With 550 daily departures to 72 destinations spread among 13 airlines, New York's LaGuardia Airport would appear to be a very competitive place. But the federal government says it isn't, primarily because of a shortage of low-fare carriers. As a result, the Federal Aviation Authority has proposed new regulations that could lead to the confiscation of slots, those assigned takeoff and landing positions that enable airlines to operate at the congested facility. The regulations were scheduled to take effect Jan. 1, but last month their implementation was largely delayed for an indefinite period. Much of the airline industry let out a sigh of relief, because the plan has been strongly opposed. "The proposals are un-American, not capitalistic and reek of eminent domain," said Dan Garton, executive vice president for marketing at American Airlines ( AMR), in an interview. Sametta Barnett, director of government affairs for Delta ( DALRQ), says the rules would enable the FAA to confiscate slots that were, in most cases, purchased by the carriers who use them. "Deregulation was intended to let the market determine how we operate," she says. "These regulations get rid of an effective market that lets us get in and out as passenger demand dictates." The Port Authority of New York and New Jersey, which operates LaGuardia and two other airports, John F. Kennedy International and Newark Liberty, believes improvements can be made to the government's suggestions, said spokesman Pasquale DiFulco.
"We have more airlines serving more cities with more nonstop flights than anyplace else in the world," he says. "The FAA is micromanaging the traditional role of the airport operator." Statistics by flight-data provider FlightStats indicate that of the 13 airlines operating at LaGuardia, three have market shares of about 20% or more. Only US Airways ( LCC) is close to 30%. Four carriers have shares of 3% to 4%. Four low-cost carriers have a combined share of about 6%, while Midwest Airlines has about 2%. (Regional carriers are included in their affiliates' shares.) The FAA contends that its proposals will lead to more passengers and lower average fares at LaGuardia, and it has estimated the benefit at $4.3 billion from 2007 through 2019. Its proposals are generally backed by the Air Carriers Association of America, a trade group that represents AirTran ( AAI), Frontier ( FRNT) and Spirit. "There's very little competition at LGA," says Ed Faberman, the group's executive director. "The carriers may offer different mileage programs, but there is not significant fare competition." In addition to changing the designation "slot" to "operating authorization," the FAA would maintain the number of hourly operations by commercial airlines at 75, and would add six additional departures for general aviation aircraft. The limitation had been set to expire on Dec. 31, but its continuation has been generally welcomed by bigger carriers. When the number of operations was allowed to increase in 2000, after Congress required access for regional jets serving small communities, the result was unprecedented congestion and massive delays.
Two proposals allow for slot confiscations. One provides that starting in 2010, the FAA could claim up to 10% of the slots held by carriers and reallocate them based on a so-far undetermined formula. Another represents an effort to ensure that bigger airplanes use the slots at LaGuardia, allowing confiscations if carriers do not meet a target for the average number of seats per aircraft. The proposed target would be between 105 and 122 seats, with exceptions for some designated markets including smaller airports. Barrett says Delta is "perplexed" by the proposal, since Congress previously designated slot exemptions for small communities. Because markets like Lexington, Ky., are too small to be served by large jets, Delta uses smaller, regional jets. The FAA "is saying 'Congress, you may have put this into law, but we are going to ignore it, because we need to foster competition -- even though it is already robust,'" Barrett said. Faberman said that taking slots from entrenched carriers is the only way to promote real competition, and he said confiscations should occur before 2010. "Our view is that they need to do something immediately," he said. "We have had these restrictions in place since 1968, and they have blocked any level of openness in market entry."