Whose slots are they, anyway?
That’s a fair question, given airlines’ recent efforts to swap slots – government permission to take off and land at a particular time – in Washington and New York.
You may not realize it, but slots can affect how much you pay for a flight. And the decisions made about landing permissions are hardly abstract. They will almost certainly have a lasting effect on competition and airfares, experts predict.
Catching a plane from a slot-controlled airport can be pricey. Fliers from Washington’s slot-limited Reagan National Airport paid an average fare of $373 for the first quarter of 2010, the latest period for which figures are available. At slot-restricted Liberty International Airport in Newark, N.J., the average fare was $423. By comparison, the average domestic airfare was just $328.
The reason? Slots – specifically a lack of them – drive airfares higher because competition is capped.
The slot system was put into place to ease congestion at some of the nation’s busiest airports, with permissions parceled out by lottery, at no cost to the airlines, based on historic flight levels. Four U.S. airports require government approval for takeoffs and landings: Reagan National and the New York area’s three major airports, John F. Kennedy International, LaGuardia and Newark.
“Slots are a lot like baseball franchises,” said Jeffrey Oliver Breen, president of Cambridge Aviation Research. “Once you have one, you have it for life.”
There’s a lot of slot-trading going on behind the scenes, and when you add it all up, it makes this a little-noticed but pressing issue for consumers, and particularly Washington-based passengers.
The government routinely rubber-stamps airline requests to trade slots. Earlier this year, American Airlines and JetBlue swapped landing permissions in Washington and New York. This summer, AirTran announced plans to stop flying to and from Newark, granting its slots there to Continental Airlines. Delta Air Lines and US Airways have tried to trade slots to build up their respective hubs at National and LaGuardia, a move they say will increase competition, but regulators rebuffed them.
“The airlines want more pricing power,” said George Hoffer, a transportation economist at the University of Richmond. In other words, although the airlines say they want to increase competition by building up their operations, they are effectively reducing it by amassing greater market share at a given airport.
Which takes us back to the question: Whose slots are they?
“Slots should be owned by the taxpayers,” says Howard Zoufaly, a business consultant in Broomfield, Colo., adding that the government, in deciding who is awarded a slot or who gets to trade it, “should represent the people.”
Jeff Carlin, a software consultant from Bloomington, Ind., says that exchanging slots doesn’t make any sense for passengers.
“Slots are made available to airlines with the expectation that the use of these slots will enhance the good of the people,” he said. “Airlines have no more right to swap slots among themselves, for the betterment of their stock price, than I have the right to give my driver’s license to my doddering uncle. The people gave the privilege to drive to me, not to him.”
Zoufaly and Carlin were just two of more than 400 readers who responded to a poll on my Web site, in which I asked who should own the slots and solicited respondents’ comments. The results were evenly divided between those who believe that the slots are an asset shared by the people and the airline, and those who thought that they belonged to the people. Fewer than 10 percent said slots should be the exclusive property of an airline.
While airlines often behave as if the slots are theirs and have enjoyed some limited ownership rights – for example, they’ve been able to buy, sell and lease these permissions – they admit that the slots probably aren’t theirs in principle.
“A slot is nothing more than the right to operate a service at a particular time, and there is little certainty about who is the legal owner,” concluded an editorial in a recent issue of the International Air Transport Association’s magazine, Airlines International. “Airports own the runways and the terminals. Governments regard a nation’s airspace as a sovereign right.”
The government can’t answer the question because of a pending lawsuit stemming from the Federal Aviation Administration’s decision relating to the proposed Delta-US Airways slot swap. Among other things, the suit seeks to answer the question of slot ownership. A spokesman for the Transportation Department declined to comment on the matter.
Airports think that the slots should belong to them. Deborah McElroy, a spokeswoman for the Airports Council International-North America, a trade group for the airports, saidthey own the land, so why not the landing rights?
“Airports are advocates for the community,” she said. “It’s in the best interests of the public for the airports to own the slots.”
But Patrick Murphy, an aviation consultant with Gerchick-Murphy Associates, says that airlines are far from unanimous on the subject of trades. “Every airline has its own perspective,” he said. A carrier’s position on the tradability of slots can shift, depending on who is trading landing permissions with whom.
Regardless of who owns the slots, one thing is certain: Those most affected by what happens to them will be air travelers. And that frustrates observers like Eli Lehrer, the national director for the Heartland Institute’s Center on Finance, Insurance and Real Estate.
“There isn’t a lot that consumers can do,” he said. But that shouldn’t stop them from trying. Passengers can still voice their opinions on slot swaps with the Transportation Department. When fares are dramatically different from one airport to the next, air travelers deserve to know why. An open market shouldn’t allow such a vast price disparity. Maybe the government should be saying “no” more often when airlines want to trade their slots.
At the very least, regulators ought to take travelers into account when making important decisions about the future of takeoff and landing permissions. You can contact the Aviation Consumer Protection division online or by phone at 202-366-2220.
Ultimately, say experts, the system of awarding takeoff and landing slots needs to be revised. That’s something our elected officials can do. And guess who puts them in office?
Update: Here are the final results survey results.
(Photo: T Robinson/Flickr Creative Commons)