 Airport congestion is a difficult problem, and
the set-up of the current system of airport slot allocation only makes
the problem worse. If airline A acts responsibly and reduces its
schedule at a congested airport, it gives its competitors the
opportunity to schedule more flights at that airport. If one of those
competitors decides to increase its schedule, airline A may lose market
share. The risk of permanently reduced market share keeps airlines
overscheduled at congested airports like Chicago’s O’Hare and New York’s
LaGuardia.
Michael Ball, Orkand Corporation Professor of Management Science in
Smith’s department of decision and information technologies, thinks that
a market-driven approach to slot allocation might prove to be the
solution. In a recent paper Ball examines the possibilities of using
auctions to allocate national airspace resources and thereby control
congestion.
Ball argues that a market-based allocation system, such as auctions,
would be more efficient than the current administrative allocation
system, maximizing the benefits to the consumer and the economy by
allocating the slots to airlines that can generate the greatest benefit
from their use. The transparency of an auction process also renders it
less open to legal challenge.
Airlines have objected to auctions on the grounds that they would
impose a new financial burden on airlines at a time when most are in
financial distress. Ball argues that careful auction design could choose
objectives that encourage new market entries and discourage monopolistic
control over markets, rather than maximizing revenue. Auction revenues
could be used to offset existing fees paid by the airlines and
passengers, and any excess revenues could be used to enhance airspace
capacity.
Although the FAA “owns” the airspace immediately above the runways
and so has the authority to allocate the use of that airspace, any
auction must take into account the physical necessities—gates, baggage
terminals—which are owned by the airport and which often have been
developed at the expense of a particular airline. The distribution of
aircraft types using the slots also impacts the capacity of the system,
so the number of arrival slots to be auctioned may vary depending on the
type of aircraft that would use them. Property rights must also be
carefully specified in an auction.
Ball recommends a transition period that moves the airline industry
from an administrative process to a market-clearing process, starting
with the nation’s most congested airports, like LaGuardia, during its
most congested time periods. The implicit property rights of incumbents
could be taken into account through a system of vouchers or through an
allocation of limited term leases during a transition period. Although
it might be appropriate to reduce flight operations to reduce delays,
the number of passengers serviced during these time periods may remain
the same or even increase, because airlines will choose to use larger
aircraft with a greater number of seats. Similarly, less in-demand
flights will likely move to alternate time periods where it makes sense
to have smaller planes taking off and landing.
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