The Transportation Department's new plan to permit airlines to freely buy and sell their landing rights at Washington National and three other major airports will create "windfall" profits for some big airlines while making it nearly impossible for new carriers to compete with them, industry officials said yesterday at a hearing before the Federal Aviation Administration.
The plan, which will take effect on April 1, will allow airlines to sell their rights -- or slots -- at National, Chicago's O'Hare and New York's LaGuardia and Kennedy Airports. All four airports operate slot systems because they have no room for more flights.
"Allowing the purchase and sale of airport slots will clearly lead to the creation of monopolies and it will hurt the competition that deregulation should foster," said Edward H. Witkowski, director of future schedules at Ozark Airlines. "I would be shocked if the smaller airlines failed to look around and see what they could get for their slots."
Ozark runs four daily flights from National, and Witkowski said yesterday the company would have to decide whether to sell those slots in April.
Most of the big carriers are in favor of the proposal, which will replace the current system of allocating slots at crowded airports through committees of airline executives. In the past, disagreements among scheduling committees have been frequent.
Critics say that the new system will allow the dominant carriers to manipulate the market with their size and the value of their landing rights. United, Eastern and American hold more than 50 percent of the slots at National, LaGuardia and O'Hare.
Because there are no specific restrictions on the sales of slots, many industry officials said that a big carrier such as United would be far more likely to lease or sell slots it was not using to a company that is not a direct competitor.
"You think Eastern is going to sell to the highest bidder if that bidder is a major competitor," said Charles Barclay, executive director of the American Association of Airport Executives, which opposes the new plan. "It makes no business sense for them to do that. The whole thing is completely inconsistent with airline deregulation."
One apparent effect of the DOT rule is the creation of an industry to broker the new commodity for sale, lease or trade. Estimates of the value of a slot in a peak travel time range from $50,000 up to $1 million.
"These things are probably going to be worth a fortune," said Lee R. Howard, executive vice president of Airline Economics Inc., a firm that follows the industry. "The system could have a very significant effect on who flies where. It just makes common economic sense that, if you are selling a valuable and limited resource, people are going to use it in the most lucrative possible way."
What that means, according to many industry officials, is that it soon may make more sense for certain airlines to sell slots rather than tickets. Because economics also will dictate that it makes more sense to fly a large plane full of people to a big market than a small plane to a medium-sized community, many people fear the plan may endanger flights to smaller cities.
The proposal includes a provision that would protect slots for commuter airlines and to cities with federally guaranteed air service.
But its opponents say that, over time, economics would force even those guarantees to disappear.