority to 
lease property to others appropriate. See also, the legislative history 
and findings of Congress when it granted the FAA the authority to lease 
property to others in Public Law 104-264. Having created slots, and 
determined the number of available slots should be limited because of 
the resulting strain on the NAS from the scheduling of more flights per 
hour than can be handled under current conditions at LaGuardia, the 
function of disposing of its interest in the slots becomes applicable.
---------------------------------------------------------------------------

    \16\ ATA also suggests that by finalizing or implementing this 
rule, the FAA would violate the Anti-Deficiency Act. The Anti-
Deficiency Act would only be violated if the FAA obligated or 
expended funds in excess or in advance of an available 
appropriation, fund, apportionment or other applicable 
administrative subdivision of funds. 31 U.S.C. 1341, 1517. The FAA 
may not use its operations appropriation to finalize or implement a 
rule to promulgate a new user fee not specifically authorized by 
law, but this rule simply reduces the number of slots (lowers the 
cap) at LaGuardia, defines the different types of slots, establishes 
a reversion of 15% of the slots, and discusses the FAA's intent to 
auction new or returned slots. This rule does not require or impose 
on any entity a requirement to pay the FAA to obtain a service or 
even a slot. If the FAA does conduct an auction as contemplated by 
this rule, it will do so using its pre-existing authorities and 
regulation. The use of its operations appropriation to finalize and 
implement this rule therefore does not violate the Anti-Deficiency 
Act.
    \17\ American Airlines reads 49 U.S.C. 106 as more limited in 
scope regarding the types of property that fall under its purview. 
The statute does not limit its scope to any particular type(s) of 
property that fall under its purview. The FAA has for years, without 
challenge, interpreted its authority broadly under the statute in 
support of Congress' intention of allowing the Administrator to 
acquire, lease, enter into cooperative agreements and other 
transactions as may be necessary to carry out the Agency's 
functions. This interpretation is known to Congress, which has 
repeatedly reauthorized the FAA without making a change to this 
section. Another commenter raised the fact that the heading of 
section 106(l) refers to ``Personnel and Services'' which the 
commenter says means that subparagraph (6) of that section does not 
provide the FAA any contracting or leasing authority. It has been 
long recognized by the courts, however, that the headings of 
statutes have little if any weight in statutory interpretation. As 
other paragraphs of this section deal with personnel matters, the 
heading is not erroneous, but it does not in any way dilute the 
broad grant of contracting, leasing, cooperative and other 
transaction agreement authority Congress gave the FAA in paragraph 
(6).
---------------------------------------------------------------------------

    Even if the only ``necessary function of the Administrator or 
Administration'' were a regulatory one, the FAA has not violated the 
appropriations restriction. Simply put, a lease is not a user fee. A 
user fee is imposed for a particular service the Government provides to 
a particular party. A lease on the other hand, is a transfer of a 
possessory interest in real, personal or intangible property that 
allows the lessee the use of that property to the exclusion of others 
including the lessor. In transferring slots to air carriers for defined 
periods of time, the FAA is not providing any air traffic or other 
service to the recipients. To the contrary, the FAA's air traffic 
controllers will not be policing or otherwise cognizant of which air 
carrier owns which slot and will provide their services in accordance 
with the FAA's Orders and policies (predominantly first come, first 
served). In transferring slots to air carriers, the FAA is allowing 
that air carrier to schedule or reserve access to that segment of 
navigable airspace that is necessary to take off or land an aircraft at 
LaGuardia during a particular half hour of time. In short, the FAA is 
leasing rather than providing a service to air carriers when it 
transfers slots to them.
    A user fee is calibrated to recover the cost to the government of 
providing a service or specific benefit to an identifiable recipient. 
See, e.g., United States v. Sperry Corp., 493 U.S. 52, 60 (1989); 
Seafarers International Union of North America v. Coast Guard, 81 F. 3d 
179, 182-83 (DC Cir., 1996). The assignment of a use of navigable 
airspace for scheduled flight operations is not a ``user fee'' under 
the principles articulated in those cases.\18\ The cost associated with 
purchasing a particular slot does not constitute a user fee. First, the 
cost associated with procuring a slot at auction is not associated with 
the cost of providing air traffic services for that particular take off 
or landing. Rather, air traffic services are paid for already through 
the Airport and Airway Trust Fund receipts. Second, the FAA is not 
creating assignments of the use of navigable airspace for scheduled 
flight operations (slots) for the purpose of raising revenue by leasing 
them to air

[[Page 60580]]

carriers. More precisely, the FAA has imposed a cap and designated 
slots for the purpose of allocating the efficient use of navigable 
airspace. Most of these slots will be awarded to current operators to 
prevent disruption of air services into and out of LaGuardia. The FAA 
is leasing a relatively small number of them, by means of an auction, 
to air carriers in order to draw in new entrant carriers and provide an 
opportunity for expansion by carriers already at the airport, thereby 
inducing airline competition at LaGuardia and ensuring that airlines 
winning the slots make the highest and best use of them. The auction is 
also designed to assure that air carriers will rationalize the use of 
their slots in accordance with the value attached to them in the 
auctions, and ultimately, in the secondary market. In the end, the 
travelling public will benefit.
---------------------------------------------------------------------------

    \18\ The FAA implemented its regulation to lease its property to 
others on April 1, 1996, well prior to the first time a restriction 
was included in the FAA's appropriation concerning the FAA's ability 
to use the operations funds appropriated to develop or implement a 
new user fee.
---------------------------------------------------------------------------

3. Leases Are Not Taxes
    A tax is generally defined as an enforced obligation to support the 
government. See United States v. La Franca, 282 U.S. 568 (1931); see 
also United States v. Butler, 297 U.S. 1, 61 (1937); Head Money Cases, 
112 U.S. 580, 596 (1884); Rural Telephone Coalition v. FCC, 8388 F. 2d 
1307, 1313 (DC Cir., 1988); United States v. City of Huntington, 999 F. 
2d 71, 73 (4th Cir., 1993). A lease acquired through a slot auction, 
however, is not a tax. It is not an amount being levied on all members 
of the industry nor is it a mandatory payment as a tax would be. 
Further, the lease is not ``imposed'' as a tax is, and is not designed 
for revenue-raising purposes.
    The auction of a limited number of slots at the airport was never 
designed to provide the FAA with a new source of revenue. Indeed, in 
the SNPRM, one of the options proposed by the FAA was to allow the 
carriers to keep all revenue after covering the FAA's costs in 
conducting the auction. Rather, the auction mechanism is intended to 
use market forces to best allocate this limited asset to those carriers 
who value it the most, placing the asset to its best and highest use. 
The FAA believes the slots auctions will inform the airlines of the 
market value of their LaGuardia slots so that slot utilization can be 
rationalized. While it is true that under today's rule, that the FAA 
may realize some revenue from the auction, the agency has also 
committed to putting that revenue back into aviation capacity 
enhancement and delay mitigation projects in the New York metropolitan 
area.
    Unlike a tax, which imposes an obligation on affected citizens or 
consumers to pay money to the state, the slot auction imposes no burden 
on a carrier based on its citizenship or use of the airport. The slot 
auction lease payments are voluntary: the FAA does not require a 
carrier to participate in an auction in order to serve LaGuardia. 
Carriers serving LaGuardia presently will be given slots through 
cooperative agreements and slightly less than ten percent of the total 
number of slots at the airport will be auctioned. Only the carriers 
winning the bids at the slot auctions will pay for the lease, and that 
amount of money will have been determined by the free market. The FAA 
will not have pre-determined a lease amount and will not attempt to 
cover its costs in conducting the auction by setting a reserve 
price.\19\
---------------------------------------------------------------------------

    \19\ As discussed in the general discussion of the auction 
procedures posted under the FAA's Acquisition Management System, the 
FAA will set a reserve price to assure that, in the event only a 
single bid is received for a particular slot, the bidding carrier 
does not actually pay the bid price. In that instance, the winning 
bidder would pay only the reserve price.
---------------------------------------------------------------------------

4. The FAA's Authority To Give Slots to Air Carriers Through 
Cooperative Agreements
    A few commenters stated that the Federal Grants and Cooperative 
Agreements Act does not provide the FAA authority to give slots as 
cooperative agreements. The Federal Grants and Cooperative Agreements 
Act defines when a cooperative agreement is to be used. The FAA's broad 
authority to award cooperative agreements, was given to the FAA in the 
Air Traffic Management System Performance Improvement Act of 1996, and 
codified as 49 U.S.C. 106(l)(6). This Act expressly confers on the FAA 
Administrator the authority to ``enter into and perform such * * * 
cooperative agreements, and other transactions as may be necessary to 
carry out functions of the Administrator and Administration. The 
Administrator may enter into such * * * cooperative agreements, and 
other transactions with * * * any person, firm, association, 
corporation * * * on such terms and conditions as the Administrator may 
consider appropriate.'' 49 U.S.C. 106(l)(6). There are several 
functions of the Administrator for which it may be ``necessary'' to 
enter into a cooperative agreement. One such function is to encourage 
the development of civil aeronautics. 49 U.S.C. 40104. By giving up to 
20 slots to all air carriers currently operating at the airport, and 85 
percent of the remaining slots to the air carriers currently operating 
at LaGuardia in proportion to their current operations, the FAA is 
encouraging those air carriers to continue their development of civil 
aeronautics at the airport and in the routes served to and from that 
airport. As several commenters noted, there is substantial economic 
value both to New York and the communities served by flights from 
LaGuardia.
    American Airlines raised an additional concern about the use of 
cooperative agreements, based upon the language in 49 U.S.C. 
40110(a)(2) that requires the FAA to receive ``adequate compensation'' 
for the disposal of property interests. The FAA finds that it is 
receiving ``adequate compensation'' through the minimum slot usage 
requirements. In addition, the slots are being given in order to 
promote civil aeronautics.
5. Leases That Terminate by Their Own Terms Are Not a ``Taking'' of 
Property
    The ATA and the air carriers argue that the proposed auctions 
constitute a taking by the government and that the taking is prohibited 
for several reasons including that it is not for a legitimate purpose, 
it lacks due process, and fair value is completely absent in the 
proposed option 1 and inadequate in option 2. The FAA strongly 
disagrees with the contention that the slot auctions contemplated in 
this rule are in any way an impermissible taking.\20\ First and 
foremost, in order to be a taking, the air carriers would need to have 
a possessory interest in the slots and they do not. For bankruptcy 
purposes, air carriers may have acquired a property interest in slots, 
as discussed above, but as also cited in those cases, if that interest 
expires under the terms under which it was granted, then there has been 
no property right to be taken. The Order establishing Operating 
Authorizations at LaGuardia was of a fixed duration and any rights the 
air carriers may have had in those operating authorizations will 
automatically terminate when this rule becomes final.
---------------------------------------------------------------------------

    \20\ The preamble to the SNPRM also addresses this issue and 
provides the Supreme Court decisions supporting the FAA's position.
---------------------------------------------------------------------------

    Slots transferred to air carriers using cooperative agreements or 
leases awarded as the result of auctions will similarly have express 
automatic termination provisions. For slots transferred using 
cooperative agreements, the air carriers' property interest would 
automatically terminate if the specified ``use or lose'' provisions are 
not met or one of the other conditions specified in the cooperative 
agreements arises. If those provisions are satisfied, then most of 
these slots will terminate in 10 years. A few will

[[Page 60581]]

have varying termination dates as agreed upon by the FAA and each 
carrier.\21\ When the termination date arrives, any property interest 
the air carrier may have in the slot similarly automatically ends. 
There is no more a taking of air carrier property than there would be 
in the eleventh year of a ten year lease of FAA real property to an air 
carrier.
---------------------------------------------------------------------------

    \21\ Perhaps more accurately, the determination of which of 
these slots have which of the specified termination dates will 
follow the process described in this rule.
---------------------------------------------------------------------------

    The ATA and the air carriers provide little support for the 
proposition that Operating Authorizations or slots awarded to carriers 
under an order with a fixed duration results in entitlement to those 
slots in perpetuity.\22\ To the extent that these commenters allege 
harm (such as having made investments in airport infrastructure) based 
on the unreasonable assumption that the status quo would remain forever 
even though the Order explicitly said it would expire, that harm is the 
responsibility of the air carriers. These carriers took a risk, for 
which they have received a return on their investment based on their 
use of the Operating Authorizations for the period specified in the 
Order. If these commenters do not wish to incur a significantly smaller 
risk \23\ for a relatively small percentage of the slots that will be 
initially be transferred to them through cooperative agreements, and 
then returned to the FAA as those agreements expire in order to be 
auctioned, the carriers are free not to apply for these cooperative 
agreements.
---------------------------------------------------------------------------

    \22\ U.S. Airways Group's main contention is that the slots are 
property of the airlines because they have held them ``more or less 
continuously'' for 40 years.
    \23\ Unlike the operating authorizations provided under the 
LaGuardia Order, where the date of the termination of the carriers' 
property interest could not be known with absolute certainty other 
than it would be when this final rule becomes effective (it 
admittedly has taken longer than the FAA contemplated to issue this 
final rule) the slots that will be awarded as the result of an 
auction have a firm term of ten years, with little right by the FAA 
to terminate prior to the end of that term. Most of the cooperative 
agreements will similarly have a ten year firm term.
---------------------------------------------------------------------------

    The ATA and the air carriers rely on what they perceive as a three 
pronged test established in Penn Central Transp. Co v. New York City, 
438 U.S. 104 (1978). In Penn Central the Court found that there was no 
compensable taking when the City's Landmarks Preservation Law would not 
allow additional stories to be added to Grand Central Station. Even 
using the three prong test articulated by the commenters, for the 
reasons stated above, the activities described in this rule would not 
constitute a Fifth Amendment taking.
    The ATA also overstates the extent of the alleged harm. Under the 
option selected in this rule, air carriers will get to keep, at a 
minimum, approximately 85 percent of their current slots and for all 
but eight airlines, they will get to keep 100 percent of their current 
slots.
    The Port Authority cites to Air Pegasus of D.C., Inc. v. United 
States, 424 F.3d 1206 (Fed. Cir. 2005), for the proposition that the 
Federal Government's sovereignty over airspace is not ownership in fee, 
but rather navigational servitude. Air Pegasus, however, stands for the 
proposition that there is no private property right of access to 
navigable airspace. If the FAA legitimately exercises this authority to 
prohibit the use of a segment of navigable airspace, there is no 
property taken for Fifth Amendment purposes. In Air Pegasus a heliport 
operator was found to have no private property rights in its facility 
even though it lost all opportunity to generate revenue (and went out 
of business) after the FAA shut down much of the airspace around 
Washington, DC following the attacks of September 11, 2001.
6. The Draft Lease Terms Included in the NPRM Were for Illustrative 
Rather Than Probative Purposes
    The ATA also uses the draft Lease agreement as evidence that the 
FAA does not have the authority to lease the slots. The ATA places far 
too much reliance on an early draft document that was provided to give 
commenters some idea of the type of lease the FAA was considering. For 
example, the standard clauses in the FAA's Acquisition Management 
System (AMS) use the word ``contract'' instead of ``lease'' because 
leases are a form of contract. The AMS, however, by its explicit terms 
applies to the acquisition and lease of property. See, Section 4.2 of 
the Acquisition Management System, and Real Estate Guidance, http://
fast.faa.gov/realestate/index.htm and T3.8.1 of the FAA's Procurement 
Guidance, also located at http://fast.faa.gov. The FAA acknowledges 
that some of the terms in the sample lease that the FAA provided for 
illustration were not appropriate for a lease of slots, and will modify 
any proposed leases accordingly. An additional opportunity to comment 
on these terms will be provided prior to any auction. These sample 
terms, however correct or incorrect, have no bearing on whether the FAA 
has the authority to enter into leases. Similarly, because Attachment A 
was not included in the sample lease, the ATA argues that is evidence 
that there is no property the FAA can lease. Attachment A will be the 
particular slots each carrier receives. Each Attachment A will be 
unique for each particular airline. Before the slots are given or 
auctioned, there is no way to tell what any particular Attachment A 
will look like, therefore no Attachment A was provided. Instead the 
sample lease simply provided notice that there will be an attachment 
that will describe which slots the lessee (or cooperative agreement 
holder) will have.

B. The FAA Has Authority To Retain the Amounts Received From the Lease 
and Disposal of Property and To Use Those Proceeds for Congressionally 
Authorized Purposes

    The commenters assert that the FAA has no authority to retain the 
amounts received from the lease of slots, and that 31 U.S.C. 3302 
requires all amounts received by an agency be deposited into the 
General Receipts account. The FAA, however, has an express exemption 
from 31 U.S.C. 3302 that it was given in 276 of the Air Traffic 
Management System Performance Improvement Act of 1996, Public Law 104-
264, codified at 49 U.S.C. 45303(c). Section 276 states that 
``Notwithstanding section 3302 of Title 31, all fees and amounts 
collected'' by the FAA, except for a few specified exceptions such as 
insurance premiums, ``shall be credited to a separate account 
established in the Treasury and made available for Administration 
activities; * * * .'' 49 U.S.C. 45303(c). These amounts are available 
immediately for expenditure for Congressionally authorized purposes and 
remain available until expended. Id.
    This paragraph of section 45303, by its unambiguous terms, applies 
to all amounts collected by the FAA, whether or not they are amounts 
from fees established under chapter 453. This is in contrast to the 
first paragraph of this section of law, which only applies to fees and 
amounts collected under chapter 453. \24\ Fees collected under chapter 
453 include fees for air traffic control services provided to planes 
that neither take off from nor land in the United States (overflight 
fees), and fees for airmen certificates and registration of 
aircraft.\25\ The FAA, however, collects amounts under authorities 
contained in

[[Page 60582]]

other chapters of law, such as insurance premiums and other amounts 
which are collected under chapter 443 of Title 49, amounts from the 
disposal of an interest in property for adequate consideration under 
chapter 401, and amounts provided from other air traffic service 
providers also under chapter 401, as well as federal, state and local 
governments and private entities under chapter 1 of Title 49.
---------------------------------------------------------------------------

    \24\ Section 45303(a) directs that all fees imposed and amounts 
collected under chapter 453 are payable to the Administrator of the 
FAA.
    \25\ Fees collected under the authority of 49 U.S.C. 45302, 
namely fees for issuing airmen certifications and registration of 
aircraft, in accordance with the express language in that section 
and language that historically has been in each appropriation, are 
credited to FAA's operations appropriation.
---------------------------------------------------------------------------

    It is a well established principle of statutory interpretation that 
laws ought ``to be so construed that, if it can be prevented, no 
clause, sentence, or word shall be superfluous, void, or 
insignificant.'' TRW Inc. v. Andrews, 534 U.S. 19, 32 (2001). 
Interpretations of statutes should ``give effect, if possible, to every 
clause and word of a statute.'' United States v. Menasche, 348 U.S. 
528, 538-39 (1955) (citing Inhabitants of Montclair Tp. v. Ramsdell, 
107 U.S. 147, 152 (1883)). Using this principle, effect must be given, 
if possible, to the words ``all fees and amounts'' except for those 
specifically excluded, should be deposited into the account established 
by 49 U.S.C. 45303(c). The only amounts the FAA is expressly authorized 
under this paragraph to exclude from this account are the insurance 
premiums and related fees it collects and deposits into the Aviation 
Insurance Revolving Fund. A plain meaning interpretation which gives 
effect to all the words in that paragraph is that all fees and other 
amounts collected by the FAA under authorities contained in other 
chapters of Title 49 or other titles should be deposited into the 
account established by 45303(c). This would include any amounts 
collected from the lease of FAA property under the authority of 49 
U.S.C. 106(n) and 49 U.S.C. 40110(a)(2).

C. The Auction of Slots Does Not Affect the Proprietary Rights of the 
Port Authority

    Similarly, both the Port Authority and the Airports Council 
International--North America (ACI-NA) as well as American Airlines 
believe that the SNPRM impinges on the proprietary rights of the Port 
Authority. The ACI-NA believes that the FAA's powers under 49 U.S.C. 
Section 40103 do not allow us to auction slots. In support of its 
position, the ACI-NA also cites to Western Air Lines v. Port Authority 
of New York and New Jersey, 658 F. Supp. 952, 956-57 (S.D.N.Y. 1986), 
aff'd, 817 F.2d 222 (2nd Cir. 1987). The FAA maintains that Western 
supports its position more than that proffered by the ACI-NA. Western 
concluded that the perimeter rule established by the Port Authority was 
a valid restraint exercised in accordance with the Port Authority's 
proprietary interest. Western did not suggest that the proprietary 
interests of the Port Authority take precedence over FAA regulation; 
instead Western explicitly states that ``[t]his Court concludes that, 
in the absence of conflict with FAA regulations, a perimeter rule, as 
imposed by the Port Authority to manage congestion in a multi-airport 
system, serve an equally legitimate local need and fits comfortably 
with that limited role, which Congress has reserved to the local 
proprietor.'' Id. at 958. Therefore, even if there were a conflict 
between the proposed rule and the Port Authority's proprietary rights, 
the FAA's rule would prevail under Western.
    The establishment of slots under Sec.  40103 is consistent with the 
authority that the FAA has exercised at LaGuardia for the past several 
decades. Western is easily distinguishable from the current rulemaking 
in that this rulemaking does not affect in any way how the Port 
Authority deals with its airport including use of its terminals. In 
fact, there will be 95 percent of the air traffic coming into the 
airport during the same time periods as currently exists at the 
airport. The only change will be the result of the five percent 
reduction in capacity.
    The Port Authority's assertion is that changing the airlines that 
come in or the number of flights interferes with its proprietary 
interests. However, through its regulatory process in certifying 
airlines or capping arrivals and departures, the FAA can and has 
affected the air traffic in and out of LaGuardia and neither the Port 
Authority nor any other entity has challenged the FAA's responsibility 
to issue certifications or control the flow of air traffic, much less 
suggested it affects the proprietary rights of airport authorities. 
Additionally, the Port Authority has always had to accommodate carriers 
under the HDR by accommodating airlines that leased, purchased, or 
traded slots under the HDR; that received slots through FAA-run 
lotteries; or that were granted slot exemptions under 49 U.S.C. 47174 
and 41716. Furthermore, the Port Authority is obliged to file 
competitive access reports to the Secretary if it denies access to a 
requesting carrier at LaGuardia. Accordingly, the Port Authority may 
not claim that the fact that a slot is acquired through an auction 
presents any unusual accommodation issues that it has not routinely 
dealt with in the past.

D. The FAA Has Complied With the Administrative Procedure Act

1. The Docket Contained Adequate Information for Meaningful Comment on 
the Rulemaking Proposal
    Several commenters also claimed the FAA failed to meet the 
requirements of the Administrative Procedure Act (APA) (5. U.S.C. 551, 
et seq.). The Port Authority claimed that relevant documents either 
were not submitted to the docket at all, or in a form and time 
insufficient to permit adequate analysis by interested parties. In 
particular, the Port Authority suggested the draft lease documents were 
submitted to the docket well after the initiation of the comment 
period, contained vague terms, and did not adequately set forth the 
conditions for default. The Port Authority maintained the default 
conditions are critical because of the impact of a default on the Port 
Authority's gate leasing agreements. The Port Authority also claimed 
that it could not adequately evaluate the appropriateness of the 
proposed usage requirement and the potential impact on small 
communities because relevant documentation was, in the first instance, 
not submitted at all, and in the second instance, submitted for the 
first time only days before the close of the comment period.
    The ATA commented that the technical report explaining how slots 
would initially be allocated does not adequately describe how the FAA 
intends to draw down operations in excess of 75 per hour (in the 0900 
and 1700 periods) under Option 2. It claimed this omission calls into 
question whether the FAA truly meant to cap operations at 75 under 
Option 2.
    The FAA believes the docket submissions provided interested parties 
with sufficient information to meaningfully comment on the proposal. 
The draft lease agreement for Unrestricted Slots, while provided 
relatively late during the comment period, is directly related to the 
FAA's potential auctioning of the slots under its acquisition 
authority. The draft cooperative agreement, which would govern the 
lease terms of the Common and Limited Slots, is arguably more directly 
related to the instant rulemaking since they will initially be 
allocated to carriers under this rule. While the Port Authority 
questions the comprehensiveness of these draft leases, they are in 
fact, largely complete. The FAA is intentionally placing only limited 
constraints on the slots. The goal of this rulemaking is not to impose 
complicated and intrusive constraints on the slots. Rather it is to 
allow for a

[[Page 60583]]

more efficient air traffic system in and around LaGuardia while 
permitting some access to new entrants and stimulating the free market. 
In order to maximize efficiencies, the FAA must assure that the 
majority of the slots have a usage requirement. That requirement, which 
is mandated by today's rule, is the primary restriction on the Common 
Slots. Limited Slots are granted for a shorter period of time, but 
otherwise largely mimic the Common Slots. The Unrestricted Slots are 
even less constrained with no usage requirement.
    As to the Port Authority's assertion that the potential impact on 
small community service was only provided days before the comment 
period closed, the Port Authority is mistaken. This documentation was 
submitted a second time at the Port Authority's request. It had claimed 
that it could not read the data in the original submission. However, 
neither the FAA nor any other commenter to the rulemaking claimed to 
have any difficulty reading the original document. The second 
submission was filed as a courtesy to the Port Authority. As to the 
Port Authority's final claim that it was unable to evaluate the 
appropriate usage rate because there was no documentation in the 
docket, the FAA continues to believe that the Port Authority is 
uniquely situated to evaluate the extent to which carriers utilize the 
existing slots because it controls the gates at the airport. The 80 
percent usage requirement at the airport has been in place at LaGuardia 
for approximately 25 years, and the FAA has not historically seen a 
need to further increase the usage requirement. The FAA's suggestion in 
the SNPRM that the Port Authority demonstrate why it believed that the 
existing usage requirement was too lenient was based on the fact that 
the Port Authority made this claim without any data. The FAA assumed 
that, as the airport proprietor, the Port Authority had some basis for 
its claim and suggested the airport provide any relevant data. Thus, 
the FAA is puzzled as to why the Port Authority would now claim that it 
needs to see data generated by the FAA to substantiate its claims.
    As to the ATA's claim that the technical report failed to describe 
how the FAA would pull down a total of three operations under proposed 
Option 2 when the report explained how those same three operations 
would be pulled down under proposed Option 1, the FAA believes that the 
technical report was sufficiently clear. In any event, the FAA has 
decided against adopting Option 2 and providing a separate reduction in 
capacity in the two hours where existing scheduled operations exceed 
75.
2. The Discussion of the Auction Process Provided Sufficient Detail for 
Meaningful Comment on the Rulemaking Proposal
    US Airways argued the FAA provided insufficient time to comment on 
the details of the auction process. United claimed that the SNPRM 
should have proposed dates as to when the auctions would be conducted 
and should have committed to providing a certain amount of advance 
notice. The ATA claimed that the FAA violated the APA by failing to 
account for carrier's costs in participating in an auction.
    In the SNPRM the FAA provided only a general discussion of the 
procedures that would govern any future auction. This general 
discussion was provided only to give interested parties a context for 
the rulemaking. One of the primary complaints about the NPRM was that 
the FAA failed to give any detail about the market-based mechanism it 
intended to use under that proposal. Consequently, the commenters 
provided very little analysis of the proposal to have ten percent of 
the slots at the airport expire every year, other than to say that it 
was overly disruptive. Because the FAA intended at that point to impose 
a market-based reallocation mechanism by regulation, the FAA believes 
the commenters complaints were valid. The agency does not believe that 
complaint was valid with regard to the SNPRM. However, the agency was 
also concerned that while the SNPRM did not propose to implement a 
market-based reallocation mechanism, commenters would continue to 
complain that they could not meaningfully comment if context were not 
provided. Thus, the FAA decided to provide a general description of the 
likely auction procedures to encourage meaningful comment on the 
underlying proposal, which is that after imposing a ten-year cap to 
address congestion, a certain number of slots would revert to the FAA 
for retirement or reallocation. The FAA has provided a more detailed 
discussion of the procedures that would be used in an auction. 73 FR 
53477. September 16, 2008. The agency provided for a 15-day comment 
period which closed on October 1, 2008. Based on the comment 
submissions, the FAA may decide to refine any final auction procedures. 
That refinement, however, does not impact this rule.
    Some commenters claimed that because the FAA has not fully 
developed the auction process, the FAA cannot finalize the proposed 
rule. Like the ATA and the draft lease documents, these commenters 
place far too much reliance on procedures unrelated to the rulemaking. 
The SNPRM discussed in detail the process for providing slots at 
LaGuardia: approximately 85 percent of them will be provided to 
incumbent air carriers operating at that airport through cooperative 
agreements and the remaining ones will be either transferred via lease 
or retired. The particulars of the auction process (e.g., will it all 
be via the internet or will paper bids be allowed, will the help desk 
be available 24/7 or only during normal business hours, the exact day 
when the auction will take place, whether successive rounds of bidding 
will be allowed, whether multiple bids from the same carrier will be 
permitted) are not relevant to this rule. The FAA will, in accordance 
with its Acquisition Management System, continue to provide adequate 
notice of its planned auction procedures and solicit comment on those 
procedures prior to conducting any auction.
    The ATA's claim that not ascribing the costs of the auction to the 
rule violates the APA likely stems from unclear drafting on the part of 
the FAA. We have included the auction costs and reallocation benefits 
in the final regulatory evaluation for this rule.
3. The FAA Adequately Considered Alternatives
    Despite the fact that the FAA has proposed a total of three 
different allocation methods in this rulemaking, several commenters 
claimed that the agency failed to adequately explore additional 
alternatives in violation of the APA. An agency is not required to 
consider all possible alternatives when engaging in rulemaking. The 
fact that the commenters dislike the alternatives considered does not 
mean that the FAA has pre-decided the outcome by failing to recognize 
that there may be other alternatives. In fact, the agency proposed 
multiple options. In addition, it has considered many of the 
alternatives that the commenters recommended in response to the SNPRM. 
As discussed later in this document, the FAA has decided against 
adopting these approaches in lieu of proceeding with a final rule. 
However, aspects of many of these recommendations have been 
incorporated into the rule or are being addressed elsewhere.

IV. Discussion of the Final Rule

A. Allocation of Slots at LaGuardia

    The FAA believes that at least for the next several years, 
LaGuardia will likely be oversubscribed in terms of its

[[Page 60584]]

physical ability to handle aircraft. Simply put, expansion of the 
airport by adding runways is not a viable option given its location. 
Accordingly, a cap on operations at the airport is necessary to provide 
for the efficient use of the NAS.
    No commenter has suggested that there is no need to cap the 
airport. While the ATA had initially claimed in 2006 that there was 
inadequate justification to retain the cap, no commenter, including the 
ATA, still appears to believe the cap should be lifted.
    Rather, the dispute surrounding this rulemaking revolves around the 
FAA's proposal to either retire or reallocate slots at the airport. 
Simply put, incumbents at the airport are largely satisfied with the 
status quo. While there were mixed opinions about whether any slots 
should be retired, the vast majority of air carriers opposed any 
measure that would result in a carrier holding fewer slots under the 
final rule than it held under the LaGuardia Order. Of those carriers 
who were open to reallocation, they tended to support an administrative 
reallocation mechanism, noting the controversy surrounding the market-
based allocation mechanism proposed in the SNPRM.
    The Port Authority noted that the FAA has asserted that the 
proposed measures were designed to address severe delays, preserve 
consumer choice, maintain airline competiveness and preserve the 
affordability of airfares. Most commenters agreed, in some form, with 
the Port Authority's assessment that the proposal achieved none of 
these objectives. Rather, most commenters noted that the reallocation 
mechanism did nothing to address congestion and could have the 
unintended consequence of harming competition and restricting passenger 
access because of the loss of service to small communities.
    United argued that rather than encouraging a market-based 
allocation method with a robust secondary market, the proposal would 
have the opposite effect--imposing a new and more market-intrusive 
regulatory scheme. To the extent there is any market failure at 
LaGuardia, it posited that failure is a capacity problem that is best 
remedied by the imposition of a cap.
    Not only is the FAA required to ensure the efficient use of the 
NAS, but it must do so in a manner that does not penalize all potential 
operators at the airport by effectively shutting them out of the 
market. The FAA cannot simply walk away from an airport once it has 
imposed caps, but rather should take steps to ensure that there are, in 
fact, competitive market forces and actual and potential competition. 
Competition at an airport benefits the flying public by providing price 
competition and expanded service. The ability of carriers to initiate 
or expand service at the airport is hindered, in large part, by the 
imposition of the cap. Accordingly, the FAA believes it must strike a 
balance between (1) promoting competition and permitting access to new 
entrants and (2) recognizing historical investments in the airport and 
the need to provide continuity. It is not the role of the Government 
either to dictate particular business models or to constrain a market 
and provide no means for others to enter that limited market.
    The FAA believes that it is well within the agency's authority in 
49 U.S.C. 40103 to provide some mechanism for reallocation. As was the 
case with the HDR, the LaGuardia Order provides for a lottery of new 
and returned capacity but does not provide for the reallocation of 
capacity that is actively being used. The FAA believes this allocation 
method may be justified as a short-term measure, but it is inadequate 
for any cap intended to last for more than a couple of years. Indeed, 
Congress appears to have shared similar concerns when it allowed for 
slot exemptions in AIR-21. Today's proposal attempts to strike the 
appropriate balance by actively developing a robust secondary market 
that properly values the limited asset that the FAA created.
1. Proposed Options
    The FAA proposed two different options for allocating slots in the 
SNPRM. Under both options the vast majority of slots would have been 
grandfathered to existing carriers at the airport, with a relatively 
small minority either retired or auctioned off in the free market. Both 
options allowed for a carrier base of operations for which up to 20 
slots would be automatically allocated to the carrier as Common Slots. 
These slots would not count toward the calculation of slots that would 
revert to the FAA for retirement or reallocation.
    Under Option 1, ten percent of a carrier's Operating Authorizations 
above its base of operations would revert to the FAA over a five-year 
period. The FAA proposed that eight percent would be used for 
reallocation and two percent would be retired for delay mitigation. The 
FAA also noted that the amount of delay mitigation with a two percent 
retirement rate may be too low to adequately address congestion and 
noted that it may increase that number. The monies collected under an 
auction of reallocated slots would be utilized by the FAA for delay-
mitigation efforts in the New York metropolitan area. Some of these 
efforts could involve a number of initiatives identified by the NYARC 
as measures that could reduce congestion in the area.
    Under Option 2, 20 percent of a carrier's Operating Authorizations 
above its base of operations would revert to the FAA over five years. 
All twenty percent would be reallocated, but the carrier would retain 
the net proceeds, rather than the FAA. The carrier initially allocated 
the slot would be unable to bid on the slot because it could bid 
unreasonably high amounts in order to keep out competitors, knowing 
that the money would come back to it as auction proceeds.
    The FAA continues to believe that under either option a sufficient 
number of slots would be available for reallocation to permit access to 
the airport and establish a fair market value for slots that could then 
translate into a robust secondary market. While Option 2 allowed for an 
even greater number of available slots, it also had the potential to 
prevent the most interested carrier, i.e., the one initially allocated 
the slot, from bidding on it. While the FAA anticipated that a carrier 
could obtain a comparable slot, either through the FAA auction or on 
the secondary market, there was no guarantee that would happen. This 
concern was raised by several commenters who noted that the inability 
for the carrier to bid on its previously held slots is even more 
troubling because that carrier may have the greatest incentive to 
retain the slot based on established service. Several commenters, 
including the ATA, Delta and US Airways, suggested that the FAA should 
not limit the number of bidders and possibly the most interested 
bidder.
    Several commenters questioned why ten percent of slots would have 
expired under Option 1 but 20 percent of slots would have expired for 
reallocation under Option 2. Specifically, ATA commented that if the 
FAA believes that ten percent of slots are enough to create a secondary 
market, then why did it propose Option 2? Additionally, Delta suggested 
that selecting twenty percent of slots in Option 2 is arbitrary and 
cannot be reconciled with the selection of ten percent of slots in 
Option 1.
    Unique among the commenters was United, who argued that Option 1 
was particularly unfair because the carrier initially holding the slot 
would not be entitled to receive any compensation for its loss.
    As noted above, the FAA believes either approach would help 
stimulate a secondary market and would lead to a proper assessment of 
the slots' true

[[Page 60585]]

value. The agency also believes that either approach would have a 
minimal impact on operations at the airport and would avoid much of the 
potential disruption associated with its proposals in the NPRM. 
However, the agency is persuaded that Option 1 maximizes the efficiency 
of the slot because the carrier who may value it the most may be the 
one who held it initially. The FAA has decided to adopt the first 
option, except that it will retire five percent of the airport's 
capacity by lowering the hourly cap for scheduled operations to 71. The 
rule also provides for the reversion of approximately ten percent of 
the total number of slots currently at the airport to provide access.
2. Categories of Slots
    Under today's rule, the FAA will lease property interests in slots 
to carriers for a period of up to ten years, the date the rule sunsets. 
There will be three categories of slots: Common Slots, Unrestricted 
Slots, and Limited Slots.
    Common Slots are those slots grandfathered to carriers currently at 
the airport. They will be awarded to the carriers under a cooperative 
agreement for the duration of the rule. The cooperative agreement will 
provide carriers with a ten-year leasehold interest. Once the rule 
sunsets, all interests will revert to the FAA. Unlike slots allocated 
under the HDR and Operating Authorizations allocated under the 
LaGuardia Order, carriers will be granted clear property rights to 
Common Slots, which could be collateralized or subleased to another 
carrier for consideration. These property rights, however, will not be 
absolute. Common Slots will be subject to reversion to the FAA under 
the rule's minimum usage provision, may be temporarily withdrawn for 
operational reasons, and could be subject to retirement should the FAA 
need to further reduce the cap.
    Those slots not categorized as Common Slots will be categorized 
initially as Limited Slots and then as Unrestricted Slots once they are 
reallocated.
    Unrestricted Slots are slots that a carrier would acquire as a 
leasehold. Unlike slots allocated under a cooperative agreement, these 
slots will require monetary consideration to the FAA. Since a carrier 
leasing an Unrestricted Slot will be required to do so because of 
government action, these slots will not be withdrawn by the FAA under 
the use-or-lose provisions, for operational reasons, or to further 
reduce the cap should such reductions be necessary. As with Common 
Slots, Unrestricted Slots will expire when the rule sunsets.
    Limited Slots are slots that are identified for retirement or 
auction. Those Limited Slots identified for auction will be leased to 
the carriers under a cooperative agreement for a period of 1-4 years 
\26\ so that they can be reallocated after that period of time. Limited 
Slots will convert to Unrestricted Slots after they are reallocated. As 
with Common Slots, Limited Slots may be withdrawn under the proposed 
use-or-lose provision, or for operational reasons. Because they are 
already awarded for less than five years, they will not be used to 
reduce capacity should additional reductions to the cap be necessary.
---------------------------------------------------------------------------

    \26\ Twenty percent of the Limited Slots that will be 
reallocated will not be leased to carriers as Limited Slots. This is 
because the FAA intends to auction them as Unrestricted Slots 
shortly after the final rule takes effect. Likewise, the Limited 
Slots scheduled for retirement will not be leased to carriers, 
although the carrier will be entitled to use the slot until March 8, 
2009.
---------------------------------------------------------------------------

3. Initial Allocation of Slots
    No later than this rule's effective date, the FAA will notify all 
carriers which slots they will initially be allocated under the rule. 
The FAA will make this determination based on slots usage of the 
underlying Operating Authorizations the week of September 28 through 
October 4, 2008. The FAA proposed in the NPRM to make this 
determination based on operations the first full week of 2007, but 
believes the later date better assesses the operating status of 
carriers now. One carrier that held Operating Authorizations in January 
2007 is no longer in business, although it continues to hold an air 
carrier certificate. While those Operating Authorizations are currently 
being operated by another carrier solely within its marketing control, 
the FAA believes it is simply cleaner to allocate the slots to the 
holder of the Operating Authorization only if the carrier is still 
operating at the airport. Likewise, some Operating Authorizations have 
been or may be returned to the FAA under the LaGuardia Order's use-or-
lose provisions and will not be allocated to the carrier that held them 
nearly two years ago.
    Upon the rule's effective date, each carrier at LaGuardia will 
automatically be awarded up to 20 Common Slots, which will constitute 
the carrier's base of operations. The FAA believes this is a rational 
approach to assuring that no carrier is impacted at a level that could 
seriously disrupt its existing operations. Air Canada will be awarded 
an additional 22 Common Slots because of the United States' 
international obligations with Canada. Eighty-five percent of the 
remaining slots will also be grandfathered as Common Slots to the 
carrier holding the corresponding Operating Authorization under the 
LaGuardia Order. The FAA has decided to grandfather the majority of 
slots at the airport in order to minimize disruption and to recognize 
the carriers' historical investments in both the airport and the 
community.
    As noted above, the remaining slots will be categorized as Limited 
Slots. Approximately one third of the Limited Slots will be retired by 
the FAA on March 8, 2009, the beginning of the 2009 Summer Scheduling 
Season. The remaining Limited Slots will be reallocated via auction 
over a five-year period. The number of slots that a particular carrier 
will have classified as Limited Slots is based proportionally on the 
carrier's presence at the airport, taking into consideration each 
carrier's base of operations. The FAA will inform all carriers that 
will be awarded Limited Slots how many Limited Slots they will have no 
later than the rule's effective date.
    An affected carrier will have ten days to identify 50 percent of 
the total number of Limited Slots. During the following ten days, the 
FAA will determine through a randomized process the remainder of slots 
that will be categorized as Limited Slots, taking into account the need 
to retire some slots at every hour and the need to have capacity 
available for reallocation throughout the day.
    In determining which slots should be designated as Limited Slots, 
the FAA will initially exclude from consideration slots held during all 
hours where carriers have collectively determined five or more slots 
should be Limited Slots.\27\ This approach will assure slots will be 
available for auction throughout the day. The FAA will also determine 
in what year (0-4) each Limited Slot will revert to the FAA for 
reallocation and which slots will be retired. In this way, all carriers 
will know within 20 days of the rule's effective date what slots will 
become available for purchase and when.
---------------------------------------------------------------------------

    \27\ In the SNPRM, the FAA had proposed that it would initially 
exclude hours where carriers had collectively identified two slots 
as Limited Slots. Since generally four slots will be retired in 
every hour, the FAA believes it is appropriate to increase that 
number from two to five.
---------------------------------------------------------------------------

    The time windows for the Limited Slots will be evenly distributed 
over the day to the extent possible. The duration of each Limited Slot 
will be assigned by a fair allocation process such that each affected 
carrier's aggregate lease

[[Page 60586]]

duration will be approximately equal to that of the other affected 
carriers.
    Although most stakeholders are opposed to any slots being withdrawn 
and auctioned, two respondents thought the auction proposals might be 
too restricted or limited. The National Air Carrier Association 
supported encouraging more competition at LaGuardia but questioned 
whether a sufficient number of slots will be available for auction to 
result in more competition. The Federal Trade Commission suggested that 
the ability for auctions to improve allocative efficiency at LaGuardia 
is limited by the small number of slots being auctioned. Additionally, 
the Federal Trade Commission is concerned that the few slots that are 
available for auction are biased towards the least valuable slots. The 
FAA believes the fair allocation methodology resolves that concern.
    The FAA recognizes that the overall number of slots that will be 
auctioned is relatively small, particularly when compared to its 
original proposal to reallocate ten percent of the airport's total 
capacity every year. Such an approach would not only have assured 
access to the airport, but would arguably maximize the efficiency of 
the system, assuming no other constraints. However, as discussed in the 
SNPRM, the carriers would in fact face other constraints. Based on the 
comments of the Port Authority to the original proposal, the largest 
constraint could be the ability of the Port Authority to handle its 
facility as airport proprietor.
    The ATA claimed that carriers need to know which of its slots are 
Limited Slots 90 days before the effective date of the rule in order to 
be compliant with the rule on the effective date. While the rule 
becomes effective on December 9, 2008, carriers can continue their 
operations without change until March 8, 2009, the first day of the 
summer scheduling season. Accordingly, the FAA believes carriers will 
have no problems setting a compliant schedule well in advance of the 
summer scheduling season.
4. Retirement of Slots
    In the NPRM and SNPRM, the FAA proposed to cap weekday and Sunday 
afternoon operations at 81 per hour (75 for scheduled operations and 
six for general aviation). The airport is already capped under the 
LaGuardia Order at 78 (75 for scheduled operations and three for 
unscheduled operations). This rule replaces that Order, although 
carriers will be allowed to use the slots held under the Order until 
March 8, 2009. On that day, the cap on scheduled operations will 
decrease to 71 per hour. This represents a five percent reduction in 
capacity at the airport. Based on the modeled results, lowering the 
hourly cap from 75 to 71 could reduce mean delays by approximately 41 
percent compared to modeled delays in August 2007. The FAA selected the 
new cap of 71 hourly scheduled operations because delays begin to 
increase sharply after that level of sustained demand. The hourly 
reductions will not result in eliminating all delay at the airport, 
especially when operating conditions, such as adverse weather, reduce 
capacity. However, congestion-related delays are expected to be 
measurably reduced.
    The FAA does not intend to raise the new cap unless conditions at 
the airport improve sufficiently to permit additional operations 
without undue delay. The FAA also specifically reserves the right to 
further lower the cap should operations at the airport remain unduly 
delayed. The FAA anticipates it would call for a Schedule Reduction 
Meeting should further reductions be warranted. In any case, the FAA 
would fully meet its obligations under the APA at that time, and this 
rule does not provide a means for further cap reductions absent 
subsequent action on the part of the agency.
    The Port Authority claimed in response to the NPRM that 75 
scheduled operations per hour are too high; American Airlines echoed 
this concern in its comments on the SNPRM. United argued against 
retiring any existing slots. It claimed that any reduction in the 
number of slots is contrary to market efficiencies because it would 
eliminate an economically valuable asset.
    The ATA argued that the FAA provided no justification for lowering 
the cap: If the FAA believes there is a need to reduce capacity below 
the cap, the need would exist regardless of allocation mechanism and 
should be fully explained. Many of the commenters also argued that the 
SNPRM results in almost no reduction in delays, with average delays 
reduced by less than one minute.
    American Airlines supported an overall reduction in the existing 
cap at the airport, noting that delays were too high. It also supported 
a flexible system to raise the cap if sufficient improvements are made 
to the airspace. United, on the other hand, was critical of the FAA's 
proposal to increase the cap when greater efficiencies in the airspace 
are realized and suggested the agency instead engage in rulemaking 
prior to increasing the cap. The ATA agreed with United that the FAA 
should not raise the cap without seeking input from stakeholders. 
United also linked the proposal to increase the cap with the proposed 
auction mechanism.
    The FAA recognizes that both the NPRM and SNPRM primarily focused 
on the efficient allocation of slots and did not propose to 
significantly reduce delay from levels established under the HDR after 
AIR-21 and the LaGuardia Order. Even under Option 1, the level of delay 
mitigation would have been minimal, with only 18 slots retired after 
five years. The agency estimated that at the end of the scheduled 
retirements, the average minutes of delay would be reduced by 
approximately one minute as the result of scheduled retirements. The 
FAA specifically noted in the SNPRM that reducing the cap could be the 
best way to address delay mitigation. Accordingly, the agency 
specifically requested comment as to whether it should reduce the 
maximum number of scheduled operations from 75 to a lower number. In 
addition, the agency sought comment on whether it should maintain a 
maximum number of scheduled operations at 75 per hour but increase the 
number of slots that would be retired. Finally, there are a few hours 
where there are slightly fewer than 75 scheduled operations. The FAA 
sought comment on whether these slots should be retired or reallocated 
via an auction.
    The FAA has decided that the cap at LaGuardia is too high and the 
type of reductions anticipated under proposed Option 1 were too low, 
and would be achieved over too long a period of time, to be meaningful. 
Prior to the implementation of AIR-21, scheduled hourly operations at 
the airport were limited by the HDR to 62. While the FAA does not 
believe the delay modeling currently justifies a reduction to these 
levels, it does believe the modeling justifies a greater reduction than 
proposed in the SNPRM. Based on the same modeling technique used to 
determine the appropriate cap at JFK and Chicago O'Hare International 
Airport in Schedule Reduction Meetings addressing those airports, the 
FAA has determined that the appropriate cap on scheduled operations at 
LaGuardia is 71.
    In the SNPRM, the FAA proposed to randomly select operations in 
excess of 75 in those hours where there are more than 75 scheduled 
operations. These operations would have been designated as Limited 
Slots and would have been retired, so that there are no hours where 
there are more than 75 scheduled operations. The FAA has decided there 
is no need to treat these slots differently from the other slots that 
are retired to reduce the hourly cap on operations. Rather, the impact 
of reducing the

[[Page 60587]]

hourly cap is that, for these two hours, five or six slots will be 
retired rather than four.
5. Market-Based Reallocation of Slots
    As discussed earlier, the FAA proposed two separate options for 
reallocating slots at LaGuardia. The FAA has decided to adopt a 
modified version of Option 1. The commenters have largely combined the 
two goals of this rulemaking, to address congestion and to provide for 
a more equitable and efficient allocation of capacity, into a single 
goal. Many commenters, including the ATA, United and American Airlines, 
said that it is the cap on hourly operations and not auctions that will 
reduce delays at LaGuardia. Furthermore, they contended that the cap 
and the auction are distinct proposals, with distinct costs and 
benefits; while a cap may reduce delays, an auction will merely add 
costs to carriers.
    US Airways claimed that the FAA is more interested in experimenting 
with auctions at LaGuardia than improving congestion and delays. 
Similarly, American Airlines said that the level of competition in the 
New York market appears to be the FAA's greatest concern rather than 
the amount of congestion. According to American Airlines, although the 
New York-area airports are some of the most competitive, the SNPRM 
suggests nothing that would reduce congestion and delays.
    The ATA claimed that the only congestion-related measure included 
in this proposal is the cap on operations, which is already in place 
under the LaGuardia Order and the retirement of a small number of 
slots. It also argued that the FAA has not articulated how its auctions 
will translate into delay mitigation or why the high costs of auctions 
are worth the burden and risk.
    The FAA fully agrees that the reallocation method, regardless of 
what it is, will not have a direct impact on controlling delays. That 
type of control is achieved by extending the cap beyond the LaGuardia 
Order, which was never intended to be anything more than a bridge 
between the HDR and a final rule. While some commenters have argued 
that it is unreasonable for the FAA to even contemplate a situation in 
which LaGuardia is unconstrained, that is exactly the result that the 
expiration of the HDR, without further regulatory action, achieves. 
Because the FAA will now be reducing the size of the cap, the delay 
reduction will be even more significant. The FAA believes that the 
reallocation mechanism may lead to an air transportation system that is 
more efficient for the travelling public, even though that mechanism 
does not reduce the number of aircraft flying in and out of the 
airport. It is possible that carriers may decide, at least on some 
routes, to increase the size of the aircraft they are using. While 
nothing in today's rule dictates this result, it is certainly at least 
generally foreseeable.
    While most of the carriers were categorically opposed to a market-
based reallocation mechanism, that opposition was not universal. The 
FTC argued in favor of an auction mechanism, recognizing the value 
associated with providing a carrier with a direct financial incentive 
to maximize the value of a slot.
    The FAA has decided to finalize its proposal because it believes 
that a market-based mechanism such as an auction is the best way to 
assure that this scarce resource is allocated to the user who values it 
the most. As a steward of public property, the FAA has an obligation to 
strive toward getting the best value for that property. Other Federal 
agencies have used auctions to determine who values Federal property 
the highest. In addition, a number of papers regarding the societal 
value of allocating slots via an auction have been published over the 
past several years,\28\ and the FAA finds the arguments made in favor 
of auctions in those papers compelling. Simply put, a carrier who is 
required to purchase a slot, will value it more highly than a carrier 
who received the slot at no cost. Accordingly, the carrier will ensure 
the slot's best economic use, i.e., putting it to the use valued most 
highly by the traveling public. If the carrier cannot profitably use 
the slot, it will presumably sublease the slot to another carrier who 
can maximize its efficient use. In addition, a carrier wishing to gain 
a presence at an airport can purchase the lease from the government 
directly rather than attempting to obtain slots solely from its 
competitors, increasing competition at the airport.
---------------------------------------------------------------------------

    \28\ Cf., DotEcon Ltd., Auctioning Airport Slots--A Report for 
HM Treasury and the Department of the Environment, Transport and the 
Regions, April 2001; Whalen and Carlton, Economic Analysis Group 
Discussion Paper--Proposal for a Market-Based Solution to Airport 
Delays, October 2007; Brueckner, Slot-Based Approaches to Airport 
Congestion Management, May 2008.
---------------------------------------------------------------------------

    The value associated with allocating a scarce government resource 
via an auction was also recognized by Congress in the 
telecommunications context when it passed the Licensing Improvement Act 
of 1993. In the section-by-section analysis of the statute, the 
committee report specifically references promotion of efficient and 
intensive use of the electromagnetic spectrum as one of the objectives 
the committee believed the new legislation would achieve. 1993 USCCAN 
at 580.
    As noted earlier, the agency's own experiences with slot-controlled 
airports under the HDR are consistent with the observations made in the 
literature. Under the Buy/Sell Rule, carriers wishing to enter the 
market complained they were unable to gain market-share, and the 
underutilization of those slots allocated to the carriers at no cost 
forced the agency to impose a usage requirement.
    The auction process contemplated by today's rule will guarantee 
carriers wishing to initiate or extend operations at the airport an 
opportunity to acquire slots. In January 2009 there will be at least 24 
slots available in the auction. In the following four years there will 
be at least 22 slots available.\29\ Since carriers need pairs of slots, 
this is equivalent to 11 to 12 round-trips per day. Assuming a minimum 
competitive pattern of service is between two and three round-trips per 
day, the equivalent of four to five routes would be available per year. 
Carriers would be free to supplement their holdings in the secondary 
market, which the agency believes will be stimulated by this rule.
---------------------------------------------------------------------------

    \29\ The agency anticipates that there may be additional slots 
available for auction because of returned or unallocated capacity.
---------------------------------------------------------------------------

    The FAA intends to auction off 20 percent of the Limited Slots that 
are not retired annually. Any carrier may bid on the slot, and it will 
be awarded to the highest responsive bidder. The winning parties may 
commence operations using the newly acquired slots on the second Sunday 
of the following March. In the unlikely event no bids are received, the 
FAA will retire the slot until the next auction. Allowing the carrier 
holding the Limited Slot to retain it, as suggested by some commenters, 
could encourage the carrier to simply not bid on the slot. The FAA will 
retain all auction proceeds. After recouping its costs, the FAA intends 
to spend the remainder of the proceeds on congestion and delay 
management initiatives in the New York City area. The FAA has already 
established a receipt account for these proceeds.
    The FAA will not reallocate slots after the first five years (other 
than those returned under the rule's use-or-lose provisions) because it 
believes that ideally slots should transfer from one carrier to another 
through the secondary market. The FAA has decided to be involved in a 
limited number of slot transactions during the first five years of the 
rule to help establish that market.

[[Page 60588]]

Not only will the auctions help create a market for slots, but all 
carriers will be able to assess the true market value of a slot. Armed 
with information on how much a given slot is likely to be worth on the 
open market, carriers (and their shareholders) will be in a better 
position to determine whether to continue operating marginally-
performing flights or to sublease the corresponding slot.
    The FAA believes that merely relying on the secondary market to 
accurately establish the value of slots, as some commenters have 
suggested, is problematic. A fundamental problem with the secondary 
market cannot be addressed without first addressing the primary market. 
Incumbents have significant incentives not to sell or lease out slots 
to airlines that will compete with their networks to a substantial 
degree. Thus, incumbents rationally foreclose entry both to other 
incumbents and to new entrants. One of our objectives in this rule is 
to change those incentives and reduce the likelihood that incumbents 
can foreclose entry and potential competition indefinitely.
    In addition, in the secondary market a carrier may rely on tangible 
assets that do not have the same monetary value for all carriers or 
even non-tangible assets, such as goodwill or a pre-existing 
relationship, when evaluating whether to lease a slot. Thus, while the 
slot may have a real value for the carriers engaged in the 
negotiations, that value cannot be translated into a ``fair market 
value'' that can be relied on throughout the industry as a reasonable 
valuation of the slot. The agency believes that it should not take more 
than five years for a robust secondary market to develop.
    Given the physical constraints at the airport and the carriers' 
ability to sublease slots if the operations associated with the slots 
are not financially productive, the FAA anticipates that there will be 
little new or returned capacity for most of the time the rule is in 
effect. With the advent of NextGen technology, there may be new 
capacity in the later years of the rule. To the extent there is any new 
or returned capacity, the FAA intends to auction off that capacity, and 
will categorize the slots as Unrestricted Slots.\30\
---------------------------------------------------------------------------

    \30\ If any slots were not bid on in the final year of the 
annual auction, the FAA would retire those slots until it 
reallocated new or returned capacity. The agency does not yet know 
if enough new or returned capacity would be available to justify an 
annual reallocation.
---------------------------------------------------------------------------

a. Network Effects of Auctions
    The potential for auctions to have adverse network effects was a 
concern for many stakeholders. The Federal Trade Commission noted that 
network effects are likely to be complex since the worth of one 
particular flight is dependent on other flights. Accordingly, the 
Federal Trade Commission cautioned that auctions at LaGuardia might not 
lead to an efficient outcome.
    US Airways noted that the network and route systems of airlines 
required substantial investments and many years to build. Carriers rely 
on routes from smaller cities to provide passengers to their hubs at 
airports such as LaGuardia. This structure, according to US Airways, is 
at risk should the FAA complete its rulemaking as proposed in the 
SNPRM. US Airways also objected to the possibility that a carrier could 
lose slots that are important feeder flights into its hub at LaGuardia. 
Furthermore, according to US Airways, the loss of just a few passengers 
could jeopardize service to some smaller markets.
    United Airlines commented that slots are essential to allow 
airlines to provide flights between LaGuardia and other cities and the 
carrier may even be forced to discontinue service to some communities 
because of the loss of slots. The ATA added that some carriers have 
made large investments in their schedules with the expectation that 
they will be able to continue serving LaGuardia and that these 
schedules will compliment their other daily operations.
    The FAA recognizes that any reallocation of slots through an 
auction, or any other allocation mechanism, can affect the network 
structure of an airline. We are also aware that several carriers at the 
airport have made investments in the infrastructure at LaGuardia based 
on their previous slot holdings under the HDR. However, when Congress 
phased out the HDR as part of AIR-21, it was clear to all stakeholders 
that slots and slot allocations under that rule would no longer exist 
as of January 2007.
    In an effort to ensure a smooth transition between the expiration 
of the HDR and a new allocative regime, the FAA grandfathered use of 
all slots to carriers on a temporary basis. This final rule will 
continue to allocate a majority of slots to the incumbent slot holders.
    To the extent that a carrier's Limited Slot reverts to the FAA, 
there is nothing in this rule that precludes that carrier from bidding 
in the auctions to acquire the same or a comparable slot for the 
purpose of maintaining the status quo. Similarly, we believe the rule 
will promote a robust secondary market, which will provide further 
opportunity for carriers to acquire slots to satisfy their network 
needs.
b. Impact of Auctions on Competition
    The SNPRM assumed that auctions will lead to efficient airline 
behavior. The Port Authority opinion differs. The Port Authority 
commented that auctions may exacerbate anti-competitive conditions, 
which would lead to reduced opportunities for new entrant and limited 
incumbent airlines to enter the airport. They claimed that the large 
incumbent carriers with the majority of slots at LaGuardia could use 
their relatively stronger balance sheets to outbid the smaller, non-
legacy airlines that help stimulate competition. The Air Carrier 
Association of America's (ACAA) comments echo this concern.
    According to the Port Authority and the ACAA, the SNPRM provides 
the legacy incumbent carriers the incentive to bid prices beyond the 
level carriers with a limited presence at the airport can afford, then 
trade the slots they win among themselves to maintain their current 
schedules. The result could be a significant increase in airfares and a 
decrease in the number of destinations served.
    Offering a different view, US Airways commented that there is 
already significant competition at LaGuardia, and new entrants have 
more the 50 daily roundtrips from this airport. US Airways also 
suggested that competition from new entrants at LaGuardia has helped 
moderate fares for the New York City region. It also asserted that 
there is no evidence that new entrants cannot enter the market, or that 
the reallocation proposal would address that concern even if it were 
valid.
    Unlike most of the commenters, the ACAA was not opposed to the 
consideration of auctions. However, it believes that too many questions 
exist about auctions as a method to promote competition for this 
proposal to move forward. The ACAA was primarily concerned with 
providing low-cost carriers access to entry in LaGuardia, particularly 
now that all three of the major New York metro airports are capped.
    US Airways argued that the 20-slot base of operations is clearly 
designed to protect new entrant carriers at the expense of other 
carriers and ignores the fact that these new entrants already have a 
significant presence both at LaGuardia and in the New York metropolitan 
area as a whole. The FAA notes that the base of operations was 
intentionally designed to promote at least some competition at the 
airport by ensuring limited incumbents retain the opportunity to serve 
the airport. However, this degree of competition, when viewed in the 
context of the total

[[Page 60589]]

number of operations at the airport, negatively impacts no one. Thus, 
the FAA finds US Airways' argument that the 20-slot base of operations 
is detrimental to carriers who have a larger presence at the airport is 
disingenuous. All carriers, regardless of the size of their operations 
at the airport, are entitled to the base of operations. For slots above 
this level, Limited Slots are assigned on a proportional basis, so that 
larger carriers will have more Limited Slots only because they will be 
grandfathered a greater number of total slots at the airport. In 
addition, while the base of operations provision protects up to 20 
slots per carrier, it does not allow a carrier with fewer than 20 
operations to increase their holdings unless they are willing to lease 
them from another carrier or participate in an auction.
    The FAA disagrees with the assertion that the limited number of 
auctions contemplated in this rule will reduce competition at the 
airport. The HDR, in place at LaGuardia airport for decades, was 
criticized for not providing sufficient opportunity for new entrant or 
limited incumbent carriers to enter or expand service at the airport. 
We believe there is merit to these criticisms.
    To encourage greater competition and expand opportunities for entry 
at the airport, the FAA intends to reallocate by auction a portion of 
existing slots from those carriers who held the majority of slots under 
the HDR. The auction is designed to provide greater competition at the 
airport because it uses the market to reallocate limited resources to 
those who value the asset most.
    We understand the concerns of some persons that carriers may 
attempt to use Unrestricted Slots which are not subject to a usage 
requirement to monopolize operations at an airport. The Department has 
the authority to ensure that carriers do not use their ability to 
permit such slots to remain idle to unlawfully restrict competition. 
The Department's mandate under 49 U.S.C. 41712 to prohibit unfair 
methods of competition authorizes it to stop carriers from engaging in 
conduct that can be characterized as anticompetitive under antitrust 
principles. If the Department is presented with clear and convincing 
evidence that a carrier is hoarding slots to monopolize operations at 
an airport it will pursue enforcement action against the carrier.
c. Alternatives to Reallocation
    The Port Authority commented that a notice of proposed rulemaking 
that solicits comment on a single solution when other significant 
solutions have been recently proposed is inherently flawed. It noted 
the NYARC, through working group 5, evaluated the use of the IATA 
Worldwide Scheduling Guidelines (WSG) but that approach was not even 
referred to in the SNPRM, despite near unanimous support among NYARC 
members for that alternative. American Airlines similarly suggested the 
FAA adopt the WSG under a slot rule addressing all three New York 
metropolitan airports rather than relying on auctions to reallocate 
capacity. Delta also suggested that the FAA take steps to improve the 
secondary market in conjunction with the existing Order before adopting 
a final rule based on the SNPRM. Echoing Delta's sentiment, U.S. 
Airways suggested the buy/sell mechanisms implemented under the HDR 
could be improved or modified to address concerns about competition.
    Many stakeholders said that the FAA should use other approaches 
instead of auctions to reduce delays at LaGuardia. In particular, the 
FAA should focus on implementing operational procedures and investments 
to enhance capacity. The American Association of Airport Executives 
said that the FAA should proceed with implementing ADS-B and other air 
traffic control technologies. The Regional Airline Association said 
that rather than auctioning slots, the FAA should focus on completing 
NextGen. Similarly, the ATA suggests that the FAA continue to implement 
the 77 New York Aviation Rulemaking Committee improvements and continue 
implementing NextGen.
    Delta suggested several alternatives to addressing a perceived 
inability to access the market. Even though it did not support any of 
the alternatives, it suggested they were both legal and less disruptive 
than the proposal. While some of the ideas associated with improving 
the transparency of the secondary market have already been proposed by 
the FAA and are incorporated in today's rule, Delta also suggested that 
all transactions in the secondary market could be negotiated via an 
FAA-managed auction or that a carrier be required to place a set number 
of slots up for auction, but be allowed to set a reserve price. The ATA 
suggested the agency adopt a slightly modified version of the existing 
Order and have the FAA act as a clearing-house for the secondary 
market, but impose no constraints on the transactions.
    The ACAA argued that some reallocation mechanism other than an 
auction should be provided since all three major New York metropolitan 
area airports are capped. It noted that there should be some slots 
available to limited incumbents because the larger carriers are drawing 
down service and exploring merger possibilities. The FAA has 
historically provided for the administrative allocation of slots. We 
could have proposed such an approach in this rulemaking. However, the 
auction allows the market to allocate resources, which is the standard 
way virtually all resources are allocated in the U.S. economy.
    The WSG approach has never been used at a domestic airport like 
LaGuardia. While the FAA could adopt a domestic equivalent of the WSG, 
the FAA has decided against this approach because, like the lottery 
provisions of the HDR, it does not provide for a sufficient amount of 
capacity available for reallocation to stimulate the secondary market. 
The ATA is correct that of the many members of the ARC working group, 
five supported using the WSG at LaGuardia. However, several carriers 
not on the working group were opposed to that approach and some of 
their concerns are included in the NYARC report.
    As to the suggestion that the FAA focus on the various 
technological and physical improvements identified by the NYARC, many 
of these initiatives are already underway. However, we do not believe 
that they will address the congestion issues at LaGuardia sufficiently 
to merit lifting the cap on operations. It is the cap that creates the 
need for reallocation.
    Finally, as to the suggestions that the FAA leave the LaGuardia 
Order in place but make improvements to the secondary market, the FAA 
has already implemented several changes to the existing provisions 
controlling the secondary market in this rule.

B. Secondary Trading

    All slots will have value in the secondary market. To the extent 
that the secondary market is not mature and the value of slots is not 
well-known, the auction should inform potential buyers of the value of 
these slots and stimulate the secondary market. The FAA believes that 
ultimately the best way to maximize competition is with the development 
of a robust secondary market. To that end, the agency did not propose a 
system of set-asides and exemptions that would be available to new 
entrants and limited incumbents.
    We believe some measures must be taken to assure access to the 
secondary market. The system of preferences and exemptions developed 
under the HDR and AIR-21 may have significantly diluted the viability 
of the secondary market ostensibly created under the HDR's Buy/Sell 
Rule as several commenters claim, but we do not

[[Page 60590]]

believe that was the sole culprit. The Buy/Sell Rule permitted 
transactions that were never advertised and the terms of which were 
never monitored for anti-competitive behavior.
    We believe all carriers interested in initiating operations at 
LaGuardia, or increasing their operations there, should have an 
opportunity to participate in any transactions. Accordingly, the FAA 
will permit carriers to include Common Slots for sale in the auction 
organized by the FAA. If a carrier wishes to include some of its Common 
Slots in the auction, these slots will be treated in the same manner as 
other slots being auctioned by the FAA. The carrier would be able to 
specify a minimum price for these slots so that it need not give up the 
slots unless they command a price that the carrier is willing to accept 
and it would retain the proceeds.
    In addition, the FAA will establish a bulletin-board system whereby 
carriers seeking to sublet slots outside the auction process, or to 
acquire such subleases, would notify the FAA, which would then post the 
relevant information on its Web site. The FAA has decided that 
transactions via the bulletin-board-system do not have to be blind, and 
the transaction may include both cash and non-cash payments.
    The ACAA commented that any mechanisms geared toward a secondary 
market must include a blind sale/transfer allocation system for any 
proposed sale or lease of slots. Other carriers, including U.S. Airways 
and American Airlines, noted that the secondary market should be as 
transparent as possible since even a hybrid system, whereby the lessor 
would accept the highest cash bid and then negotiate the value of non-
monetary assets after the bid was accepted, would close interested 
lessees out of the transaction.
    We continue to have reservations about the adequacy of the value 
associated with non-monetary assets when the leasing carrier is not a 
direct competitor versus when the potential lessee competes directly 
against the carrier offering to lease the slot. However we also believe 
non-cash transactions should result in both more bidders and 
potentially higher bids. Since the non-cash aspect of a transaction 
would require direct negotiating, parties would need to be disclosed.
    In order to preclude the type of collusion that appears to have 
been present, at least some of the time, under the Buy/Sell Rule, the 
Department will monitor trades on the secondary market. The Department 
already has the authority under 49 U.S.C. 41712 to investigate, 
prohibit, and impose penalties on an air carrier for an unfair or 
deceptive practice or an unfair method of competition in air 
transportation or the sale of air transportation. The Department has 
consistently held that this authority empowers it to prohibit 
anticompetitive conduct (1) that violates the antitrust laws, (2) that 
is not yet serious enough to violate the antitrust laws but may do so 
in the future, or (3) that, although not a violation of the letter of 
the antitrust laws, is close to a violation or contrary to their 
spirit.\31\
---------------------------------------------------------------------------

    \31\ See United Airlines, Inc. v. Civil Aeronautics Board, 766 
F. 2d 1107, 1112, 1114 (7th Cir. 1985) and cases cited therein; see 
also H.R. Rep. No. 98-793, 98th Cong., 2d Sess. (1984) at 4-5, Order 
2002-9-2, Complaint of the American Society of Travel Agents, Inc., 
and Joseph Galloway against United Air Lines, Inc, et al. (Docket 
No. OST-99-6410) and Complaint of The American Society of Travel 
Agents, Inc., and Hillside Travel, Inc. against Delta Air Lines, et 
al. (Docket No. OST-02-12004) (September 4, 2002) at 22-23.
---------------------------------------------------------------------------

    Today's rule requires carriers to file with the Department a 
detailed breakdown of all lease terms and asset transfers for each 
transaction, and the subletting carrier must disclose all bids 
submitted in response to its solicitation. The requirement is needed so 
that the Department can adequately monitor the secondary market. The 
slot may not be operated by the acquiring carrier until all 
documentation has been received, and the FAA has approved the transfer. 
The approval process is required to assure the FAA has up-to-date 
information on who is operating the flight. The FAA will not limit its 
approval based on any substantive provisions in the document. Although 
the ATA claimed the provisions governing the secondary market are 
unduly intrusive and chilling, the FAA believes that even in a robust 
market it needs to track and provide oversight of the market. This 
oversight will ensure access remains available to all interested 
parties and the slots are actually being used in the manner represented 
to the FAA. Since Common and Limited Slots may be transferred in the 
secondary market, the underlying policy considerations supporting the 
FAA's decision to award them under a cooperative agreement rather than 
for monetary consideration remain, even if the operating carrier has 
changed.
    Trades among marketing carriers and one-for-one trades do not have 
to be advertised. Marketing carriers should not have to open up 
transactions to the carrier community as a whole any more than a single 
carrier should have to disclose its scheduling decisions with other 
carriers. The FAA will approve these transactions, as it has done 
historically. As is the case with longer-term transfers among different 
carriers, the FAA only approves the transaction to maintain accurate 
information on which carrier is operating a particular slot.
    Same day trades among marketing carriers that address emergency 
situations such as maintenance problems or other unforeseen operational 
issues may take place without prior approval by the FAA, but carriers 
must notify the FAA of the trade within five business days. One-for-one 
trades among carriers will not be subject to the restrictions of the 
secondary market because they enhance the operational efficiency of the 
airport. However, the exchange of slots on a one-for-one basis cannot 
be for consideration, since they would then take on the characteristics 
of lease agreements negotiated in the secondary market. Nonetheless, 
carriers must notify the FAA of all such trades so that the agency can 
maintain accurate information on which carrier is operating a 
particular slot.

C. Usage Requirements

    The FAA is adopting the usage requirements proposed in the SNPRM. 
Specifically, Common and Limited Slots must be used 80 percent of the 
time over a two-month reporting period unless the FAA waives the usage 
requirements due to unusual and unforeseeable circumstances beyond the 
carrier's control. The impact of these events must extend beyond five 
consecutive days. Unrestricted Slots will not be subject to the usage 
requirements.
    Under this rule each slot will be assigned a corresponding 
scheduled operation. Carriers will be required to report a series of 
flights under a single slot number rather than in the aggregate. In 
this way the FAA will be able to more accurately track a slot's usage 
with the flight it was scheduled against. Carriers will be permitted to 
operate a charter, maintenance, or ferry operation in lieu of a 
scheduled operation and not have that operation discounted as long as 
they do not abuse the privilege.
    Several commenters, including the ATA and the Port Authority, noted 
that the proposal to exclude Unrestricted Slots from the usage 
requirement is inconsistent with the current practice of requiring all 
slots, even those purchased in the secondary market, to be subject to 
the use-or-lose requirements. These commenters suggested that all slots 
should be subject to usage requirements. The Port Authority added that 
given current market conditions of higher fares, driven by higher fuel 
costs, there is a possibility that the auction bid

[[Page 60591]]

prices may be sufficiently low to cause a large incumbent carrier to 
make low bids for various slots, and then simply not use them as a 
means of blocking future competition after markets improve from the 
current depressed condition.
    We understand the concerns of some persons that carriers may 
attempt to use Unrestricted Slots which are not subject to a usage 
requirement to monopolize operations at an airport. We do not believe 
this risk is sufficiently large to attach a usage requirement on 
Unrestricted Slots. One hundred percent of the slots allocated under 
the HDR and then converted into Operating Authorizations under the 
LaGuardia Order were initially allocated by the FAA at no cost to the 
carrier. Because the slots were free, carriers were incentivized to 
hoard slots in order to keep competitors out, and the FAA was forced to 
implement a usage requirement. Since the FAA wishes to introduce a 
market-based means of addressing slot allocation, both initially and in 
the secondary market, the agency believes the Unrestricted Slot should 
be just that--unrestricted. The FAA does not believe there is a need to 
treat all slots equally when they are not all allocated under the same 
terms and conditions.\32\
---------------------------------------------------------------------------

    \32\ Unrestricted Slots could potentially have a higher value in 
the secondary market than Common or Limited Slots because they are 
not subject to the same restrictions.
---------------------------------------------------------------------------

    The Department has the authority to ensure that carriers do not use 
their ability to permit such slots to remain idle to unlawfully 
restrict competition. The Department's mandate under 49 U.S.C. 41712 to 
prohibit unfair methods of competition authorizes it to stop carriers 
from engaging in conduct that can be characterized as anticompetitive 
under antitrust principles. If the Department is presented with clear 
and convincing evidence that a carrier is hoarding slots to monopolize 
operations at an airport it will pursue enforcement action against the 
carrier. In order to assist the Department in determining whether a 
carrier is engaging in anticompetitive behavior, we are expanding the 
requirement in the regulatory text to report usage to include 
Unrestricted Slots as well as Common and Limited Slots. While a carrier 
would not risk losing an Unrestricted Slot for failure to report, the 
FAA could take civil enforcement action consistent with its authority 
to take enforcement action for any violation of a regulatory 
requirement.
    The Port Authority continues to argue, without support, that the 
usage requirement should be higher than 80 percent. It commented to the 
SNPRM that it has an interest in maximizing use of its runways. 
Although it is not reasonable to expect 100 percent utilization, the 
Port Authority believes that a 90 percent utilization standard, applied 
against aggregate slot use would assure five-day-per-week use of slots. 
The Port Authority also proposed that the FAA report data on slot usage 
at least at the aggregate level. It stated it could use these data to 
evaluate the relationship of slot usage and the FAA's exercise of 
authority to enforce the use-or-lose provisions. We have not seen a 
need to increase the usage requirement beyond 80 percent. The waiver 
provisions of this rule are quite limited. In addition, the agency has 
recently demonstrated that it intends to apply these provisions 
narrowly.\33\ The usage requirement is designed to address legitimate 
problems that arise in the regular course of business and includes 
flight cancellations due to maintenance problems, poor weather, or 
missed connections. Given the likelihood that the FAA will not grant a 
waiver request except under exceptionally tight conditions, a carrier 
has every incentive to use the slot as much as possible to preserve a 
cushion for the types of problems it can reasonably expect to 
encounter. We acknowledge the Port Authority's request to see usage 
data, but that request does not fall within the ambit of this 
rulemaking.
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    \33\ On July 3, 2008, the FAA denied a request submitted by six 
air carriers, seeking a waiver of the minimum usage requirements at 
all U.S. airports that have such requirements as a result of rapidly 
escalating fuel prices. The FAA's denial of the air carrier's 
request is available in docket FAA-2008-0656. In addition, on August 
6, 2008, the FAA denied a separate request by AirTran Airways for a 
temporary waiver of the minimum usage requirement at LaGuardia based 
on the construction-related closure of a jetway that was dedicated 
to AirTran's operations.
---------------------------------------------------------------------------

    Finally, in the SNPRM, the FAA proposed to provide for a 90 day 
waiver of the usage requirement for common and limited slots acquired 
by sublease. We have subsequently determined that there is no need for 
such a provision. The starting date of a sublease is fully within the 
control of the contracting carriers and can be easily negotiated to 
address any possible concerns related to starting new service.

D. Unscheduled Operations

    As proposed in the SNPRM, the FAA is limiting unscheduled 
operations into and out of LaGuardia during the constrained hours. 
Historically these operations have been restricted via the LaGuardia 
Order to six per hour, but the FAA has recently reduced that number to 
three under the LaGuardia Order. Under today's rule, reservations are 
required to use the airport (except for emergency operations) and may 
be obtained up to 72 hours in advance. The reservations will be 
available on an hourly, rather than half-hourly, basis. This will 
provide additional flexibility with minimal operational impacts 
overall.
    To the extent Air Traffic Control (ATC) can handle additional 
requests (for example in good weather), it will do so without regard to 
the reason for the request. In addition, ATC may decide special 
circumstances justify an additional flight. However, there is no 
guarantee that the FAA will accept more than three reservations per 
hour, and the determination to handle more traffic would likely be made 
on that day. Reservations for all non-emergency flights would still be 
required. The FAA will allow public charter operators to reserve one of 
the three available allowable operations up to six months in advance. 
If more than one public charter operation is desired for a given hour, 
the public charter operator without the advance reservation could 
attempt to secure a reservation within the three-day window that is 
available for all other unscheduled operations.
    The Aircraft Owners and Pilots Association (AOPA), NetJets and the 
National Air Transportation Association (NATA) commented that the 
number of unscheduled arrivals is overly restrictive. According to 
AOPA, although general aviation is less than four percent of total 
operations at LaGuardia, the number of unscheduled arrivals is reduced 
by fifty percent. Similarly, NetJets suggested that although general 
aviation makes a negligible contribution to congestion in the New York 
area, the SNPRM has a disproportionate impact on general aviation 
compared with scheduled carriers. It also asserts that the FAA has not 
linked the reduction in permitted operations with any delay reduction 
benefit nor evaluated the potential cost impact on affected businesses. 
These commenters do not believe an objective analysis of the historical 
usage rate for unscheduled operations has been provided to justify the 
proposed decrease and therefore, the FAA may have underestimated the 
negative effect of a 50 percent reduction in unscheduled operations. 
The Port Authority claimed the FAA did not look at the proposed 
reduction in unscheduled services at LaGuardia in light of similar 
restrictions at JFK and Newark Airports.
    Contrary to the Port Authority's assertion, the proposal to reduce

[[Page 60592]]

unscheduled operations at LaGuardia was generated by the agency's 
concern on managing operations within the region. Consistent with this 
action, the FAA proposed limits for unscheduled operations at JFK and 
Newark.\34\ At these airports, the FAA proposed reductions in the 
number of unscheduled operations in the most congested hours. The FAA 
finds it reasonable to limit unscheduled operations at LaGuardia to 
their 2007 usage levels. In the New York area, the FAA must balance 
fair and reasonable access against congestion reduction and management 
goals. To reach these goals, the number of unscheduled operations 
cannot grow at LaGuardia, JFK or Newark. While permissible unscheduled 
operations at the airport are reduced by 50 percent, actual operations 
are reduced little, if at all.
---------------------------------------------------------------------------

    \34\ 73 FR 41156 (July 17, 2008).
---------------------------------------------------------------------------

    In addition, NATA objected to the proposal to allow public charter 
carriers to reserve one of the three available hourly slots up to six 
months in advance, while Part 135 on-demand air carriers will only be 
able to reserve slots up to 72 hours in advance. NATA believes that 
passengers on Part 135 on-demand aircraft should have the same ability 
to pre-plan their arrival and departure times as passengers on 
scheduled airlines and public charters.
    The FAA does not believe that public charter operators and on 
demand charter operators should be treated similarly. Unlike on demand 
charters, public charters may not be marketed until prospectuses are 
filed with the Department and they are marketed to individual consumers 
long in advance of the dates of operation. Public charters are also 
generally limited to operating from larger airports. Thus, in the New 
York area, public charters cannot be operated from many of the local 
airports, such as Teterboro, that are available to on demand charter 
flights. For these reasons, we believe public charter operators should 
have a significantly earlier opportunity to obtain slots for their 
operations under this rule than on demand charters.
    Additionally, unscheduled flights produce roughly the same delay 
costs as scheduled flights at the same time. However, unscheduled 
flights can be accommodated if operators are flexible in their arrival 
or departure times. In response to public comment we have assessed the 
impact on business if unscheduled flights are restricted based upon the 
FAA's record of actual operations in the agency's Enhanced Traffic 
Management System for year ended May 31, 2008. The total number of 
hours where unscheduled operations exceed available slots was 174. The 
number of hours where there was insufficient capacity in the adjacent 
two hours to handle excess demand was zero. Thus, if an unscheduled 
flight changes its flight plan slightly, it will be accommodated and 
this operator would not incur costs.
    The ATA commented that helicopters should be subject to this 
proposal because they also take up valuable air traffic control 
services. The FAA recognizes that helicopter operations can add to a 
controller's workload. However, because the FAA did not propose, or 
even suggest, that helicopters would be covered by this rule, there 
would have been no reason for helicopter operators to comment on the 
rule and there is inadequate scope to add them at this time.

E. Sunset Provision

    This rule will expire in ten years. One of the criticisms of the 
HDR was that it was a temporary rule that has lasted almost 40 years. 
As such, it became difficult to manage, particularly as it was amended 
to address changes in business models. We believe the public interest 
is better served by directly providing the rule will sunset in ten 
years. This approach will allow for future determinations by the FAA as 
to whether a cap is still needed and, if so, whether changes are needed 
to more efficiently allocate and constrain the scarce resource. At 
present it is impossible to determine what changes in business models 
may occur over the next ten years. In addition, full implementation of 
the New York/New Jersey/Philadelphia Metropolitan Area Airspace 
Redesign project and NextGen technologies are expected to mitigate and 
improve air traffic efficiency within the next ten years, and we should 
not prejudge the market response.
    The ATA questioned why this rule is implemented on a temporary 
basis if the agency believes it represents the best solution for the 
airport. Additionally, several commenters noted that temporary slot 
lives reduce the value of slots. They argued the short-term nature of 
the proposal and the uncertainty of future slot operations at LaGuardia 
would have a chilling effect on the value given to slots and gates in 
relation to capital flow and collateralization. Several carriers were 
concerned that financial institutions would lose confidence in slots as 
collateral and reduce or eliminate a carrier's ability to fully 
collateralize the asset.
    The FAA is somewhat puzzled by the carriers' assertion that having 
the rule sunset in ten years is somehow more detrimental to their 
interests than keeping in place an order whose expiration date is 
linked to a final rule that could be issued at any time. The FAA 
believes providing a date certain through which slots will be awarded 
actually increases the certainty of the holding. The assumption seems 
to be that regulatory inactivity is the solution to all the carriers' 
concerns, and that therefore, the FAA should just maintain the 
LaGuardia Order status quo. This is not an acceptable solution. The 
LaGuardia Order was issued as a bridge document and was never intended 
to stay in place for more than a year or two. Accordingly, the FAA 
simply froze all operations at the airport under the HDR conditions, 
except that the carriers are precluded from selling their Operating 
Authorizations. The Order was not subjected to the type of policy rigor 
or economic analysis that justifies any rule intended to be more than 
an initial measure. In addition, the FAA believes it is important for 
carriers and those who provide financing to realize that slots at a 
constrained airport are not intended to be a permanent response to 
solving congestion, with the incumbents being afforded unlimited 
rights.

F. Other Issues

1. Withdrawal for Operational Need and for Future Reductions in the Cap
    The FAA is adopting its proposal to retain the right to temporarily 
withdraw Limited and Common Slots for operational need. The FAA has 
historically retained this right, although it has rarely, if ever, been 
exercised. This provision is included to allow the FAA to immediately 
address a situation where it cannot handle the usual amount of traffic 
on a temporary basis. This provision would typically be invoked because 
of problems with the landside infrastructure, such as a closed runway 
or terminal, or changes to air traffic control procedures that would 
result in sustained capacity reductions.
    As discussed earlier, the FAA is also retaining the right to 
further reduce the cap on operations should the Administrator determine 
that the cap on operations remains too high. For the reasons discussed 
earlier, this provision is limited to Common Slots.
2. Limit on Arrivals and Departures
    In response to the NPRM, American Airlines and The City of New York 
suggested the final rule should regulate arrivals only. The FAA 
explained in the SNPRM why it continues to believe that the sequencing 
of flights at LaGuardia is so tight that the FAA does not believe it 
can merely limit arrivals. American

[[Page 60593]]

Airlines continues to assert that only constraints on arrivals are 
needed. Nevertheless, the FAA continues to believe both arrivals and 
departures should be slot-controlled.
3. Common Ownership
    The proposal defines ``common ownership'' as requiring at least 50 
percent beneficial ownership or control by the same entity or entities. 
ATA commented that this definition would not cover many of the network 
carriers' regional partners as very few have at least a 50 percent 
beneficial ownership or control of these independent companies. The FAA 
will treat commonly owned carriers as single entities for determining a 
carrier's base of operations or whether transfers are appropriate. 
Independent carriers, such as those cited by the ATA, will each be 
entitled to a base of operations of up to 20 slots regardless of 
whether they offer services under their own names or under a code-share 
agreement with another carrier. Transfer provisions between commonly 
owned and affiliated carriers receive similar treatment.
4. Impact of the Final Rule on the Port Authority's Ability To Run Its 
Airport
    The ACI-NA and the Port Authority both claim that the proposal to 
auction slots interferes with the Port Authority's ability to run the 
airport and constitutes an impermissible infringement on the Port 
Authority's right to collect revenue for use of the airport facilities. 
The ACI-NA believes that market-based access issues should remain 
within the exclusive purview of the airport's proprietor. The Port 
Authority expressed similar sentiments in its comments to the NPRM 
suggesting it develop a method of allocation at the airport.
    The FAA has never proposed to deny carriers gate access at 
LaGuardia, nor has it proposed to otherwise address issues associated 
with the facilities at the airport. The FAA recognizes that the Port 
Authority bears responsibility for the terminal-side portion of the 
airport. However, it is the FAA, and not the Port Authority, that has 
responsibility for managing the airspace. While the Port Authority 
claims that slot auctions would somehow be disruptive to the airport, 
it fails to explain how, in terms of making arrangements for gates and 
other airport facilities, acquiring a slot via an auction is any 
different from acquiring a slot via the secondary market, or for that 
matter, via a lottery, as was the case under the HDR.
    To the extent public policy goals could arguably be better achieved 
by an airport proprietor rather than the FAA, the agency notes that 
this rule provides for no special carve-outs. To the extent an airport 
could address these policy issues through a market-based, or even 
administratively-based mechanism, it is free to do so consistent with 
its grant obligations and any other restrictions imposed by Federal 
law.

V. Potential Loss of Service to Small Communities

    Several stakeholders were concerned about the adverse effects of 
this SNPRM on service to small communities. The ATA noted that at least 
one destination is served by Essential Air Service (EAS) from 
LaGuardia. The one EAS community currently with service to LaGuardia 
(Lebanon, New Hampshire) will receive service to a new hub airport in 
another city as of November 4, 2008.
    Several carriers, their associations and ACI-NA commented that if 
carriers prioritize which service to continue, it is likely that 
carriers will continue the most profitable routes, the dense routes 
connecting to large markets, and drop service to smaller markets. 
Commenters argued that both the provision that Limited Slots revert to 
the FAA and the market-based allocation of Unrestricted Slots would 
result in a loss of small community service.
    United noted that the ``confiscation'' of slots would lead to 
carriers eliminating flights, most likely to smaller communities. It 
claimed the argument in the initial regulatory evaluation that carriers 
would keep these flights because they are currently profitable is 
flawed; faced with a reduction in the overall number of flights, which 
could only be recouped at a cost, carriers will reprioritize its 
current interests and will likely drop service to smaller communities.
    US Airways also remarked that the SNPRM proposed a form of a 
``forced upgauging'' on LaGuardia and that will almost inevitably lead 
to diminished service to small and medium-sized markets. US Airways 
went on to state that this loss of service would be exacerbated by the 
auctioning of slots at other New York area airports. The commenter 
argued that the auction could end up actually increasing system-wide 
congestion because there would be more flights between LaGuardia and 
other airports that are already congested because the service to 
smaller, non-congested airports would no longer make sense 
economically.
    Several commenters noted that service to small communities is 
provided on smaller aircraft. The Port Authority estimated that with 
auctions, the cost per seat for carriers could be from two to six times 
higher for small aircraft. The Regional Airline Association commented 
that many communities are served exclusively by small regional aircraft 
and that it is only through these smaller planes that there can be any 
meaningful competition in smaller communities.
    Both the Port Authority and the American Association of Airport 
Executives raised concerns about the potential impact to communities 
within 300 miles of New York City. These commenters noted that 
alternative hubs are not a realistic option for cities within a 300 
mile radius of LaGuardia; and the Port Authority noted that service to 
these communities has already declined 14 percent in the past year. 
They also noted that the concern that a particular community could lose 
existing service to LaGuardia was raised by several smaller 
municipalities and their community organizations in response to the 
NPRM. In particular, the Port Authority noted the assessment by Newport 
News/Williamsburg International Airport that the loss of one third of 
AirTran's service to the community could result in the loss of 
approximately $20 billion per year to the region.
    Finally, NetJets commented that limiting unscheduled operations 
will also negatively impact small communities. According to NetJets, 
many of the smallest markets have no commercial air service to the New 
York City area and general aviation is the only air link to the region. 
Additionally, NetJets noted that general aviation is going to become 
more important for service to New York City as scheduled carriers 
reduce the reach of their networks because of high fuel prices.
    While not directly related to the loss of service to small 
communities, the Canadian Airports Council expressed concern that air 
service to Canada would be jeopardized because the major Canadian 
cities are much smaller than their U.S. counterparts and cannot sustain 
larger aircraft.
    The FAA recognizes that there is a significant level of small 
community service at LaGuardia. We believe small community service is 
an important sector of aviation. The FAA has made several changes to 
its original proposal to address the potential loss of services. Not 
only did the agency withdraw the requirement for aircraft upgauging at 
LaGuardia, but it also reduced the number of slots that would be 
reallocated from 100 percent of slots every ten years to 10 percent of 
slots in the first five years, with no reallocation thereafter. The 
SNPRM did not provide any carve-outs for small community

[[Page 60594]]

service like the upgauging proposal of the NPRM, and we do not adopt 
any today. The agency continues to believe that a system whereby 
upgauging to larger aircraft is completely voluntary decreases the 
likelihood of a whole-sale withdrawal from smaller markets.
    We note that the AIR-21 exemptions from the HDR, which permitted 
additional flights by new entrant carriers and by carriers serving 
small hub and non-hub airports with smaller aircraft have expired. 
Until the spring/summer of 2008, when the cost of oil reached 
unprecedented levels, we had not seen a reduction in service to small 
communities under the LaGuardia Order, which allows commercial 
decisions by the carriers and does not classify Operating 
Authorizations by class of user. Therefore, although there may be a 
slight reduction in small community service by not dedicating slots for 
those particular cities, we believe market conditions and fuel prices 
are the primary motivation for any reduction in service, and not a 
consequence of federal action in this rule.
    Furthermore, several air carriers have noted in public fora that 
service to small communities from LaGuardia is profitable and an 
important part of their network operations. Due to these facts, and the 
Administration's decision to rely on the market to allocate slots 
according to their highest and best use, we do not believe it is 
appropriate to develop a separate class of slots specifically for use 
to and from small communities. The FAA wishes to avoid any unintended 
consequences on a carrier's marketing and network decisions that could 
result from set asides or exemptions for small communities.
    The FAA acknowledges the Canadian Airports Council's concern about 
service to smaller sized Canadian cities. However, Air Canada will be 
allocated 42 common slots because of the United States' bilateral 
obligations with Canada. Consequently, Air Canada, the only Canadian 
carrier currently serving LaGuardia, will have continued access to the 
slots they have historically operated and will not be affected by the 
reallocation aspect of this final rule.

VI. Regulatory Notices and Analyses

    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 requires agencies to analyze the 
economic impact 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 (Pub. L. 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, and is a ``significant 
regulatory action'' as defined in Executive Order 12866 both because it 
is economically significant and because it raises the type of novel 
policy issues contemplated under that executive order. Accordingly, OMB 
has reviewed this final rule. The rule is also ``significant'' as 
defined in DOT's Regulatory Policies and Procedures. The final rule 
will not have a significant economic impact on a substantial number of 
small entities and will not adversely affect international trade or 
impose an unfunded mandate on State, local, or tribal governments, or 
on the private sector.
    The FAA received numerous comments regarding its regulatory 
analysis of this rulemaking action. These comments are addressed in the 
Final Regulatory Evaluation and readers are directed to that document 
to see how they are addressed.
    Among the concerns raised by commenters was that the analysis of 
the SNPRM did not satisfy Executive Order 12866. 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. The FAA complied with this order by 
making its determination in the SNPRM regulatory evaluation based upon 
the quantified benefits exceeding the quantified costs. In addition we 
have taken into account public comments in our final evaluation and 
have updated our cost and benefits estimates.

Total Costs and Benefits of This Rulemaking

    We evaluate the costs and benefits of this rule using two 
baselines. One baseline assumes no operating constraints at the 
airport; this is the same baseline as the NPRM and SNPRM. The second 
baseline preferred by some commenters assumes the current operating 
limits at the airport continue into the foreseeable future. When we 
evaluate this final rule using the same baseline as in the SNPRM, the 
net total benefits are $3.2 billion. When we use the alternative 
baseline, the total estimated net benefits are $1.3 billion.
    The net present value benefits of the auction are $65.4 million. As 
the sale of a slot is a transfer (no change to gross national product), 
we assign no costs to those purchasing a slot. While the total present 
value auction costs are $24 million, the slot reallocation benefits 
that offset these costs are $89.3 million.

Who Is Potentially Affected by This Rulemaking

     Operators of scheduled and non-scheduled flights to 
LaGuardia and new entrants who do not yet operate at LaGuardia.
     All communities, with air service to LaGuardia (including 
small communities).
     Passengers of scheduled flights to LaGuardia.
     The Port Authority of New York and New Jersey, which 
operates the airport.
     Passengers on scheduled and unscheduled flights transiting 
New York airspace.

Base Case

     Base Case 1: No operating authorizations or caps (the rule 
will generate $3.2 billion in net benefits, of which $65.4 million is 
attributable to reallocation benefits associated with auctions and the 
balance to the cap on operations).
     Base Case 2: Indefinite extension of the current LaGuardia 
Order (the rule will generate $1.3 billion in net benefits, of which 
$65.4 million are attributable to reallocation benefits associated with 
auctions and the balance to the cap on operations).

Assumptions

     Discount Rate--seven percent.
     Assumes 2008 Constant Year Dollars.
     Passenger Value of Travel Time--$30.86 per hour.\35\
---------------------------------------------------------------------------

    \35\ GRA, Incorporated ``Economic Values for FAA Investment and 
Regulatory Decisions, A Guide'' prepared for the FAA Office of 
Aviation Policy and Plans (October 3, 2007). Value is weighted using 
LaGuardia shares of 51 percent leisure and 49 percent business 
travel.
---------------------------------------------------------------------------

     85 percent of current slots will be ``grandfathered'' to 
carriers who hold

[[Page 60595]]

the corresponding Operating Authorization under the LaGuardia Order 
pursuant to a cooperative lease agreement for a period of ten years.

Alternatives We Have Considered

     No caps (no action): Based on past history, the FAA 
expects operators would expand operations and further worsen airport 
delay.
     2006 NPRM: The 2006 NPRM would have instituted caps, 
provided for mandatory upgauging, and withdrawn 10 percent of slots 
annually for reallocation. We have amended the SNPRM proposal in favor 
of the one finalized here.
     Caps with no reallocation: This alternative would 
permanently impose caps at 75 scheduled operations and three 
unscheduled operations per hour. It would grandfather all current 
Operating Authorizations, assigning them to carriers currently 
operating at the airport. This alternative would stifle actual and 
potential competition.

Benefits of This Rulemaking

    The primary benefits of this rulemaking will be due to the delay 
reduction from the reduction in the cap on operations and an 
improvement in the allocation of scarce slot resources through the use 
of an auction mechanism.
    Since publishing the NPRM and the SNPRM, we have updated our cost 
and benefit estimates. A detailed discussion of the applied methodology 
as related to consumer and producer surplus can be found in the NPRM 
regulatory evaluation. The total net benefits of this final rule are 
summarized in the following table. The baseline costs and benefits from 
setting the cap of 75 scheduled operations and 6 unscheduled 
operations, plus reducing the cap, and the net benefits from the 
auction result in net benefits of $3.2 billion. The net benefits from 
reducing the cap and from the auction are $1.2 billion based on the 
current capped operation level. This is the alternative baseline 
suggested by commenters.

                  Net Benefits of the Rule ($2008 mil)
------------------------------------------------------------------------

------------------------------------------------------------------------
Net Benefit of a Cap: 75 scheduled; 6 Unscheduled.......        $1,862.5
Net Benefit of Reducing Cap: 71 scheduled; 3 unscheduled         1,226.7
Net Benefit of the Auction..............................            65.4
                                                         ---------------
    TOTAL NET BENEFITS of CAP, CAP Reduction and Auction         3,154.6
    TOTAL NET BENEFITS of CAP Reduction and Auction.....         1,292.1
------------------------------------------------------------------------

Costs of This Rulemaking

    Since the SNPRM, and at the request of commenters, we have re-
estimated the costs associated with this rule. These costs include the 
costs to the public and private sectors of designing, implementing and 
participating in the auction. The total present value costs are $23.9 
million. As the costs of purchasing a slot are a transfer from one 
entity to another, these costs are not included. However, we include a 
discussion of slot values in the Final Regulatory Evaluation. We 
estimate $6.2 million as the nominal auction costs to the FAA. The 
nominal cost for carriers is $21.7 million.

Paperwork Reduction Act

    This proposal contains the following new information collection 
requirements. As required by the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507(d)), the FAA has submitted the information requirements 
associated with this proposal to the Office of Management and Budget 
for its review.
    ATA believes the FAA's estimate of the paperwork burden is 
understated. ATA noted that there will also be significant legal fees 
associated with negotiating, drafting, executing and monitoring the 
secondary market. Based on this, ATA believes the estimated burden 
should be between 50 percent to 100 percent of a full-time management 
employee's time.
    FAA does not agree with ATA's assessment of the time necessary to 
participate in the secondary market. The secondary market being adopted 
in this final rule does not vary much in scope from the secondary 
market in place at the airport over the past several years. We do, 
however, acknowledge that participation in the government auction will 
require airlines to dedicate employee time and resources in order to 
prepare and submit their bids. It should be noted, however, that 
participation in the auction and secondary market are not requirements 
of this rule. A carrier with existing slots at LaGuardia is permitted 
to continue operations at the airport using the common slots 
grandfathered to them as part of this final rule. Carriers will only 
need to engage in the secondary market and auction if they choose to 
buy, lease or sell slots.
    Some of the information requirements in today's rule are similar to 
those originally proposed in the 2006 notice. The FAA has updated these 
requirements and summarized them below.
    Title: Congestion Management Rule for LaGuardia Airport.
    Summary: The rule grandfathers the majority of operations at the 
airport and will develop a robust secondary market by annually 
auctioning off a limited number of slots; the FAA plans to use the 
proceeds from the auctions to mitigate congestion and delay in the New 
York City area. In addition, the hourly cap on scheduled operations 
will be reduced to 71 per hour during the regulated hours except. This 
reduction will lead to an estimated 41 percent reduction in modeled 
delay at the airport. This rule also contains provisions for use-or-
lose, unscheduled operations, and withdrawal for operational need. The 
rule will sunset in ten years.
    More information on the proposed requirements is detailed elsewhere 
in today's notice.
    Use of: The information is reported to the FAA by scheduled 
operators holding slots. The FAA logs, verifies, and processes the 
requests made by the operators.
    This information is used to allocate, track usage, withdraw, and 
confirm transfers of slots among the operators and facilitates the 
buying and selling of slots in the secondary market. The FAA also uses 
this information in order to maintain an accurate accounting of 
operations to ensure compliance with the operations permitted under the 
rule and those actually conducted at the airport.
    Respondents: The respondents to the proposed information 
requirements in today's notice are scheduled carriers with existing 
service at LaGuardia, carriers that plan to enter the LaGuardia market 
(by auction or secondary market), and carriers that enter the LaGuardia 
market in the future. There are currently fourteen (14) carriers with 
existing scheduled service at LaGuardia.
    Frequency: The information collection requirements of the rule 
involve

[[Page 60596]]

scheduled carriers notifying the FAA of their use of slots. The 
carriers must notify the FAA of: (1) Its designation of 50 percent of 
its Limited Slots; (2) request for confirmation to sublease slots; (3) 
its consent to transfer slots under the transferring Carrier's 
marketing control; (4) requests for confirmation of one-for-one slot 
trades; (5) slot usage (operations); (6) request for assignment of 
slots available on a temporary basis; and (7) participation in FAA 
auctions.
    Annual Burden Estimate: The annual reporting burden for each 
subsection of the rule is presented below. Annual burden estimates 
presented in today's notice are based on burden estimates from the 2006 
notice.
    The burden is calculated by the following formula:
    Annual Hourly Burden = ( of respondents) * (time involved) 
* (frequency of the response).

Section 93.64(c)(3) Categories of Slots: 50 percent designation of 
Limited Slots

    (6 carriers) * (80 hours per submittal) = 480 hours.
    Based on the current allocation of Operating Authorizations and the 
level of baseline operations each carrier would be grandfathered under 
today's rule, we assumed the 6 carriers with the most operations at 
LaGuardia would expend up to 10 days of planning time each, potentially 
80 hours, to develop and submit its designation of 50 percent of its 
Limited Slots. This designation would occur once, ten days after the 
final rule effective date.

Sections 93.65(c)-(d) and 93.66(a) Initial Assignment of Slots and 
Assignment of New or Returned Slots

    We assumed 50 carriers will expend time submitting and collecting 
information to participate in the proposed auctions for slot 
assignments. For the overall auction activity, a carrier would likely 
assemble a multidisciplinary team of existing staff that would consist 
of an auction manager, an operations research specialist, and a 
corporate lawyer. The assembled team involved in the auction would not 
be dedicated entirely to the auction process and could continue to work 
on existing projects and responsibilities. The information collection 
is 32 hours per carrier and is a subset of the overall carrier auction 
costs. It consists of submitting an expression of interest (8 hours) 
and submitting bids (24 hours).
    We estimate the annual auctions would require approximately 32 
hours for the assembled team of resources to submit the Auction 
Expression of Interest and submit the bid file to FAA auction system. 
Both of these paperwork submission requirements will be filed 
electronically.
    (50 bidding carriers) * (32 hours per carrier ) * (1 occurrence per 
year) = 1,600 hours.

Section 93.68(b)-(f) Sublease and Transfer of Slots

    (14 carriers) * (1.5 hours per submittal) * (4 occurrences per 
year) = 84 hours.
    Based on burden estimates from the 2006 notice, we assumed the 14 
carriers operating at LaGuardia would expend one and one half hours for 
each occurrence of a lease or transfer of a slot. For each operator, we 
assumed that a lease or transfer of a slot would occur on average 
quarterly.

Section 93.69(b) One-for-One Trades of Operating Authorizations

    (14 carriers) * (1.5 hours per submittal) * (4 occurrences per 
year) = 84 hours.
    Based on burden estimates from the 2006 notice, we assumed the 14 
marketing carriers operating at LaGuardia expend one and one half hours 
for each occurrence of a one-for-one trade of a slot. For each 
operator, we assumed that a one-for-one trade of a slot would occur 
quarterly.

Section 93.72(a) Reporting Requirements

    (14 carriers) * (1.5 hours per submittal) * (6 occurrences per 
year) = 126 hours.
    Based on burden estimates from the 2006 notice, we assumed the 14 
carriers operating at LaGuardia expend one and one half hours every two 
months of the data required by Sec.  93.72(a).

Section 93.73(d)-(e) Administrative Provisions

    (14 carriers) * (1.5 hours per submittal) * (4 occurrences per 
year) = 84 hours.
    Based on burden estimates from the 2006 notice, we assumed the 14 
carriers operating at LaGuardia expend one and one half hours every 
quarter for administrative provisions.

Summary

    Total First Year Hourly Reporting Burden--2,458 Hours; 
    Total Recurring Annual Hourly Reporting Burden (years 2-5)--1,978 
Hours;
    Total Recurring Annual Hourly Reporting Burden (after fifth year)--
378 Hours.
    According to the 1995 amendments to the Paperwork Reduction Act (5 
CFR 1320.8(b)(2)(vi)), 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. 
OMB has assigned control number 2120-0719 to this information 
collection.

Regulatory Flexibility Determination

    The Regulatory Flexibility Act of 1980 (Pub. L. 96-3540) (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 would have a significant economic impact on a substantial 
number of small entities. If the agency determines that it would, 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.
    This final rule will not have a significant impact on a substantial 
number of entities as there is only one small entity that might be 
affected. Although there are three scheduled operators whose employee 
total is less than 1,500 (the SBA criterion for small entity airline), 
all three of these operators are subsidiaries of larger companies with 
employees exceeding 1,500. In January, 2007 there was one destination, 
Nantucket Memorial Airport, whose surrounding community was 
substantially less than the SBA criterion of 50,000 for communities. 
When we checked Official Airline Guide for July, 2008 we found one 
additional destination, Martha's Vineyard, with seasonal service having 
a surrounding-community population less than 50,000. We conclude that 
there is only one community with year-round

[[Page 60597]]

service that qualifies as a small entity and no airline operator is a 
small entity.
    Since the comments to the SNPRM referenced small communities, 
operators, and small equipment, we will now discuss those comments 
within the context of the requirements of the Regulatory Flexibility 
Act. We have already provided more general responses to the comments 
earlier in this document.
    The FAA received one comment claiming that the FAA failed to 
adequately consider alternatives in violation of the Regulatory 
Flexibility Act. This commenter was not a small entity. Because the 
agency has determined that the rule will not have a significant 
economic impact on a substantial number of small entities, no further 
analysis as required under the Act. However, as discussed earlier, the 
agency has considered multiple alternatives in developing this rule.
    Several commenters noted that service to small communities is 
provided using smaller aircraft. The Port Authority estimated with 
auctions, the cost per seat for carriers could be from two to six times 
higher for small aircraft. The Regional Airline Association (RAA) 
commented many communities are served exclusively by small regional 
aircraft and that it is only through these smaller planes that there 
can be any meaningful competition in smaller communities. US Airways 
also remarked the SNPRM will be a form of a ``forced upgauging'' on 
LaGuardia and that to the extent the other New York area airports use 
auctions, it will preclude nonstop service from many smaller 
communities.
    Finally, NetJets commented limiting unscheduled operations will 
also negatively impact small communities. According to NetJets, many of 
the smallest markets have no commercial air service to the New York 
City area and general aviation is the only air link to the region.
    This final rule helps ensure service to small communities as we 
dropped the requirement for aircraft upgauging at LaGuardia and we 
reduced the number of slots for reallocation from 100 percent of slots 
in ten years to ten percent of slots in five years. A majority of slots 
at the airport will be grandfathered to current slot-holders for the 
duration of the rule. The reduction of slots to be reallocated, and the 
withdrawal of upgauging will help ensure service to small community 
airports. This rule is not designed to force carriers to serve 
particular communities. Ultimately this rule allows the market to 
allocate scarce resources. Just as is the case today, the rule allows 
an operator to make a business decision to retain, add, or remove 
service to a small community. In the case a small community loses 
service, they can apply for Essential Air Service from the Department 
of Transportation to restore service. Currently neither the airport at 
Martha's Vineyard with its seasonal service nor Nantucket Memorial 
Airport receives Essential Air Service.
    The changes contained in this final rule also help operators flying 
smaller equipment. With only ten percent of the slots subject to 
reallocation, the initial impact on all operators is substantially 
reduced. Although there will be no rule requirement regarding the size 
of airplane, the operator might decide to fly a larger, or smaller 
airplane. This decision belongs to the operator. With a reduced number 
of slots to be reallocated and the removal of upgauging, the impact on 
all operators and especially those flying smaller equipment has been 
reduced.
    Lastly most of NetJet's comments are directed toward the 
nonscheduled service requirement. After reviewing LaGuardia 
nonscheduled service, nearly all service can be accommodated at 
preferred times under the final rule. For those few cases where the 
preferred hour is not possible, almost all service can be accommodated 
in the adjacent hours. Lastly, in the rare case where the adjacent hour 
will not accommodate the overflow, a 2- to 3-hour window should permit 
the operation. The rule does allow all operators, including NetJet the 
opportunity to buy a slot to ensure operations to New York. Such an 
opportunity is very difficult in today's environment.
    In summary, the FAA has mitigated the impact on all operators, 
especially those flying smaller equipment, and there is only one small 
entity who would potentially be affected by this rule. Nantucket 
Memorial receives year-round service and the surrounding community is 
less than 50,000. However, as one small entity is not a substantial 
number, as the acting FAA Administrator, I certify this final rule will 
not have a significant economic impact on a substantial number of small 
entities.

International Trade Impact Assessment

    The Trade Agreements 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. The FAA has assessed the 
potential effect of this proposed rule and determined that it would 
impose no costs on international entities and thus have a no trade 
impact. Canadian entities are the only foreign operators at LaGuardia 
and their slots are protected by a bilateral aviation agreement and not 
affected by the rule. They might benefit from the rule if they choose 
to participate in the proposed auction to acquire additional slots.

Unfunded Mandate Assessment

    The Unfunded Mandate 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 $136.1 million in lieu of $100 
million. This final rule does not contain such a mandate. The 
requirements of Title II do not apply.

Executive Order 13132, Federalism

    The FAA has analyzed this 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, on 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, ``Environmental Impacts: Policies and 
Procedures'' identifies FAA actions that are normally categorically 
excluded from preparation of an environmental assessment or 
environmental impact statement under the National Environmental Policy 
Act (NEPA) in the absence of extraordinary circumstances. The FAA has 
determined that this rulemaking qualifies for the categorical 
exclusions identified in paragraph 312d ``Issuance of regulatory 
documents (e.g., Notices of Proposed Rulemaking and issuance of Final 
Rules) covering administration or procedural requirements (does not 
include Air Traffic procedures; specific Air traffic procedures that 
are

[[Page 60598]]

categorically excluded are identified under paragraph 311 of this 
Order)'' and paragraph 312f, ``Regulations, standards, and exemptions 
(excluding those which if implemented may cause a significant impact on 
the human environment.)'' It has further been determined that no 
extraordinary circumstances exist that may cause a significant impact 
and therefore no further environmental review is required. The FAA has 
documented this categorical exclusion determination. A copy of the 
determination and underlying documents has been included in the Docket 
for this rulemaking.
    The Port Authority estimates that there would be a five to fifteen 
percent increase in night operations as a result of the proposed 
auction alternatives in the SNPRM. A resident of a neighborhood near 
LaGuardia said that there are already many flights until midnight and 
that flights in these later hours adversely affect the quality of life 
of neighbors. The FAA does not believe there is a reasonable projection 
that the final rule will result in additional nighttime operations for 
the following reasons. First, there are currently 14 unused slots in 
the 8 p.m. and 9 p.m. hours that could be used for scheduled 
operations; we therefore believe it is unlikely that the number of 
nighttime operations will increase to a point where the currently 
unallocated slots are filled and additional operations are added in the 
later evening hours. Second, there are a limited number of remote 
overnight parking positions at the airport, which physically bounds the 
number of nighttime operations that can be accommodated at LaGuardia.

Regulations That Significantly Affect Energy Supply, Distribution, or 
Use

    The FAA has analyzed this 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 while 
a ``significant regulatory action'' under Executive Order 12866, it is 
not likely to have a significant adverse effect on the supply, 
distribution, or use of energy.

Additional Information

Availability of Rulemaking Documents

    You can get an electronic copy of rulemaking documents using the 
Internet by--
    1. Searching the Federal eRulemaking Portal (http://
www.regulations.gov);
    2. Visiting the FAA's Regulations and Policies Web page at http://
www.faa.gov/regulations_policies/; or
    3. 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, SW., Washington, DC 20591, or by calling (202) 267-9680. Make 
sure to identify the docket number, notice number, or amendment number 
of this rulemaking.
    You may access all documents the FAA considered in developing this 
rule, including economic analyses and technical reports, from the 
internet through the Federal eRulemaking Portal referenced in paragraph 
(1).

List of Subjects in 14 CFR Part 93

    Air traffic control, Airports, Navigation (air).

VIII. Regulatory Text

0
In consideration of the foregoing, the Federal Aviation Administration 
amends Chapter I of Title 14, Code of Federal Regulations, as follows:

PART 93--SPECIAL AIR TRAFFIC RULES

0
1. The authority citation for part 93 continues to read as follows:

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


0
2. Subpart C is added to read as follows:
Subpart C--LaGuardia Airport Traffic Rules
Sec.
93.35 Applicability.
93.36 Definitions.
93.37 Slots for scheduled arrivals and departures.
93.38 Categories of slots.
93.39 Initial assignment of slots.
93.40 Assignment of new or returned slots.
93.41 Reversion and withdrawal of slots.
93.42 Sublease and transfer of slots.
93.43 One-for-one trade of slots.
93.44 Minimum usage requirements.
93.45 Unscheduled operations.
93.46 Reporting requirements.
93.47 Administrative provisions.

Subpart C--LaGuardia Airport Traffic Rules


Sec.  93.35  Applicability.

    (a) This subpart prescribes the air traffic rules for the arrival 
and departure of aircraft used for scheduled and unscheduled service, 
other than helicopters, at LaGuardia Airport (LaGuardia).
    (b) This subpart also prescribes procedures for the assignment, 
transfer, sublease and withdrawal of Slots issued by the FAA for 
scheduled operations at LaGuardia.
    (c) The provisions of this subpart apply to LaGuardia during the 
hours of 6:00 a.m. through 9:59 p.m., Eastern Time, Monday through 
Friday and from 12 noon through 9:59 p.m., Eastern Time, Sunday. No 
person shall operate any scheduled arrival or departure into or out of 
LaGuardia during such hours without first obtaining a slot in 
accordance with this subpart. No person shall conduct an unscheduled 
operation to or from LaGuardia during such hours without first 
obtaining a reservation.
    (d) Carriers that have common ownership shall be considered a 
single air carrier for purposes of this rule.
    (e) The slots assigned under this subpart terminate at 10:00 p.m. 
on March 9, 2019.


Sec.  93.36  Definitions.

    For purposes of this subpart, the following definitions apply:
    Airport Reservation Office (ARO) is an operational unit of the 
FAA's David J. Hurley Air Traffic Control System Command Center. It is 
responsible for the administration of reservations for unscheduled 
operations at LaGuardia.
    Base of operations are those common slots held by a carrier at 
LaGuardia on December 9, 2008, that do not exceed 20 operations per day 
and all slots guaranteed under The Air Transport Agreement between the 
Government of the United States of America and the Government of 
Canada.
    Carrier is a U.S. or foreign air carrier with authority to conduct 
scheduled service under Parts 121, 129, or 135 of this chapter and the 
appropriate economic authority for scheduled service under 14 CFR 
chapter II and 49 U.S.C. chapters 411 and 413.
    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.
    Common slot is a slot that is allocated by the FAA as a lease under 
its cooperative agreement authority for the length of this rule.
    Enhanced computer voice reservation system (e-CVRS) is the system 
used by the FAA to make arrival and/or departure reservations for 
unscheduled operations at LaGuardia and other designated airports.
    Limited slot is a slot, the lease for which expires prior to the 
expiration of this rule for retirement or subsequent allocation by the 
FAA as an unrestricted slot.
    Public charter is defined in 14 CFR 380.2 as a one-way or roundtrip 
charter

[[Page 60599]]

flight to be performed by one or more direct air carriers that is 
arranged and sponsored by a public charter operator.
    Public charter operator is defined in 14 CFR 380.2 as a U.S. or 
foreign public charter operator.
    Reservation is an authorization received by a carrier or other 
operator of an aircraft, excluding helicopters, in accordance with 
procedures established by the FAA to operate an unscheduled arrival or 
departure on a particular day during a specific 60-minute period.
    Scheduled operation is the arrival or departure segment of any 
operation regularly conducted by a carrier between LaGuardia and 
another point regularly served by that carrier.
    Slot is the operational authority assigned by the FAA to a carrier 
to conduct one scheduled operation or a series of scheduled operations 
at LaGuardia on a particular day(s) of the week during a specific 30-
minute period.
    Unrestricted slot is a slot that is allocated to a carrier by the 
FAA via the auction of a lease.
    Unscheduled operation is an arrival or departure segment of any 
operation that is not regularly conducted by a carrier or other 
operator of an aircraft, excluding helicopters, between LaGuardia and 
another service point. The following types of carrier operations shall 
be considered unscheduled operations for the purposes of this rule: 
Public, on-demand, and other charter flights; hired aircraft service; 
extra sections of scheduled flights; ferry flights; and other non-
passenger flights.


Sec.  93.37  Slots for scheduled arrivals and departures.

    (a) During the hours of 6 a.m. through 9:59 p.m., Eastern Time, 
Monday through Friday and from 12 noon through 9:59 p.m., Eastern Time, 
Sunday, no person shall operate any scheduled arrival or departure into 
or out of LaGuardia without first obtaining a slot in accordance with 
this subpart.
    (b)(1) Prior to March 8, 2009, the number of slots shall be limited 
to no more than seventy-five (75) per hour unless otherwise provided by 
the Administrator. The number of slots may not exceed 38 in any 30-
minute period, and 75 in any 60-minute period.
    (2) Effective March 8, 2009, and except as otherwise established by 
the FAA under paragraph (c) of this section, the number of slots 
available from 6 a.m. through 9:59 p.m. shall be limited to no more 
than seventy-one (71) per hour. The number of slots may not exceed 38 
in any 30-minute period, and 71 in any 60-minute period. The number of 
arrival and departure slots in any period may be adjusted by the FAA as 
necessary based on the actual or potential delays created by such 
number or other considerations relating to congestion, airfield 
capacity and the air traffic control system.
    (c) Notwithstanding paragraph (b) of this section, the 
Administrator may increase the number of slots based on a review of the 
following:
    (1) The number of delays;
    (2) The length of delays;
    (3) On-time arrivals and departures;
    (4) The number of actual operations;
    (5) Runway utilization and capacity plans; and
    (6) Other factors relating to the efficient management of the 
National Airspace System.


Sec.  93.38  Categories of slots.

    Each slot shall be designated as a common slot, limited slot or 
unrestricted slot and shall be assigned to the carrier under a lease 
agreement. A lease for a common or limited slot shall be assigned via a 
cooperative agreement. A lease for an unrestricted slot shall be 
awarded via an auction.
    (a) Common slots.
    (1) All slots within any carrier's base of operations as determined 
on December 9, 2008 shall be designated as common slots.
    (2) 176 slots at LaGuardia on December 9, 2008 shall be designated 
as limited slots or unrestricted slots. All other slots shall be 
designated as common slots.
    (b) Limited slots. Those slots assigned to a carrier subject to 
return to the FAA under Sec.  93.39(c) and (d) shall be designated as 
limited slots until the date of their reassignment by the FAA as 
unrestricted slots or their retirement by the FAA. A carrier may 
continue to use a limited slot that has reverted to the FAA until the 
second Sunday in the following March.
    (1) Each carrier with a total number of daily operations at 
LaGuardia in excess of its base of operations, will be notified by no 
later than December 9, 2008 how many of its slots will be designated as 
limited slots pursuant to paragraphs (b)(3) and (4) of this section.
    (2) A carrier shall designate 50 percent of its limited slots. The 
carrier must notify the FAA of its designation by December 19, 2008.
    (3) The FAA will designate the remaining limited slots, initially 
excluding those hours in which five or more slots have been designated 
as limited slots by the carriers.
    (4) No later than December 29, 2008, the FAA will publish a list of 
all limited slots and the dates upon which they will expire.
    (c) Unrestricted slots. Unrestricted slots are slots acquired by a 
carrier through a lease with the FAA awarded via an auction. 
Unrestricted slots are not subject to withdrawal by the FAA.


Sec.  93.39  Initial assignment of slots.

    (a) Except as provided for under paragraphs (b) and (c) of this 
section, any carrier allocated operating rights under the Order, 
Operating Limitations at New York LaGuardia Airport, during the week of 
September 28-October 4, 2008, as evidenced by the FAA's records, will 
be assigned corresponding slots in 30-minute periods consistent with 
the limits under Sec.  93.37(b). If necessary, the FAA may utilize 
administrative measures such as voluntary measures or a lottery to re-
time the assigned slots within the same hour to meet the 30-minute 
limits under Sec.  93.37(b). The FAA Vice President, System Operations 
Services, is the final decision-maker for determinations under this 
section.
    (b) If a carrier was allocated operating rights under the Order 
Limiting Operations at LaGuardia Airport during the week of September 
28-October 4, 2008, but the operating rights were held by another 
carrier regularly conducting operations at the airport as of that week, 
then the corresponding slots will be assigned to the carrier that held 
the operating rights for that period, as evidenced by the FAA's 
records.
    (c)(1) In accordance with the schedule published under Sec.  
93.38(b)(4),
    (i) Twenty-four (24) limited slots shall revert to the FAA on 
January 13, 2009 and be auctioned as unrestricted slots by the FAA.
    (ii) Every year thereafter, twenty-two (22) limited slots shall 
revert to the FAA and be auctioned as unrestricted slots by the FAA.
    (2) Any slot receiving no responsive bids will be retired until the 
next auction.
    (3) An affected carrier will be allowed to use the limited slot 
until the following second Sunday in March.
    (d) On March 8, 2009, the FAA will retire 64 of the limited slots 
returned to the FAA under Sec.  93.38(b).


Sec.  93.40  Assignment of new or returned slots.

    (a) New capacity or capacity returned to the FAA pursuant to the 
provisions of Sec.  93.44 will be reassigned by the FAA via an auction. 
Slots acquired from the FAA under the auction proceeding shall be 
designated as unrestricted slots.
    (b) The FAA may decide to accumulate a quantity of slots prior to 
conducting an auction.

[[Page 60600]]

Sec.  93.41  Reversion and withdrawal of slots.

    (a) This section does not apply to unrestricted slots.
    (b) A carrier's common slots or limited slots revert back to the 
FAA 30 days after the carrier has ceased all operations at LaGuardia 
for any reasons other than a strike.
    (c) The FAA may retime, withdraw or temporarily suspend common 
slots and limited slots at any time to fulfill operational needs.
    (d) Common slots and limited slots temporarily withdrawn for 
operational need will be withdrawn in accordance with the priority list 
established under Sec.  93.47.
    (e) Except as otherwise provided in paragraph (a) of this section, 
the FAA will notify an affected carrier before withdrawing or 
temporarily suspending a common slot or limited slot and specify the 
date by which operations under the common slot or limited slot must 
cease. The FAA will provide at least 45 days' notice unless otherwise 
required by operational needs.
    (f) Any common slot or limited slot that is temporarily withdrawn 
under this paragraph will be reassigned, if at all, only to the carrier 
from which it was withdrawn, provided the carrier continues to conduct 
scheduled operations at LaGuardia.
    (g) Should the Administrator determine that the cap on scheduled 
operations at LaGuardia is too high, he may withdraw common slots to 
reduce the cap. Any such action by the Administrator shall be subject 
to the notice and comment provisions of the Administrative Procedure 
Act.


Sec.  93.42  Sublease and transfer of slots.

    (a) A carrier may sublease its slots to another carrier in 
accordance with this section and subject to the provisions of the 
carrier's lease agreement with the FAA. The character of the slot 
(e.g., common slot) will not change.
    (b) A carrier must provide notice to the FAA to sublease a slot. 
Such notice must contain: The slot number and time, effective dates 
and, if appropriate, the duration of the lease. The carrier may also 
provide the FAA with a minimum bid price.
    (c) The FAA will post a notice of the offer to sublease the slot 
and relevant details on the FAA Web site at http://www.faa.gov. An 
opening date, closing date and time by which bids must be received will 
be provided.
    (d) Upon consummation of the transaction, written evidence of each 
carrier's consent to sublease must be provided to the FAA, as well as 
all bids received and the terms of the sublease, including but not 
limited to:
    (1) The names of all bidders and all parties to the transaction;
    (2) The offered and final length of the sublease;
    (3) The consideration offered by all bidders and provided by the 
sublessee.
    (e) The slot may not be used until the conditions of paragraph (d) 
of this section have been met, and the FAA provides notice of its 
approval of the sublease.
    (f) A carrier may transfer a slot to another carrier that conducts 
operations at LaGuardia solely under the transferring carrier's 
marketing control, including the entire inventory of the flight. Each 
party to such transfer must provide written evidence of its consent to 
the transfer, and the FAA must confirm and approve these transfers in 
writing prior to the effective date of the transaction. However, the 
FAA will approve transfers under this paragraph up to five business 
days after the actual operation to accommodate operational disruptions 
that occur on the same day of the scheduled operation. The FAA Vice 
President, System Operations Services is the final decision maker for 
any determinations under this section.
    (g) A carrier wishing to sublease a slot via an FAA auction under 
Sec.  93.39(c), rather than pursuant to this section may do so. The 
carrier shall retain the proceeds and the slot shall retain the same 
designation that it had prior to the carrier placing it up for auction.


Sec.  93.43  One-for-one trade of slots.

    (a) A carrier may trade a slot with another carrier on a one-for-
one basis.
    (b) Written evidence of each carrier's consent to the trade must be 
provided to the FAA.
    (c) No recipient of the trade may use the acquired slot until 
written confirmation has been received from the FAA.
    (d) Carriers participating in a one-for-one trade must certify to 
the FAA that no consideration or promise of consideration was provided 
by either party to the trade.


Sec.  93.44  Minimum Usage Requirements.

    (a) This section does not apply to unrestricted slots.
    (b) Any common slot or limited slot that is not used at least 80 
percent of the time over a consecutive two-month period shall be 
withdrawn by the FAA.
    (c) The FAA may waive the requirements of paragraph (b) of this 
section in the event of a highly unusual and unpredictable condition 
which is beyond the control of the carrier and which affects carrier 
operations for a period of five or more consecutive days. Examples of 
conditions which could justify a waiver under this paragraph are 
weather conditions that result in the restricted operation of the 
airport for an extended period of time or the grounding of an aircraft 
type.
    (d) The FAA will treat as used any common slot or limited slot held 
by a carrier on Thanksgiving Day, the Friday following Thanksgiving 
Day, and the period from December 24 through the first Sunday of 
January.


Sec.  93.45  Unscheduled operations.

    (a) During the hours of 6 a.m. through 9:59 p.m., Monday through 
Friday, and 12 noon through 9:59 p.m. on Sunday, no person may operate 
an aircraft other than a helicopter to or from LaGuardia unless he or 
she has received, for that unscheduled operation, a reservation that is 
assigned by the Airport Reservation Office (ARO) or in the case of 
public charters, in accordance with the procedures in paragraph (d) of 
this section. Requests for reservations will be accepted through the e-
CVRS beginning 72 hours prior to the proposed time of arrival to or 
departure from LaGuardia. Additional information on procedures for 
obtaining a reservation is available on the Internet at http://
www.fly.faa.gov/ecvrs.
    (b) Three reservations are available per hour, including those 
assigned to public charter operations under paragraph (d) of this 
section. The ARO will assign reservations on a 60-minute basis.
    (c) The ARO will receive and process all reservation requests for 
unscheduled arrivals and departures at LaGuardia. Reservations are 
assigned on a ``first-come, first-served'' basis determined by the time 
the request is received at the ARO. Reservations must be cancelled if 
they will not be used as assigned.
    (d) One reservation per hour will be available for allocation to 
public charter operations prior to the 72-hour Reservation window in 
paragraph (a) of this section.
    (1) The public charter operator may request a reservation up to six 
months in advance of the date of flight operation. Reservation requests 
should be submitted to Federal Aviation Administration, Slot 
Administration Office, AGC-200, 800 Independence Avenue, SW., 
Washington, DC 20591. Submissions may be made via facsimile to (202) 
267-7277 or by e-mail to 7-awa-slotadmin@faa.gov.
    (2) The public charter operator must certify that its prospectus 
has been accepted by the Department of Transportation in accordance 
with 14 CFR part 380.
    (3) The public charter operator must identify the call sign/flight 
number or

[[Page 60601]]

aircraft registration number of the direct air carrier, the date and 
time of the proposed operation(s), the airport served immediately prior 
to or after LaGuardia, and aircraft type. Any changes to an approved 
reservation must be approved in advance by the Slot Administration 
Office.
    (4) If reservations under paragraph (d)(1) of this section have 
already been allocated, the public charter operator may request a 
reservation under paragraph (a) of this section.
    (e) The filing of a request for a reservation does not constitute 
the filing of an IFR flight plan as required by regulation. The IFR 
flight plan may be filed only after the reservation is obtained, must 
include the reservation number in the ``Remarks'' section, and must be 
filed in accordance with FAA regulations and procedures.
    (f) Air Traffic Control will accommodate declared emergencies 
without regard to reservations. Non-emergency flights in direct support 
of national security, law enforcement, military aircraft operations, or 
public-use aircraft operations may be accommodated above the 
reservation limits with the prior approval of the Vice President, 
System Operations Services, Air Traffic Organization. Procedures for 
obtaining the appropriate waiver are available on the Internet at 
http://www.fly.faa.gov/ecvrs.
    (g) Notwithstanding the limits in paragraph (b) of this section, if 
the Air Traffic Organization determines that air traffic control, 
weather and capacity conditions are favorable and significant delay is 
unlikely, the FAA may determine that additional reservations may be 
accommodated for a specific time period. Unused slots may also be made 
available temporarily for unscheduled operations. Reservations for 
additional operations must be obtained through the ARO.
    (h) Reservations may not be bought, sold or leased.


Sec.  93.46  Reporting requirements.

    (a) Within 14 days after the last day of the two-month period 
beginning January 1, 2009 and every two months thereafter, each carrier 
must report, in a format acceptable to the FAA, the following 
information for each slot:
    (1) The slot number, time, and arrival or departure designation;
    (2) The operating carrier;
    (3) The date and scheduled time of each of the operations conducted 
pursuant to the slot, including the flight number and origin/
destination;
    (4) The aircraft type identifier.
    (b) The FAA may withdraw the common slot or limited slot of any 
carrier that does not meet the reporting requirements of paragraph (a) 
of this section.


Sec.  93.47  Administrative provisions.

    (a) Each slot shall be assigned a number for administrative 
convenience.
    (b) The FAA will assign priority numbers by random lottery for 
common slots and limited slots at LaGuardia. Each common slot and 
limited slot will be assigned a withdrawal priority number, and the 30-
minute time period for the common slot or limited slot, frequency, and 
the arrival or departure designation.
    (c) If the FAA determines that operations need to be reduced for 
operational reasons, the lowest assigned priority number common slot or 
limited slot will be the last withdrawn.
    (d) Any slot available on a temporary basis may be assigned by the 
FAA to a carrier on a non-permanent, first-come, first-served basis 
subject to permanent assignment under this subpart. Any remaining slots 
may be made available for unscheduled operations on a non-permanent 
basis and will be assigned under the same procedures applicable to 
other operating reservations.
    (e) All transactions under this subpart must be in a written or 
electronic format approved by the FAA.

    Issued in Washington, DC, on October 6, 2008.
Robert A. Sturgell,
Acting Administrator.
 [FR Doc. E8-24048 Filed 10-9-08; 8:45 am]

BILLING CODE 4910-13-P
