Navigator: Should airlines be allowed to trade slots?
Friday, October 8, 2010; 1:35 PM
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.