### 1 U.S. Department of Transportation

FEDERAL AVIATION ADMINISTRATION



## INITIAL REGULATORY EVALUATION

**Slot Management and Transparency for LaGuardia Airport, John F. Kennedy International Airport, and Newark Liberty**  **International Airport**

Office of Aviati on Policy and Plans Regulatory Analysis Division, APO

- 300

Nicole Nance and Esther Hernandez

April 1, 2012

(Based on 2009 D ata)

### 2 

## Contents
Executive Summary

................................ ................................ ................................ ................... 3

Background

................................ ................................ ................................ ................................ 4

Overview of Proposed Rule

................................ ................................ ................................ ...... 5

Use

- or

- Lose Requirement

................................ ................................ ................................ ......... 5

Secondary Market

................................ ................................ ................................ ...................... 6

Cost and Benefits

................................ ................................ ................................ ....................... 7

Methodology

................................ ................................ ................................ .............................. 7

Summary of Total Benefits

................................ ................................ ................................ ...... 24

Reporting Cost for Use

- or

- Lose

................................ ................................ .............................. 24

Cost of Reservation System

................................ ................................ ................................ ..... 25

Costs of Secondary Market

................................ ................................ ................................ ...... 25

Conclusion

................................ ................................ ................................ ................................ 28

Appendix

................................ ................................ ................................ ................................ .. 29

### 3 

## Executive Summary

The purpose of this rulemaking is to replace the current temporary orders limiting scheduled operations at LaGuardia Airport (LGA), John F. Kennedy International Airport (JFK), and Newark Liberty Internat ional Airport (EWR) with a permanent rule. Under the existing Order
the h ourly scheduled operations are already limited to 81 at JFK, 81 at EWR, and 71 at LGA

, and unscheduled operations are limited to 3 at LGA. This proposal, if adopted, would replace
those Orders a nd continue the existing limits on scheduled operations in addition to limiting unscheduled operations to 2 per hour at J FK and 1 at EWR and establishing dai ly scheduled operations limits. As the daily limits are consistent with current allocations, the F AA expects no additional costs or benefits as a result of the daily operational limits.

The proposed rule would permit a secondary market for U.S. and foreign air carriers to buy, sell, trade, and lease slots amongst each other. This would allow carriers serving or seeking to serve
the New York City (NYC) area airports to exchange slots as their business models and strategic goals require. Giving carriers the ability to exchange slots amongst themselves has the potential
to increase the efficient use of t hese scarce slots as a more explicit value is placed on the slots. The FAA proposes alternatives for how the secondary market would operate.

The rule also proposes changes to the use

- or

- lose requirement. Carriers would be required to use the allocated s lot at least 80% of the time for which it is allocated during the scheduling season

, and a slot must be used for the same flight or series of flights throughout the period for which it
is allocated. This is different from the current requirement w h ere car riers have the ability to spread flights over a set of s lots to achieve the 80% usage. The FAA believes that the majority of the costs and benefits from this proposed rule come from changes to the use

- or

- lose requirement, plus new administrative and repor ting costs. Benefits are mainly consumer benefits (measured as consumer surplus) from additional flights at both JFK and EWR. Costs are attributed to the additional operating costs carriers would incur for these flights, the additional minutes of delay ca used by the increase in number of operations and any administrative and reporting costs associated with the new rule

.

The FAA developed this analysis using 2009 data to model the behavior s of carriers based on meeting the minimum requirement of the propos ed rule. Under th is assumption

, carriers would incrementally increase actual operations in year one to meet the new use

- or

- lose requirement and this new operating level would grow by the FAA’s Terminal Area Forecast (TAF) until it reached the daily limits. The analysis period begins in 2012 (first year) because compliance cost is the highest in that year, and if benefits exceed the cost in the first year, this relationship will continue until passenger demand forces operations up to 100% of the available s lots. In the first

year , carrier utilization of slots will be at least 80%. Thereafter , increase s in operations and slot
utilization are a result of an increase in forecasted demand. Total benefits and costs are
estimated at $ 74

, 696

, 596 ( $ 65

, 242

, 900 Pre sent Value at 7%) for benefits and $ 53

, 056

, 768

### 4 ( $4 6

, 341

, 836 Present Value at 7%) for costs, assuming the highest cost secondary market alternative 4 or alternative 5 is adopted

. Moreover, t he FAA believes that this rule would improve utilization of existi ng slots , possibly increase a carrier’s penalty for retaining slots of limited value and thus result in the return of some slots, and would result in net benefits over one

year

.

Total Cost and Benefits of Alternatives Four or Five of the Proposed Rule

Fir st Year Benefits Present Value (Discount Rate 7%) Costs Present Value (Discount rate: 7%) Net Benefits
Regulatory Case $74,696,596 $65,242,900 $53,056,768 $46,341,836 $18,901,064



## Background

The thr ee New York City Area (NYC) airports Joh n F. Kennedy (JFK), LaGuardia ( LGA), and
Newark

- Liberty (EWR) have historically been among the most congested airports in the United States. These airports experience a heavy flow of traffic each day due to their proximity to the heavily populated N YC are a. When unconstrained, the heavy flow of tra ffic has resulted in high levels of congestion and delay that negatively affect the entire National Airspace System (NAS).

In addition to affecting the NAS , congestion and delays at each of the three airports n egatively
affect each other. The FAA has attempted to manage congestion at the three airports through a series of rules and orders dating back to 1969, when the High Density Traffic Airports Rule (HDR) was implemented. In 2000, Congress passed the “Wende ll H. Ford Aviation Investment and Reform Act for the 21st Century” (AIR

- 21). AIR

- 21 set an expiration date of 2007 for the

HDR at JFK and LGA and provided a number of immediate exemptions from the rule. The immediate exemptions and eventual expiration o f the HDR resulted in a high level of congestion
and delay at the New York Area airports, forcing FAA to implement temporary orders and to propose a longer

- term rule for LGA in 2006 (modified in 2008) and a longer

- term rule for EWR
and JFK in 2008.

In th e 2008 Congestion Management Rules the FAA examined the costs and benefits of implementing slot restrictions and auctions at these three airports. Consistent with AIR

- 21, the analysis assumed as a baseline that in the absence of these rulemakings, the FAA would not otherwise extend the temporary limits on aircraft operations at JFK, EWR or LGA. The refore, the primary benefits of those rulemaking s were the delay reduction from limits on operations and the improvement in the allocation of scarce slot resour ces. The FAA estimated that during the

ten

- year life of the rule, the rule would have resulted in approximately a 25 percent reduction in the average delay per operation at JFK relative to an unconstrained scenario. At EWR, this rule
would have result ed in approximately a 23 percent reduction in the average de lay per operation
relative to no limits. In total, the net benefits from both the auctions and the limits on operations

### 5 as implemented would have resulted in $1 .9 billion for JFK and $839 million fo r EWR over 10

years

. For LGA, when assuming no limits to limits , the net benefits over 10 years were estimated to be approximately $3.2 billion

. These delay reduction benefits have largely been realized under the current FAA Orders and would be expected to continue with the proposed scheduling limits, including an y additional operations expected from this rule.

These rules were stayed by the U.S. Court of Appeals for the District of Columbia Circuit prior
to the rules’ effective date. The 2008 rules wer e rescinded in 2009. The temporary O rders limiting scheduled operations at the three airports , and unscheduled operations at LGA, have
been extended until this proposed rule becomes effective.



## Overview of Proposed Rule

This proposed rule would replace the Orders currently limiting scheduled operations at JFK and EWR and the Order currently limiting scheduled and unscheduled operations at LGA. If adopted, this proposed rule would apply to both scheduled and unscheduled operations every day
at JFK and EWR b etween the hours of 0600 and 2259, local time. This rule would also apply to all operations at LGA Monday through Friday between the hours of 0600 and 2159, local time, and Sunday between the hours of 1200 and 2159, local time.

The rule would maintain th e current scheduled operation hourly limits of 81 at JFK and EWR,
and 71 at LGA. It would maintain the current h ourly unscheduled operations limit at LGA of three operations. The proposal also would limit hourly unscheduled operations to 2 at JFK and 1

a t EWR.

**Use**

**- or**  **- Lose Requirement** 



### As with the HDR, the Chicago O’Hare International Airport ( ORD ) congestion management rule, and the Orders, the FAA proposes an 80% use

- or

- lose requirement

. The FAA would change the way it applies the use

- or

- lose requiremen t by tying the 80

- percent usage requirement to a “one slot per operation” standard. This is generally consistent with the International Air Transport Association’s Worldwide Slot Guidelines and encourages more efficient use of scarce airport slots. The c urrent use

- or

- lose provisions, as applied by the FAA, allow a carrier to report its actual flights in any of its slots in the corresponding slot period . Carriers with multiple slot holdings can report flights on different days in any of its slots. Thus, a single flight can contribute to usage for more than o ne slot. While permitted under the current rules, this leads to inefficient use of the scarce resources and may preclude potential competitors from gaining
access to those underutilized slots. The us e

- or

- lose requirement, as proposed, would continue to allow carriers to cancel or not operate slots up to 20 percent of the time to allow for planned or unplanned cancellations but would require carriers to schedule operations that match the slots
held.

### 6 The rule would define a slot as day

- of

- the week operation during a scheduling season at each of
the three airports. At LGA, the proposal to calculate use

- or

- lose based on a full scheduling season would be a change from the way use

- or

- lose is currently app lied. Under the existing order, slot usage is reported every two

- months; however, t he FAA is proposing to de termine minimum usage for approximately a six

- month period. The FAA is proposing this change to

use

- or

- lose at LGA in order to be consistent with t he use

- or

- lose and allocation requirements at
the other two NY C area airports.

**Secondary Market**



### The rule also proposes to allow a secondary market for U.S. and foreign air carriers to buy, sell, trade, and lease slots amongst each other. This would all ow carriers serving or seeking to serve
the NY C area a irports to exchange slots as their business models and strategic goals require. Giving carriers the ability to exchange slots amongst themselves has the potential to increase the
efficient use of these scarce slots as the value of the slots is more clearly established. Only certificated carriers that operate or plan to operate at the airport w ould be allowed to hold slots. If a slot holder that has ceased all operations at t he airport for two correspo nding scheduling
seasons still hold s slots (by leasing t hem to other carriers), it w ould be required to return its slots to FAA or sell them on the secondary market.

There are several alternatives being considered for implementing the secondary market.

C urrently, there is no recommended alternative and the FAA is seeking comments on these variations. Specifically, helpful comments would include the pros and cons of each alternative, with respect to factors such as transparency, efficiency, and flexibilit y. Establishing a more transparent secondary market is intended to address a common concern expressed by new entrants and carriers with a limited presence at slot

- controlled airports. In particular, these carriers complained that the secondary market at these airports lacked transparency and limited market participation. For example, under the 1985 Buy

- Sell Rule new entrants and limited incumbent carriers argued that they did not have a systematic means by which to determine the availability or monetary value of slots. To the extent that slots did become available, trades frequently took place between the incumbent carriers. It was further argued that the exchange of slots between incumbent carriers was limited to ensure that such transactions did not j eopardize a carrier’s competitive position at these airports.

T he system for the secondary market remains subject to further consideration. The alternatives for the secondary market are summarized below:

i. Under this alternative, a carrier would be permit ted to buy, sell, or lease a slot to another carrier or to trade a slot with another carrier for a slot at any U.S. or foreign slot

- controlled airport. This alternative would permit privately

- negotiated transactions between carriers. Moreover, it allows for p rivately

- negotiated buy, sell, lease, and trade s without prior public
notice.

### 7 ii. Under the second alternative, a carrier seeking to sell, lease, or trade a slot with another carrier would be required to follow a formal process to negotiate the terms of the transaction. This alternative would require a public notice on an FAA

- managed bulletin board system. The carrier would have to submit a notice to the FAA that it intended to engage in a slot transaction,
and the notice would include the carrier’s intended terms. The FAA would publish a b ulletin board notice of buy, sell, lease, and trade. B idding and negotiation would occur between seller
and bidders after public notice.

iii. The third alternative is similar to the second alternative, except that c arriers would be permitted to privately negotiate tentative terms of a transaction before publishing its intent to transfer slots on the bulletin board. The FAA would publish a b ulletin board notice of buy, sell,
lease , and trade

. N egotiations may take pla ce p rior to public notice but bidding and negotiation
would still occur between seller and bidders

.

iv. For alternative four, a carrier would submit a notice to the FAA that it intended to engage in a slot transaction, and the bidding time frames would be the same as under the second alternative. The FAA would then publish a b ulletin board notice of buy, sell, lease , and trade

. Bidding carriers would post their bids, along with any counterbids, on the bulletin board. Therefore, negotiations in the form of iterative bids would be available to all registered interested parties.

v. The fifth alternative is similar to alternative four, except that bidding carriers would not be identified. The FAA would publish a b ulletin board notice of buy, sell, an d lease without identifying poster ; cash

- only bid s would be posted on the bulletin board without identifying
bidders ; and request for FAA approval must include terms of transaction . The terms of the final transaction would be posted on the FAA website.



## Cos **t and Benefits**

**Methodology**



### This section of the regulatory analysis estimate s the costs and benefits of the proposed rule. The rule would affect all operations at EWR, LGA, and JFK. The major changes from this proposed rule are driven by the proposed cha nge in the use

- or

- lose provisions, with additional impacts from the secondary market and new reporting requirements. Key assumptions are identified
below:

Who Is Potentially Affected By This Rulemaking

• Operators of scheduled and non

- scheduled, domestic an d inte r national flights, cargo operators, and new entrants who do not yet operate at JFK, LGA

, and EWR

• All communities with air service to JFK, LGA

, and EWR

• Passengers of schedul e d flights to JFK, LGA

, and EWR

### 8 • The Port Authority of New York and New Jersey, which operates the airport s

• FAA Air Traffic Control

Assumptions

• All costs an d benefits are in 2010 dollars.

• Costs and benefits estimated for 2012 (the first year)

• Additional flights added to meet new use

- or

- lose requirements excludes weekends (Saturday a nd Sunday)

• S ome flights are slightly re

- timed to meet new use

- or

- lose requirement

• Present value discount rate of 7 percent is applied

• Some unscheduled flights would be redirected

• Carriers that would need to add a large number of flights in less desirabl e hours (hour 6 and 21) would return or sell th ose slots

Current Environment : The current O rder s limit scheduled operations to 81 per hour at JFK and EWR and 71 at LGA. For LGA there is also a limit on unscheduled operations of 3 operations per hour and o perators are required to obtain a reservation. There is a current use

- or

- lose requirement at all airports where carriers have the ability to spread flights over a set of slots to achieve the 80% usage requirement

. The current Orders have a limited secondar y market, where trades and leases, not extending beyond the effective dates of the Orders, are permitted but slot sales are prohibited.

Regulatory Cas e : The NPRM proposes limits on scheduled operations at JFK and EWR to 81 per hour and 71 per hour at LG A. The FAA proposes a daily slot limit of 1,205 at both JFK and EWR and 1,136 at LGA. This proposed limit would not result in any withdrawal of slots. This daily limit would apply to the slot

- controlled hours at LGA and from hours 0600 to 2159 at JFK and EWR. A daily limit would provide flexibility to carriers scheduling flights because the FAA could approve new flights or retime existing flights to less congested hours while preventing a build

- up of the schedule across the day that would result in signif icant increases in delays. Unscheduled operations would be limited to 3 per hour at LGA, 2 at JFK, and 1 at EWR and would require an advance reservation. Under the use

- or

- lose provision, carriers would also now be required to use the allocated slot at le ast 80% of the time for which it is allocated du ring the scheduling season and the slot must be used for the same flight or series of flights throughout the period. The proposal permits a secondary market where carrier can buy, sell, and lease or trade sl ots.

Given the static nature of the slot restrictions from the Orders to the proposed rule, the FAA believes that costs and benefits from this proposed rule are based on change s to the use

- or

- lose requirement, the secondary market, and new administrat ive and reporting costs

.

C alculation of Operations Impact

Under the proposed rule change, each slot, assigned by day of week and by hour, would have to be used at least 80 percent of the time to be maintained by a slot holder. The same flight or

### 9 series of flights would be reported as used for an allocated slot. The same series of flights would be at least five flights at approximately the same time on the same day

- of

- week, generally with the same flight number, generally serving the same market, and dis tributed regularly in the same season (for example, a 1035 JFK

- LAX flight on every Monday of the summer season). This definition of same series of flights allows the FAA to see the intent to operate a series of flights but is not intended to preclude a ca rrier from changing the flight number, origin/destination, or flight time (within the same 30

- minute slot time period) during the scheduling season. This is a change from the current rule where a carrier may optimize its flight operations over multiple
sl ots to meet usage. Additionally, at LGA, usage would be calculated on a day

- of

- week basis over a scheduling season rather than on a weekly basis over a 2

- month period

. Changing this regulation would require some operators to increase utilization of slots or alternatively require
carriers to trade, sell, lease, or return the slots to FAA. In either case, operations at these airports would increase. Herein the FAA estimates the cost and benefits of this proposed change in slot utilization. This change is expected to generate benefits from increased flights, but those increased flights would also increase delays which would add cost. The analysis includes all carriers that hold slots at these three NYC airports including cargo. Additional detail is provide d in an appendix at the end of this document.

The FAA modeled the current environment and the regulatory case. The regulatory case assumes that carriers would add enough additional actual flights to meet the minimum 80% usage requirement per slot. Moreove r, the FAA makes no assumption on how carriers would schedule their flights but the FAA does recognize that a carrier would need to schedule at least 80% of their slots to operate the minimum number of flights needed to meet the new requirement. Also, the FAA assumes that if a carrier requires a significant number of additional flights in a less desirable hour (hours 0600 and 2100) carriers would either return or sell those
slots.

To estimate how many additional actual operations would be needed to meet t he proposed use

lose requirements, the FAA analyzed the actual flights flown relative to the existing allocation of slots. For this analysis, FAA studied actual departures flown for August 2009 in comparison to
the allocated slots. FAA selected the month of August for the analysis because that was the peak month of operations for 2009. The FAA decided not to analyze summer 2010 because a runway closure at JFK affected operations into and out of the New York region and a use

- or

- lose waiver
at JFK was in e ffect during the runway construction.

To analyze the impact of the proposed change to the use

- or

- lose requirement, each carrier’s allocated slots were matched with the actual flights scheduled and operated for that departure
hour. The actual flight s attr ibuted to a specific carrier included matching operations from code

share regional carriers to the marketing carrier holding the slot . The F AA observed all Monday flights for August 2009 since there were five Mondays in August 2009. For example, with a

sa mple of five days, if a carrier had one allocated slot at hour 0900 and it flew a flight at least

### 10 four times for the 0900 departure hour, then the carrier would meet the 80% usage requirement. This process 1 

### was done for each of the hours from 0600 t hrough 2200. The actual flights flown that were scheduled to depart at that hour were subtracted from the minimum number of flights needed to meet the 80%. There was a positive difference whenever a carrier fell short of meeting the requirement and a negative d ifference if the carrier exceeded 80% . The next step was to smooth these differences across adjacent hours. The FAA assumed that carriers with slots in
consecutive hours w ould reschedule flights between adjacent hours to minimize the number of
additional flights needed to meet the new requirement. For example, if a carrier had a negative difference in the 0800 hour but a positive difference in the 0900 hour the FAA assumed that a carrier would use some of the flights from the 0800 hour to meet the new us age requirement in the 0900. After smoothing, f or hours where there was still a positive difference, the FAA recorded the amount of additional flights needed to meet the minimum usage requirement.

In 2009 , under the new definition of the same series of fli ghts per slot, there are flights being flown in particular slots that would not meet the new use

- or

- lose requirement. Although the analysis looked at actual flights by scheduled hour, the analysis was not done by origin and destination pairs or by flight numbers. However, the FAA expects that carriers would modify the origin and destination pairs or make other adjustments to these flights to meet the new use

or

- lose

- requirement. Moreover, this case assumes that carriers would meet the new 80% use

- or

lose requirement by adding the fewest number of operations. The FAA requests comments on the assumption that carriers will adapt these flights to meet the new use

- or

- lose requirement and there is a more detailed discussion of this assumption in the Appendix b elow

.
Slot Utilization Analysis Findings

Using departure data

, the FAA determined that carriers would need to fly additional departures to satisfy the proposed changes to the use

- or

- lose requirement

. At EWR, an average of 5 additional departures per day would be needed, while an average of 1 0 additional departures per day would be needed at JFK and an average of 1 additional departure per day would be needed at
LGA

. It was assumed that a n identical number of arrivals would be required at each airport , so the number of required additional operations would be twice the number of additional departures

. Furthermore, if carriers determine that such flights would be unprofitable, they have the option of either selling these slots or returning them to the FAA a nd that carriers would more likely return unused slots during off

- peak hours. A chart of the hours showing the number of flights needed per airport for all five Mondays by hour is listed below.

1 Although slots are allocated by half hours, the FAA summed slots to create hourly slot holdings for the purpose of matching hourly scheduled data reported by carriers.

### 11 Proposed Rule

Based on slot utilization analysis, under t he proposed rule, the FAA forecasts an increase in th e number of actual flights flown from the proposed rule versus the current O rder s

. In the first year, the FAA expects an additional 10 actual flights at EWR (arrivals and departures), 20 flights at JFK, and 2 at LGA above the current environment. After the first year, increases in demand are projected by the FAA Terminal Area Forecast (TAF) , so fewer additional flights would be required after the first year to meet the use or lose requirement. Moreover

, after the first year the FAA would expect slot utilization at these airports to be increasingly driven by forecasted demand rather than the use or lose requirement. Therefore, based on the TAF, eventually all additional flights would be a result of pass enger demand and no longer a cost of this proposed
rule.

Unscheduled Operations

Under the proposed rule there would also be changes to unscheduled operations. Unscheduled

oper ations in excess of the hourly limit at all three New York airports would be redirected to other airports. Moreover, according to the 2009 unscheduled f light data, there were a few hours where unscheduled flights exceeded the hourly limit. The FAA anticipates that some of these flights would be redirected or scheduled to other ho urs and would decrease the number of operations during those hours and also dec rease the number of daily operations handled at these airports. These airports should receive a delay saving from the reduction in unscheduled flights however; these savings wou ld be offset by increases in the number of scheduled operations from

### 12 tightening the use

- or

- lose provision

. Using informati on provided by GRA based on 2009 unscheduled traffic, the FAA assumed 4 daily unscheduled redirected flights at JFK, 6 daily at EWR, and 1.5 daily at LGA. 2 

### These flights would be redirected to other NYC area airport s such

as Tete r boro (TEB) and the FAA anticipates that those flights that were redirected to TEB would pay for a taxi or sedan to transport them to their desired airport or f ind local destinations at a
minimal cost.

Average Incremental Flight s

The method used to estimate the benefits associated with these additional operations is based on the economic concept of consumer surplus. The net benefits of these additional opera tions resulting from changes to the use

- or

- lose requirement are equal to the change in consumer surplus accruing to the additional passengers in the affected markets, minus additional delay costs imposed on other existing flights and passengers at the airp ort.

The benefits of flying another flight depend on the characteristics of the market served. FAA cannot be sure how carriers will react to having to fly more to retain slots under the proposed rule. The opportunities for a carrier may range from transfer ring or returning the slot, adding
mainline flights, a dding regional or commuter flights to cover the slot (with limited benefits) or leasing out the slot to an international code share partner for additional flying internationally (which may have substant ial benefits). For analysis purposes, since the FAA does not know which markets a carrier will choose to serve, an assumption was made that carriers would add flights into random existing markets (regardless of the number of existing frequencies in those
market s ). The benefits of having another flight depend on the characteristics of the market
served. FAA cannot be sure how carriers will react to shortfalls in the use of slots under the proposed rule. The opportunities for the carrier may range from sell ing or returning the slot, adding standard jet flights, asking its regional partner to fly a small aircraft to cover the slot (with limited benefits) or leasing out the slot to an international code share partner for additional flying overseas (which may h ave substantial benefits). For analysis purposes FAA calculated the incremental consumer benefit of adding one flight with a typical aircraft type for that market and then computed the average across all markets. This is an expected value of adding a fligh t, given the uncertainty of carrier response. FAA invites comments on this assumption

.

2 Although, unscheduled demand has declined since 2008 and there may be fewer unscheduled operations that could not obtain a reservation during the day, flights still may need to go to different airport in the busiest hours. This is also true for LGA. The increase in scheduled operations would likely lower the FAA’s ability to accommodate flights over the hourly limit of 3 operations. However, the FAA may authorize addit ional reservations at an airport under certain conditions and accommodate more flights.

### 13 To forecast the impact of changes to the use

- or

- lose requirement , at these airports, in terms of delays on actual operations the FAA employed the University of Maryland Delay Model (UMD) with help from GRA, Inc. A complete discussion of this model can be found in the Appendix

.

Sample Calculations of Changes in Consumer Surplus

To illustrate the consumer benefits methodology, consider a hypothetical added flight from EWR

to Albuquerque ( ABQ ) . The analysis is conducted in terms of the Full Price of Travel (FPT)
framework. FAA observe s the FPT (from available market data) as the money price plus the value of travel time plus the value of delay time. FAA then measure s the w illingness of consumers to pay more than the FPT, which corresponds to consumer surplus (the benefit that consumers gain from traveling in excess of their costs (measure d in money and the value of time). The details on the sources and calculations can be f ound in the Appendix.

In the EWR

- ABQ market, t here are 91 PDEWs and the full price of travel is estimated at $390 per passenger, so as shown in the following chart, consumer surplus is the shaded triangle under the full price of travel demand curve between 0 and 91 PDEWs. With one added flight, total passengers served increases to 182 PDEWS, and the corresponding incremental consumer surplus is the cross

- hatched triangle between 91 and 182 passengers per day. (The chart is not drawn to scale.) Detailed da ta used in these calculations can be found in the appendix . This process is repeated for every market at EWR and JFK.

The logic for the consumer surplus calculation is as follo ws. The additional flight to ABQ results in a reduction in the average money pr ice paid by $76. On average, all of the regulatory case passengers thus gain a transfer from the airlines of $76 (from $193 to $117), which is not a net gain in surplus. But, incremental passengers do get to fly to ABQ at a new time of day whereas previous ly they could not, and they are willing to pay an amount above the new full price of travel ($300) as indicated by the cross

- hatched triangle. This is the incremental consumer benefit of the flight (above the money price and value of time).

It is also imp ortant to note that the consumer surplus for the incremental flight is net of the regulatory case level of delay at the airport. Thus, when calculating the increased delay costs for passengers due to incremental flying, the FAA needed to only calculate th e change in delay for
the regulatory case and new flights because both types of flights already account ed for the impacts of regulatory case delay on passengers.

Table 1 : Example of Consumer Surplus Calculations

### 14 The average incremental operation at EWR p roduces $5,982 in consumer surplus per day. The average for JFK (where international operations make up a larger share of scheduled services) is $10,071. The average incremental operation at LGA produces $971 in consumer surplus per day.

Airport Delay Cost s of Incremental Flights

Based on the proposed rule, the delay costs of adding five additional arrivals and five additional departures at EWR are shown in the following table. The impact accounts for redirected unscheduled operations. These additional oper ations at EWR increase total departure delay by a little less than four total block hours. To estimate these delay impacts, FAA applied the UMD delay and cancelation model for scheduled operations. Following are the two equations applied:

• Cancellation :

- .115824+ 0.000122 x Scheduled Operations

• Average Delay per realized operation:

- 76.864755+ 0.082185 x Total Realized Operations

The following table shows the calculations for EWR:

EWR Delay Impacts

Base Scenario Incremental Delay Scheduled Pax operations (OAG) 1142 1152


### Cancellation Rate 2.4% 2.5% Realized ScheduledOperations 1115 1124 Unscheduled pax 27 21 Freight (realized) 97 97 Total Realized operations 1239 1242 Airport Delay per Op (min) 25.0 25.2 0.19



### The average realized operation at EWR experiences 0.19 of added delay as a result of the proposed rule.

### 15 Overall, departures experience an increase delay of 3.83 hours, consisting of the following:

• Added departures x Base Delay (5 x 24.98 minutes) + Scenario Departures x Incremental Delay (5+ 537) x .19

The daily costs of the a dded delays are estimated to be under $37,000 per day, including costs to passengers, airlines and downstream network effects. See the table below for an illustration of
this calculation.

Table 2 : Delay Cost of Incremental Flying at EWR per Day 3

3 The FAA in collaboration with MITRE Corporation developed a delay propagation multiplier for use in airport benefit

- cost analyses. This multiplier is a measure of the change in system

- wide delays as a result of a change in delay at a particular airport. The report is available on the following FAA website: http://www.faa.gov/regulations_policies/policy_guidance/benefit_cost/

### 16 At JFK, the regulatory case assumes 20 total scheduled operations added daily, as a result of the

use

- or

- lose proposal. After accounting for redirected unscheduled flights these additional flights
result in about 12 hours of incremental aircraft block hou rs per day. The incremental delay costs per day at JFK are estimated to be under $161,000 per day, or about five times more than at EWR. In part, this outcome reflects both the need to add more flights and a higher proportion of larger aircraft delayed at JFK. See the table below for an illustration of this calculation.

Table 3 : Delay Costs of Incremental Flying at JFK per Day

### 17 For LGA, 2 total scheduled operations were added daily, as a result of the use

- or

- lose proposal. After accounting for redire cted unscheduled flights the total number of operations impacting LGA was less than one. These additional flights result in .2 hours of incremental aircraft block hours per day. The incremental delay costs per day at LGA are estimated to be under $804 per day, much less than both EWR and JFK. See the table below for an illustration of this
calculation.

Table 4 : Delay Costs of Incremental Flying at LGA per Day

### 18 Net Impacts of Additional Flying at EWR
, JFK , LGA

In actuality, some added flights may be more valuable and others less valuable than the average incremental flight in existing markets. For EWR alone there are 150 markets. An important question is whether the average per flight consumer surplus should vary. Given that the actual outcome is not easily predictable, the average is the expected value of the consumer benefits (exclusive of increases in airport delay), regardless of the number of flights that need to be added. The FAA has assumed that the expected value per flight does not vary w ith the number of flights. The FAA invites comments on the expected benefits to consumers of incremental flying caused by the new use

- or

- lose provision.

The following table summarizes the daily and annualized net impacts of additional flyi ng due to
the change in the use

- or

- lose r equirement at EWR for the first year , accounting for both changes in consumer s urplus and additional airport delays

. The data used for this analysis is
from the 2009 summer schedule. The overall impact is positive.

Table 5 : Net Benefits of Incremental Flying at EWR

### 19 The analysis of the net benefits of incremental flying due to a change in the use/lose rule at JFK is shown in the following table. Again the overall impact is positive.

Table 6 : Net Benefits of Incrementa l Flying at JFK

Finally, t he analysis of the net benefits of incremental flying due to a ch ange in the use/lose rule

at LGA is shown in the following table. The o verall impact is positive.

Table 7 : Net Benefits of Incremental Flyi ng at LGA

### 20 Sum mary Calculation of Additional Operations

Below is a summary of the additional costs and benefits discussed above, from additional fights

, at all three a irports.

Table 8: S um of Cost and Benefits of Additional Actual Flights for the First Year ( Regulato ry Case)

Future Years

Under the regulatory case, t he analysis is static. In the future, demand will grow at EWR

, JFK,

and LGA even though the airports w ould remain under schedule limits . The characteristics of the incremental flights would change the c onsumer surplus per operation which is likely to

increase as carriers find better uses for slot s

. In particular, US incumbents might be expected to add international flying and/or lease out more slots to their international partners. This change

in the mi x would tend to increase consumer benefits of the incremental flights attributable to

the rule overtime.

After the first year , additional operations would grow by the FAA unconstrained demand forecast. Future growth in operations are assumed to be from i ncreases in passenger demand and are not compliance costs. A ccordingly

, the costs attributable to the proposed use or lose requirement would decrease over time until the point that the requirement no longer drives any
carrier slot utilization behavior.

Th ere would also be some additional benefits from changes to the reporting requirements
associated with use

- or

- l ose. Carriers would report four times a year at all three airports, which is
the same as the current Orders for J F K and EWR but lessens the repor ting requirement for LGA

. Reporting for LGA would drop from 6 to 4 reports per year. The four reports include one interim and one final report for each season. However, p rior to the start of each scheduling season, the FAA would require carriers at LGA, JFK

, and EWR to submit its proposed slot reques ts for each airport. T his seasonal slot repo rt is currently required under the Orders at JFK and EWR, but it
would be a new requirement at LGA. Many of the carriers operating at LGA also operate at
either JFK and/or EWR and are familiar with this reporting requirement. While there may be an initial learning curve for carriers at LGA that are unfamiliar with this report, the FAA believes
that it would not be particularly burdensome since most carriers are like ly to have a database that

### 21 contains their airport slot information that they maintain for scheduling purposes. For this

reason, the FAA has assumed that the addition of these seasonal reports

, under this proposed
rule , would negate benefits that carriers would have received at LGA in cost savings from a
reduction in reporting for use

- or

- lose (from six reports to four reports per year).

Benefits and Costs of the Secondary Market

**Qualitative Benefits**



### The FAA recognizes that slots have value in the sec ondary market. The FAA believes the development of a robust secondary market ultimately is the best way to maximize economic efficiency

. Research shows that the creation of a secondary market improves allocation of products and services. 4 

### Among other thi ngs, it provides a secondary market for resellers to trade products and sets a market price. In a market where prices are transparent, the efficiency of the market is enhanced. Buyers and sellers have better information regarding the value of the item
bei ng sold (i.e., slots).

From the perspective of developing an efficient secondary market for the buying, selling, and leasing of slots, there are a number of competing factors that need to be considered when evaluating the benefits and cost of the secondar y market. A primary motivation for establishing
a well

- functioning secondary market is to provide opportunity for a robust exchange of slots. A robust exchange of slots will help ensure that slots are being used according to their highest and
best use. A secondary market provides a market

- solution, in an otherwise regulated environment, for carriers to exchange slots, which thereby encourages efficient use of these

scarce resources.

FAA has outlined 5 different secondary market alternatives under consid eration in this proposed rule. While similar, there are nuances among these alternatives which may benefit or inadvertently chill the market. All f ive different versions of the secondary market summarized below are intended to encourage a more efficient exchange of slots, each has its own pros and cons. For that reason, FAA seek s comment on each of these alternatives and is particularly interested in each commenter’s view of the viability of each of these alternatives to produce an
efficient and more com petitive market. A summary of the five secondary market alternatives is provided in the table below:

Secondary market ( Alternative 1) Privately

- negotiated buy, sell, lease, and trade; request for FAA approval must include terms of transaction. Public tra nsparency is not required before a deal is approved.

4 Hau Lee and Seungjin Whang. The Impact of the Secondary Market on the Supply Chain; Management Science, Vol. 48, No. 6 (Jun., 2002), pp. 719

- 731, INFORMS

### 22 Secondary market ( Alternative 2) The FAA publishes a bulletin board notice of buy, sell, lease, and trade; bidding and negotiation between se ller and bidders after public notice; request for FAA approva l must include terms of transaction Secondary market ( Alternative 3) The FAA publishes a bulletin board notice of buy, sell, lease, and trade; carriers would be permitted to privately negotiate tentative terms of a transaction before bulletin board postin g; bidding and negotiation between seller and bidders; request for FAA approval must include terms of transaction
Se condary market ( Alternative 4) The FAA publishes a bulletin board notice of buy, sell, lease, and trade; bidding and negotiation through bu lletin board between seller and bidders after public notice; all bids are posted to bulletin board during bidding period; request for FAA approval must include terms of transaction Secondary market (Alternative 5) The FAA publishes a b ulletin board notice of buy, sell, and lease without identifying poster ; cash

- only bid s posted on bulletin board without identifying bidders ; request for FAA approval must include terms of transaction ; terms of final transaction posted on FAA website

For each of these alte rnatives , it may be necessary for the DOT to review a transact ion for anti

competitive effects. The FAA believes that review may provide benefits by preventing potential anticompetitive behavior. Over the course of the last several years, the DOT has hea rd many market participants express concerns that incumbent slot holders have acted improperly to limit competitors’ access to slots. Arguments have been made that incumbent carriers have chosen
not to transact with low cost carriers and other new entrant s, preferring transfers to other incumbent carriers to preserve their competitive position in the market and forestall more rigorous competition from low

- cost carriers. Similarly, there have been complaints that
incumbent slot holders transfer slots for s hort periods to avoid losing slots under the application
of use

- or

- lose requirements. As a result, some have sought more rigorous agency regulation of slot transactions, especially to ensure that all carriers interested in obtaining slots have an equal

op portunity to acquire them.

While a transparent secondary market would encourage a more efficient use and allocation of the existing slots at the three New York airports, additional oversight may be needed. To ensure that competition remains robust and that the use of the secondary market does not unjustly increase

### 23 industry concentration, DOT has authority to examine transactions on the secondary market. Accordingly, the DOT proposes §93.47 that contains procedures for reviewing slot transfer
transactions. The DOT would be able to evaluate any transaction in which it has an interest based on the information provided by to the FAA for approval of a slot transaction. The DOT also may monitor bulletin board postings, if that option is adopted in a final rule, t o determine whether it suspects anti

- competitive behavior.

**Quantitative Benefits**



### After comparing the current process for transferring slots to changes in the process presented in the proposed rule, the FAA anticipates savings across all three airports from the consolidation of slot transactions for carriers’ with unified marketing control. Unified marketing control would apply in cases where one carrier makes marketing decisions and sells the tickets while another carrier operates the flights on behalf of t he selling carrier. Under the proposed rule, carriers with unified market control would have two options for ensuring the operating carrier has a slot for an operation. These carriers could continue to transfer slots among each other (as is currently be done under the Orders), or they could manage the slot inventory without formal transfers (unified marketing control option).

If a carrier chose to manage its slot inventory without formal transfers, the carrier would need to provide advance informatio n to advise FAA of the specifics of the planned flights. Advance information would include the airport, names of selling and operating carriers, carrier three letter designators, and flight number ranges to be used for ATC communications, effective dates, and responsibilities for each carrier for slot purposes. Detailed scheduled information would not be required in advance. If the carriers elect to use this proposed option, they would report the actual usage by carrier after the fact rather than transfe r slots for each operation. The slot holder could submit one slot usage report breaking out the individual slot operators. This would streamline the transfer process for carriers that are commonly marketed and provide sufficient information
for the FAA t o monitor carrier operations and enforce the slot rules if needed.

Based on historical use of the secondary market in New York, FAA estimates that there would be approximately 2,700 secondary market transactions per year for all three airports. Consideri ng estimates of 2,700 annual slot transfer transactions, the FAA estimates that roughly 55% currently are transfers between carriers with unified marketing control. If transferred rather than managed under the unified marketing control option, costs would similar to other slot transactions except that outside attorney costs would not generally be incurred for these
transactions. Moreover, for transactions processed by carriers under the unified marketing option , the FAA assumes that a scheduler or an admi nistrative service manager 5 

### would ha ndle all aspects of the documentation with an hourly estimated burdened wage of $52.70 . Using this

5 http://www.bls.gov/oes/current/oes113011.htm ; Bureau of Labor Statistics Occupational Employment and Wages Statistics plus May 2009, the Employee Benefit Research Institute, using a Bureau of Labor Statistics Survey of employee benefits estimated the total 2009 benefit as a percentage of payroll at 30.2 percent

### 24 wage for about 1,500 (55%) of the 2,700 annual slot transfer transactions in place of an hourly burden wage for a lawyer 6 

### of $89.89 gives an estimated yearly savings of $55,700 to carriers across all three airports.

**Summary of T otal Benefits** 



### Aggregating the consumer surplus benefits resulting from the additional flights at JFK

, EWR

, and LGA plus the cost savings resulting from the unified marketing control option for slot
transfers benefits are estimated to be $74,696,596 ($65,242,900 Present Value) 7



### .
**Reporting Cost for Use**

**- or**  **- Lose** 



### Administrative costs associated with modifications to the use

- or

- lose requirement include the cost of record keeping and reporting. Although, this is a stricter adaptation of use

- or

- lose, which the FAA believes would increase flights; carriers can accommodate these changes with minimal

costs. Carriers presumably already track and record slot usage on a daily basis under the current
O rder s but the FAA does recognize that larger carriers may require modifications to existing optimization software to track and report slot usage. Alternatively, smaller U.S. and
international carriers have far few er operations and slot holdings leading the FAA to believe that because of their size they are less likely to spread flights over a series of slots. These carriers are probably already recording and reporting one flight per slot which would result in no ad ditional costs. Moreover, from the analysis above the FAA estimates that carriers would be reallocating the usage of existing slots and g iven the current method of tracking use

- or

- lose FAA anticipate s no additional reporting costs to meet changes in 80% s lot usage requirement. The FAA also assumed no additional maintenance costs since carriers already pay for software maintenance. The FAA request s comments on th ese assumption s

.

6 http://www.bls.gov/oes/current/oes532011.htm ; Bureau of Labor Statistics Occupational Employment and Wages Statistics; Lawyer (May 2009); May 2009, the Employee Benefit Research Institute, using a Bureau of L abor Statistics Survey of employee benefits estimated the total 2009 benefit as a percentage of payroll at 30.2 percent

7 In this analysis, FAA has assumed that markets will become more competitive as a result of the rule change. Any losses to producers r esulting from the rule would be losses in rents or transfers, which would not change economic efficiency.

The logic is as follows. Clearly carriers find the incremental flying unattractive in the regulatory case (under the current rule), otherwise they wo uld fly it. Producer surplus is the return above normal returns, so it is reasonable to project that carriers would not be earning surplus on these incremental flights caused by the proposed rule. Some carriers might lose surplus as a result of the rule

– e.g. their returns in the markets where they add flights would be less than normal. But, if carriers take the opportunity to minimize their losses (as they would in competitive markets), losses resulting from the rule become unlikely given the many oppo rtunities they have to sell, lease out or return excess slot holdings. A more competitive outcome is consistent with the intent to change the use/lose provision to encourage more intensive and higher

- valued uses of slots.

### 25 **Cost of Reservation System** 



### To operate during the slot

- controlled hours, an u nscheduled operator needs a reservation. The FAA does not expect the unscheduled reservations to require new capital or equipment by the FAA or the operators . These systems are already in place within the FAA for unscheduled flights under Speci al Traffic Management Programs, Washington’s Reagan National Airport, and LGA. Thus FAA expects no additional costs for LGA. For J F K and EWR the capability for an FAA reservation system already exists , and under the proposed rule unscheduled operations would
now be required to obtain a reservation prior to operating at the airport. T here are approximately 34 unscheduled reservations available per day at JFK and 17 at EWR. From prior experience with the reservation system at LGA the reporting time per reservation is two minutes. The pilots of these unscheduled flights perform many non

- flight duties, which include record keeping and
schedul ing. The FAA selected a burden labor rate 8 

### of $75.60 per hour based on annual earnings
of airline dispatchers, pilots, copilots, and flight engineers. This includes benefits that are estimated as a percentage of the payroll. T he FAA esti mates that it would cost $31,181 at JFK and $15,729 at EWR per years for pilots to make reservations for unscheduled operations

.

The FAA’s Airport Reservation Office (ARO) would receive and process all reservation requests. Although the FAA assumes that most reservations would be made through the automated system, staffing needed to handle any manual requests and maintain the system is incorpora ted into the analysis

. Extrapolating from current experience at LGA, the FAA expects that the ARO personnel will spend roughly 1.5 hours a day handling phone calls or adjustments
at JFK and EWR. The salary for this person is estimated at a GS

- 13 Step 5 for an hourly burden
labor rate 9 

### of $63.07. The FAA estimates yearly public costs of $ 34,528 for maintaining the unscheduled reservation system at both JFK and EWR. Combined cost of the reservation system to pilots and the federal government sums to roughly $ 81,438 per year for both JFK and EWR.

**C osts**  **of Secondary Market** 



### Alternative 1 is the least cost secondary market alternative. This alternative is very similar to current practices for lease agreements under the existing Orders. This alternative does not include the costs for a bulletin board, rather carriers would p rivately

- negotia te buy, sell, lease, and trade. Alternatives 2, 3, 4, and 5 propose a bulletin board to post information on buy, sell, trade and leases. Costs include the reporting and maint enance of the board for both the FAA and carriers. All five alternatives, however, would incur the transaction costs associated with the
agreements.

8 http://www.bls.gov/oes/current/oes532011.htm ; Bureau of Labor Statistics Occupational Employment and Wages Statistics; 53

- 2011 Airline Pilots, Copilots, and Flight Engineers (May 2009); May 2009, the Employee Benefit
Researc h Institute, using a Bureau of Labor Statistics Survey of employee benefits estimated the total 2009 benefit as a percentage of payroll at 30.2 percent (http://www.ebri.org/pdf/publications/books/databook/DB.Chapter%2003.pdf updated May 2009)

9 U.S. Offic e of Personnel Management, Salary Table 2010

- GS plus mean burdened hourly labor rate from the Bureau of Labor Statistics, includes locality pay for DC

- MD

- VA

- WV

- PA

### 26 Alternatives 2, 3, 4, and 5 would require the FAA to develop and maintain a bulletin board. The
bulleti n board would be used to publish notices to bu y, sell, lease, and trade. However, the FAA proposes some limited exceptions to using the bulletin board system. A carrier may trade a slot

on a one

- for

- one basis with another carrier without submitting a bul letin board notice, but no consideration or promise of consideration must be offered for these trades. A carrier also may lease a slot to another carrier for a period of time no longer than one scheduling season. Additionally, trades among carriers with u nified marketing control (marketing carriers) are permitted without using the bulletin board, thus effectively allowing those carriers to treat slots as one inventory because these transactions do not have the characteristics of a normal arms

length transa ction. Carriers engaging in these exception types of transactions still would submit a request to the FAA for approval of the transaction.

There are costs associated with the creation of the bulletin board. For alternatives 2 and 3 the
FAA envisions a s imple webpage that would display notices submitted by carriers but bids
would be submitted directly to the transferring carrier. The FAA maintains that such a bulletin board already exists and there would be no additional costs to develop this site. Alter native 4
tries to encourage the greate st transparency by requiring bids to be posted on the bulletin board during the bidding period. A carrier would submit a notice to the FAA that it intended to engage in a slot transaction however, bidding carriers wou ld pos t their bids, along with any counterbids,

on the bulletin board. Therefore, negotiations in the form of iterative bids would be available to all registered interested parties. Cost for this bulletin board is estimated at $10,000. This is the

estima ted cost to develop and host the site. The fifth alternative is similar to the fourth alternative, but the identities of the offering carrier and bidders would not be revealed. Bids under this alternative would be cash only because non

- monetary assets co uld reveal the identity of the parties.

For all alternatives that require a bulletin board, a carrier would submit a no tice to the FAA that
it intends to engage in a slot transaction

. T he FAA would in turn post this information on the
bulletin board. Th e FAA cost for uploading the notice is estimated at a GS

- 13 Step 5 for an hourly burden labor rate 10 

### of $63.07. Using leasing information provided by FAA Slot Administration, the FAA estimates that each airport may have up to 25 requests for the bulletin
bo ard per year. Request s are estimated to take 30 minutes to upload for a yearly cost of $2,365 for all three airports.

Carrier costs related to the bulletin board include submitting the notice of intent to the FAA and under alternative 4 and 5, the cost to carriers for posting bids. The FAA estimate s that carrier s would need at least one hour to report the buying, selling, or trading of a slot. As mentioned above the FAA estimates that carriers will post up to 25 trades per year. To estimate the annual

rep orting costs to carriers for buy ing , selling, or trading on the bulletin board, the FAA

10 U.S. Office of Personnel Management, Salary Table 2010

- GS plus mean burdened hourly labor rate from the Bureau of Labor Statistics, includes locality pay for DC

- MD

- VA

- WV

- PA

### 27 multiplied the estimated number of annual reports by the number of hours needed per report and the wage

. The hourly labor rate was for a scheduler or an administrative service manager 11 

### at $52.70 for a total of $3,952. This should also include 1 hour for legal review of posting. The FAA expects that the public nature of these postings would lead carriers to seek legal review for an hourly burden labor rate for a lawyer 12 

### of $89.89

. Total yearly cost to carriers, at all three airports, is estimated to be $10,693.

The bidding period would last 14 days and the FAA estimates that bidders would spend approximately 2 hours dealing with the bid over the course of 14 days. A sche duler or an administrative service manager 13 

### would manage the bids at $52.70 an hour for 2 hour for a total of $105.40 per bid. The FAA estimates that there would be roughly 25 notices per airport a year with approximately 5 bids per notice for a total 125 bids a year. The 125 bids a year multiplied by $105.40 per bid sums to $13,175. Multiplying the $13,175 by 3 airports brings the total to $39,525. Given the public nature of the bid, carriers would also seek legal review before postings
bids for an hourly burden labor rate for a lawyer 14 

### of $89.89. The 125 bids a year multiplied by $89.98 of labor cost per bid for an attorney at 3 airports totals $33,743. Summing the $39,525 for a scheduler with the $33,708 for legal review totals $73,233 yearly at all thr ee airports ; however FAA requests comment on these assumptions since these options are new to both the industry
and the FAA.

The chart below associates total costs with the relevant options.

Options

Year Costs Present
Value Costs Present Value Costs Present Value Costs Present Value Costs Present Value

$0 $23,058 1

First Year $0 $85,851 2 3 4 5

$23,058 $20,140 $20,140 $98,291 $85,851 $98,291



### Aggregating the cost of operating the additional flights, t he value of the additional delay from those flights

, reporting costs, the reservation syst em, and the bulletin board e quals the total cost
of the proposed rule. These costs are estimated to be $ 53,056,768 ( $46,341,836 Present Value).

11 http://www.bls.gov/oes/current/oes113011.htm ; Bureau of Labor Statistics Occupational Employment and Wages Sta tistics plus May 2009, the Employee Benefit Research Institute, using a Bureau of Labor Statistics Survey of employee benefits estimated the total 2009 benefit as a percentage of payroll at 30.2 percent

12 http://www.bls.gov/oes/current/oes532011.htm ; Bureau of Labor Statistics Occupational Employment and Wages Statistics; Lawyer (May 2009); In May 2009, the Employee Benefit Research Institute, using a Bureau of Labor Statistics Survey of employee benefits estimated the total 2009 benefit as a percentage of payroll at 30.2 percent

13 http://www.bls.gov/oes/current/oes113011.htm ; Bureau of Labor Statistics Occupational Employment and Wages Statistics plus May 2009, the Employee Benefit Research Institute, using a Bureau of Labor Statistics Survey of employee benefits estimated the total 2009 benefit as a percentage of payroll at 30.2 percent

14 http://www.bls.gov/oes/current/oes532011.htm ; Bureau of Labor Statistics Occupational Employment and Wages Statistics; Lawyer (May 2009); In May 2009, the Employee Benefit Research Institute, using a Bureau of Labor Statistics Survey of emplo yee benefits estimated the total 2009 benefit as a percentage of payroll at 30.2 percent 

### Table 9: Costs for Secondary Market (25 Notices)

### 28 

## Conclusion

The FAA mo deled the behavior s of carriers in response to the proposed rule. Under the proposed
rule carriers would incrementally increase operations in year one to meet the new use

- or

- lose requirement and this new operating level would grow by the FAA’s TAF until it reached the daily limits. The analysis period is one year because compliance cost is the highest in the first year, and if benefits exceed the cost in that year, this relationship will continue until passenger demand forces operations up to 100% of the a vailable slots. In the first year , carrier utilization of
slots will be at least 80%. After the first year , the increase in operations is due to an increase in
forecasted demand and increased utilization of the slots. Total benefits and costs for the regul atory case are estimated at $ 74

, 696

, 596 ( $ 65

, 242

, 900 Present Value) for benefits and $ 53,056,768 ( $46,341,836 Present Value) for costs, assuming the highest cost secondary market alternative 4 or alternative 5 is adopted

. Under the regulatory case t he FAA believes that this rule
would improve utilization of existing slots that result in net benefits.

T able 10: T otal Cost and Benefits of Alternative Four or Five of the Proposed Rule

First Year Benefits Present Value Costs Present Value Net Benefits
Regula tory Case $74,696,596 $65,242,900 $53,056,768 $46,341,836 $18,901,064

### 29 

## Appendix

Detailed Description of Benefits Methodology and Data for ABQ Example 15



### The empirical analysis described above is based on estimating the ful l price of travel and

social marginal costs for representative markets at New York Airports . Estimates are provided

for domestic and international markets for services provided by legacy (standard jet), RJ,

turboprop, and LCC 16 

### operators, and for internati onal and cargo 17 

### operations.

The consumer benefits can be estimated using the economic concept of consumer

surplus, defined as the difference between what consumers must pay for a given level of service

and what they would be willing to pay. In passenger transportation markets, consumer surplus is

usually defined in the context of the full price of travel. The full price of travel includes the

money fare that a consumer must pay and the value of his or her time in transit (including both

the scheduled ti me and any expected delays) and the value of schedule delay (the difference

between the ideal time of departure/arrival for the consumer versus the actual schedule offered

weighted by the probability of being accommodated on the desired flight). The commo n sense

interpretation of the full price of travel model is that consumers prefer to fly at a time closest to

their desired departure (or arrival) time, at the lowest possible price, and in a manner that

minimizes the expected time in transit, including th e risk of delays and cancellations.

15 The values of the charts in the appendix are 2008 values and have not been adjusted to reflect 2010 which is used throughout the document.

16 LCC is low cost carrier

. 17 Cargo operations are assumed to produce surplus and experience delays in the same way as legacy jet operations.

### 30 The analysis is carried out at the segment level, i.e., each non

- stop destination from LGA,

JFK and EWR is considered to be a separate market. To implement the analysis, estimates are

needed for the full price of travel and social marginal costs as of August 2009.

The full price of travel (FPT) in each case is defined as:

FPT = money fare + value of scheduled time in transit + value of airport delay and cancellations + value of schedule delay 

### For the sample sched ule day , data are available to estimate each term in the above equation:

 Money fare: Average segment fare 18 

### for each of the four types of service

 Average time in transit: Weighted average block time from the OAG sample day

 Expected airport delay and ca ncellations 19



###  Value of travel time applied to transit time, delay and cancellations: GRA, Incorporated“ Economic Values for FAA Investment and Regulatory Decisions, A Guide”, prepared for FAA Office of Aviation Policy and Plans, (October 3, 2007).
Pass enger value of time is for “all purposes,” reflecting a mix of business and leisure travel in the New York area, valued at $30.02 per hour

 Schedule delay: Computed from the OAG data using a method described below

 Value of time in schedule delay: $2.70 per hour from a study by Morrison and Winston 20

18 Based on DB1B third quarter 2009. The calculation includes "zero fare" observations (frequent flyers) and all O

D trips with 2 or less c onnect points involving JFK,EWR and LGA as an endpoint or a connect point. It is important to include frequent flyers in order to avoid overestimating carrier revenues (calculated as total passengers x average fare). To derive the segment fare observatio ns, the total itinerary fare for each DB1B record is first allocated to separate O

- D trips using the DB1B trip break indicators and a weighting factor of W = exp(2.485+0.720668*ln(miles))

– this represents an approximation to ICAO formula prorates. The O

- D trip fare is then further allocated to individual segments based on direct segment distance.

19 Passenger delay costs are estimated as the product of expected delay time and the value of time. Cancellation costs are calculated the same way. In estimating expected passenger time lost due to a cancellation, the FAA assumes that a passenger is reaccommodated on the next flight out with enough available seats, where available seats are estimated as (1

- load factor) x seat capacity. In some cases, passengers ca n be reaccommodated on the next flight out; in others, they might have to wait for the second flight.

### 31 For each segment, there are data on the level of service by the six types of aircraft

operations (legacy, LCC, RJ, turboprop, cargo, and international). These data are aggregated up

to the segment level to estimate an average money fare, passengers per day each way, measures

of travel time, airport delay, and schedule delay. The resulting sample day full price of travel

and number of passengers together represent a point on the segment FPT demand curve. Th e

corresponding point on the money demand curve can be found by substituting the money fare for

the FPT.

Estimating Schedule Delay

One of the important differences that need to be accounted for between the cases is the

effect of frequency and averag e seat size on consumer benefits. In general, consumers prefer

more frequent flight opportunities and larger aircraft so that they can more easily accommodate

their own schedules. For valuation purposes, schedule delay is broken into two components

–

fr equency delay and stochastic delay. Frequency delay measures the average difference between

a passenger's preferred departure time and the closest scheduled departure time. Frequency delay

(FD) in minutes for a given market segment is parameterized as:

F D = 92 F - 0.456

20 Morrison and Winston, “Enhancing the Performance of the Deregulated Air Transportation System,” Brookings Papers on Economic Activity, Microeconomics , 1 989, p. 66, use the ratio of value of schedule delay/value of travel time applied to current estimate of travel time value. The results of this study suggest that consumers place a lower value on schedule delay than on travel time. The rationale is that w hile consumers will prefer to fly at precisely the time that fits their schedules, deviations from the schedule do not generally result in large losses of consumer benefits because they are able to use any deviations in other productive or leisure pursuits . For example, a business person who would prefer to leave at 4 PM but is forced to leave at 5 PM because of the schedule of available service may find ways to productively use the extra hour at work.

### 32 where F is daily flight frequency. 21



### Stochastic delay measures the expected delay due to the probability that a passenger

would not be able to obtain a seat on his most preferred departure because of capacity limitations

of the aircraft. S tochastic delay (SD) is parameterized as: 22

79

. 1 5725

. 0 

### ) ( 12010 SD

−



### − × × = P S P F



### where F = daily flight frequency

P = passengers per flight

S = seats per flight

The sum of frequency delay and stochastic delay yields total schedule delay. Estimates of

schedule dela y from these equations for various values of F and S are shown below in Exhibit 15

below (using the observed average JFK system load factor of 68.6 percent):

Exhibit 15: Equation Estimates of Schedule Delay (minutes)

5 0 7 5 100 12 5 1 5 0
4 213 149 120 103 92
6 1 5 0 108 88 77 69
8 118 86 71 63 5 7
10 98 72 60 5 4 49 Average Seatsize Daily Frequency

21 Douglas and Miller (1974). Economic Regulation of Dom estic Air Transport: Theory and Policy , p. 105.

22 Morrison and Winston, op. cit. , p. 63. This is based on a parameterization of the Douglas and Miller ( op. cit. ) schedule delay equation.

### 33 Schedule delay is valued at $2.70 p er hour based on estimates developed by Morrison and

Winston cited earlier.

The following Exhibit shows the individual calculations applied to data at the segment level for EWR. In the analysis, consumer surplus estimates are developed at the segment leve l and then summed across segments. The segment shown is EWR

– ABQ. The general assumptions are shown at the top of the table; the calculations for the segment then follow below:

EWR INPUTS
% Leisure traffic 60% Source: EWR Fact sheet from www.jcdecauxna.com Value of Travel Time per Ir $30.02 Source: . usiness and leisure values from FAA critical values Value of Schedule Delay per Ir $2.63 Source: aorrison and Winston, "Enhancing the t erformance...", . rookings 1989.

t assenger/Segment/A&I Tax w ate 8% Source: G Ielledy, FY04 scheduled domestic pax svc (airline rev % ticket rev)

t FC and Security Fee per Segment $7.00 $4.50 t FC + $2.50 Security Fee aoney Fare Arc Elasticity -1.372 Arc elasticity assumed to apply between current t ,Q and that which would occur with 1 additional flight in the market Downstream delay multiplier 0 Chg in LF with 1 pt incr in completion 0.14 T-100 LF and completion rates, Dec. 2000 vs. Apr 2001
Cancellation cost factor 50%

L nclude cancellation effects? Y Avg . lkcost per Iour for GA $1,108 Source: FAA critical values Table 4-10, avg. of aulti-Engine Turboprop 1-9 seats and Turbojet <=12,500 lbs variable operating costs

t assengers per GA flight 2.8 op. cit., Table 3-15

Annualization Factor 365.0

### 34 GROUP
Data L CC LEGA C Y JET PROP RJ INTL Grand Total
Sum of FLT C OUNT 0 2 0 0 0 2 Sum of SEATSIZE 0 228 0 0 0 228 Sum of TIME 0 5 46 0 0 0 5 46 Sum of TOT C OST 0 26708 0 0 0 26708 Sum of pax 0.00 182.86 0.00 0.00 0.00 182.86 Sum of totrev 0 3 5 207 0 0 0 3 5 207

L CC LEGA C Y JET PROP RJ INTL TOTAL Scheduled Operations 0 2 0 0 0 2 Scheduled Roundtrips 0.0 1.0 0.0 0.0 0.0 1.0 Scheduled RT Seats 0.0 114.0 0.0 0.0 0.0 114.0 Avg Seatsize 0.0 114.0 0.0 0.0 0.0 114.0 C ancellation Rate 0.0% 3.7% 0.0% 0.0% 0.0% 3.7% Realized Roundtrips 0.00 0.96 0.00 0.00 0.00 0.96 Realized RT Seats 0.00 109.76 0.00 0.00 0.00 109.76

Segment PDEWs 0.00 91.43 0.00 0.00 0.00 91.43 Pax per Operation 0.00 91.43 0.00 0.00 0.00 91.43 Avg Load Factor 0.0% 80.2% 0.0% 0.0% 0.0% 80.2%

BlkHrs/Operation 0.00 4. 55 0.00 0.00 0.00 4. 55
Var C ost $0 $26,708 $0 $0 $0 $26,708
Var C ost/Hr $0 $2,93 5 $0 $0 $0 $2,93 5

PASSENGERS Avg Segment Fare $192. 5 4 Money Fare Arc Elasticity -1.372

Travel Time C ost per Pax $136. 5 9 Airport Delay C ost per Pax $10.46

Avg Time between Flights (hrs) 18.00 # Flights needed to Accommodate All C ancelled Pax 0.1 5 Total Passenger Hours Incurred 61.16 C ancellation C ost per Pax $20.08

Frequency Delay (min) 92.00 Stochastic Delay (min) 601.69 Schedule Delay C ost per Pax $30.38

Avg Full Price of Travel $390.06

With 1 Additional Scheduled Flight: Segment PDEWs 0.00 182.86 0.00 0.00 0.00 182.86
Intermediate calculation -2.0 5 8 Avg Segment Fare $117.27

(ignore marginal changes in airport delay and cancellation costs) Frequency Delay (min) 67.07 Stochastic Delay (min) 300.84 Schedule Delay C ost per Pax $16.11 Avg Full Price of Travel $300. 5 2

Money slope -0.823 Money intercept $267.81

FPT Slope -0.979 FPT Intercept $479.60

### 35 

# Description of “UMD Model”

To project de lay and cancellation levels at the study airports, a combination of historical data and prediction models were employed. Where available, it was deemed preferable to use historical data to approximate airport level of service, as this removes the necessit y of modeling assumptions. For operation levels for which historical data were not available, scaled historical demand data was used as input to queuing and cancellation prediction models. Thus, the “U M D M odel” represents a combination

of these two sourc es. See Figure 1 for a graphical depiction of this division. Level of service for intermediate operational regimes can be inferred using a regression model on these data points.



### Figure 1

– Queuin g curve for EWR



## Historical Data

H istorical data was used to quantify much of the curve representing the relationship between operations and performance. The data for this analysis was drawn from two sources. Scheduled levels of operation and flight delay s came from the Aviation System Performance M etrics (ASP M ) system. Cancellation data was drawn from the Bureau of Transportation Statistics (BTS) On

- Time Performance Database of individual flight records. Data from January 2000 through September 2007 wer e examined.

The first step in quantifying these relationships was to identify historical periods wherein the level of operations was reasonably constant. This was done by plotting the number of daily operations against time, and then choosing regions wher e the data reached a plateau. These individual plateau regions were then sorted cumulatively and examined more closely. The flattest region of the plateau, subject to a minimum length, was identified heuristically, as shown in Fi gure 2 . The data on the level of service for those days was averaged to create a single point on the curve shown in Figure 1

. 

### Historical data

Projection

### 36 Figure 2

– Sorted data to locate plateau region (EWR, 9/2002

- 12/2002)


## Proje cted Points

To develop a complete picture of airport level of service under various conditions, several predictive models were used to study these airports under demand levels higher than those currently experienced. To predict average delays, the M IT

- dev eloped DELAYS queuing model was used. The U M D network flow cancellation prediction model was applied to estimate cancellation levels. Each of these models requires as input only time

- varying demand and capacity profiles for a single day. The aggregate n ature
of these models makes them well

- suited for analyzing systems in which there is limited access to proprietary information and uncertainty about future operational paradigms.

The demand and capacity data for the projected points was drawn from the ASP M system. The published schedule for Thursday, August 2, 2007 was chosen as a representative demand day for each of the study airports. The level of scheduled operations in hour of this day was scaled up by a factor (110% and 115%) and then rounded down t o the nearest integer to produce a hypothetical new schedule. To represent capacity variation throughout the year, the same scaled demand scenario was tested for the declared profile of Airport Arrival Rates for each day of 2004 for the study airports. T he delay and cancellation levels resulting from these 366 runs were averaged to produce aggregate estimates of level of service for the specified higher level of operations.

Because demand and capacity may vary throughout the day, an equilibrium queuing mo del cannot be used. Rather, such a dynamic queuing system must be modeled using time

- varying processes. The M IT DELAYS model was developed for precisely this situation. This stochastic queuing model closely approximates the M ( t )/ E k ( t )/ n queuing system, in which demand is modeled as a time

- varying Poisson process and service times conform to a time

- varying k th order Erlang distribution.

The cancellation model used operates as a maximum flow network model with increasing marginal

cancellation cost within e ach hour. The premise is to create a time

- based network with the considered demand profile as input and some capacity profile to control the maximum number of arrivals permitted in any one hour. Cancellations are induced by enforcing a maximum delay leng th on the aggregate

### 37 aircraft flows. See M ukherjee, et al. (2005) or (2007) for more information on the structure and

calibration of this model.

Following are the data used in developing delay models at each airport. The data were drawn from

2001

- 2007. Shown in the first column is the number of operations for each “plateau” in the data. The second column shows the number of sample days represented in the plateau. Entries with a star or * in the second column refer to estimates of delay and cancelations developed using the M IT DELAYS queuing model. The third column shows the average arrival delay. The fourth column shows the fraction of flights cancelled.

EWR

Number of Ops Sample Days Average Arrival Delay Fraction flights
cancelled

1030 46 8.3 1.3%
1090 4 5 11.9 1.6%
1130 28 17.9 2.1%
1180 38 20.1 2. 5 %
1230 28 23.2 2.7%
1240 27 24.8 3.7%
1270 21 26.8 4. 5 %
1360 * 33.2 4.7%
1430 * 42.8 6.1%

JFK

Number of Ops Sample Days Average Arrival Delay Fraction flights
cancelled
660 1 5 9 11.6 0.9%
760 296 13.1 1.1%
880 93 16.4 1.4%
970 9 5 21. 5 1.3%
1110 86 22.1 1.6%
1230 89 23.6 2.4%
1290 42 31.2 4.3%
1420 * 47.8 6.1%

LGA

### 38 Number of Ops Sample Days Average Arrival Delay Fraction of Flights
C ancelled
1110 12 5 12. 5 4.8%
1160 6 5 14.9 4.4%
1220 8 5 16.6 6.8%
1300 28 24.0 7.3%
13 5 0 38 3 5 .7 9.2%
1400 0 47.8 13.0%



## References

M ukherjee, A., D. J. Lovell, M . O. Ball, A. R. Odoni, and G. Zerbi b. (2005)

. “ M odeling Delays and Cancellation Probabilities to Support Strategic Simulations.” Proceedings of the 6th USA/Europe Air

Traffic M anagement R&D Symposium, Baltimore, M D.

M ukherjee, A., D. J. Lovell, M . O. Ball, A. M . Churchill, and A. R. Odoni . (2007). “Using Optimization and Queuing M odels to Estimate Long

- Term Average Flight Delays and Cancellation Rates.” Proceedings of the Sixth Triennial Symposium on Transportation Analysis, Phuket, Thailand.

Incremental Consumer Surplus per Operation at JFK, EWR and LGA 23

JFK EWR LGA

Market Consumer Surplus due to Added Flight Market Consumer Surplus due to Added Flight Market Consumer Surplus due to Added Flight

A CC $26,830 ABQ $4,093 A C K $ 5 8

A C K $2, 55 8 A C K $371 ALB $63

ALB $210 ALB $107 ATL $998

AMS $8,396 AMS $8,3 5 2 BGR $791

AN C $19,186 ARN $9,061 BHM $7 5 3

ATH $17, 5 99 ATH $16,626 BNA $1,243

ATL $2,808 ATL $1,223 BOS $227

AUA $2,666 AUA $7,0 5 4 BTV $48

AUH $38,9 91 AUS $2,11 5 BUF $290

AUS $3,320 AVL $720 BWI $4 5 2

BAQ $10,381 B C N $14,2 5 9 C AE $762

B C N $18, 5 96 BDA $2,778 C AK $1,330

23 The values of the charts in the appendix are 2008 values and have n ot been adjusted to reflect 2010 which is used throughout the document.

### 39 BDA $1,361 BDL $92 C HO $218

BDL $349 BFS $12,686 C HS $424

BGI $ 5 ,286 BGR $409 C LE $1,022

BGM $4 21 BHM $93 5 C LT $6 5 1

BKK $32,772 BHX $14,018 C MH $60

BNA $1,406 BNA $321 C VG $2,361

BOG $12,184 BOG $8,16 5 DAY $394

BOM $24,263 BOS $381 D C A $236

BOS $1,14 5 BQN $ 5 ,64 5 DEN $2,312

BQN $3,1 5 6 BRS $12,870 DFW $926

BRU $9,323 BRU $18,243 DSM $1,39 5

BTV $723 BTV $149 DTW $1,968

BUD $12,844 BUF $2,0 5 0 FLL $1,24 5

BUF $ 5 67 BWI $1 5 1 GRR $666

BUR $1,808 C AE $663 GSO $204

BWI $360 C DG $ 5 ,631 GSP $4 5 3

C AI $30,786 C GN $11, 5 78 HOU $1,923

C DG $3, 5 27 C HS $ 5 16 IAD $1,281

C LE $ 5 94 C LE $837 IAH $477

C LT $1,403 C LT $81 5 ILM $34 5

C MH $84 5 C MH $1,966 IND $1, 5 11

C MN $11,010 C PH $9, 5 03 ITH $91

C UN $2,627 C UN $2,637 JAX $292

C VG $3,486 C VG $219 LEB $71

D C A $9 7 DAB $3,17 5 LEX $1, 5 07

DEN $ 5

, 5 37 DAY $468 M C I $817

DFW $4,086 D C A $913 M C O $2,933

DKR $18,439 DEL $38,6 5 4 MDW $ 5 92

DTW $1,638 DEN $1,020 MEM $1,743

DUB $9, 5 04 DFW $ 5 40 MHT $49

DUS $28,9 5 8 DTW $1,092 MIA $647

DXB $2 5

, 5 62 DUB $9, 5 16 MKE $699

EZE $16,79 5 EDI $8,210 MSN $1,176

F C O $6,366 F C O $10,19 5 MSP $1,266

FLL $1, 5 31 FLL $1, 5 89 MSY $4,600

FRA $7,390 FRA $11,64 5 MYR $1,800

G C M $7,403 GLA $9,8 5 1 NAS $4,087

GEO $8, 5 89 GRR $721 ORD $2 5 9

GRU $9,1 5 2 GRU $19,992 ORF $633

GUA $8,696 GSO $23 5 PBI $3,488

### 40 GVA $16,233 GSP $4 5 3 PHF $1,300

GYE $13,2 5 6 GVA $13,729 PHL $317

HAM $1 5 ,732 HAM $13,007 PIT $762

HEL $26,090 HKG $36,688 PVD $ 55

HKG $67,414 H NL $14,3 5 6 PWM $203

HOU $1,461 IAD $90 RDU $ 5 7

IAD $8 5 7 IAH $760 RI C $101

IAH $1,290 IND $3,333 ROA $264

I C N $31,233 JAX $2,423 RO C $420

IND $633 LAS $1,2 5 8 RSW $3,201

IST $1 5

, 5 44 LAX $1,046 SAV $ 5 9 5

JAX $1,111 L EX $1,28 5 SDF $684

JED $36,992 LGW $7,193 STL $1,393

KBP $1 5 ,412 LHR $7,877 SYR $279

KEF $10,100 LIM $11, 5 33 TPA $894

KIN $4,263 LIS $6,907 TYS $1,498

LAS $2,803 LIT $1,637 XNA $1,14 5

LAX $ 5 81 LTN $ 5 ,672 YHZ $1,1 5 2

L GB $1,441 MAD $7,6 5 7 YOW $329

LGW $7,623 MAN $8,1 5 3 YUL $269

LHR $2,204 MBJ $3,180 YYZ $738

LOS $3 5 ,037 M C I $4,177

MAD $10,064 M C O $1,609 Average 9 5 2

MAN $9,64 5 MDW $1,064

MBJ $2,66 5 MEM $2,431

M C O $1,4 5 0 MEX $3,784

MDE $9,128 MHT $132

MEX $1,199 MIA $742

MHT $ 5 3 MKE $264

MIA $1,426 MSN $1,362

MSP $4,362 MSP $1,431

MSY $2, 5 49 MSY $1,630

MU C $26,671 MU C $ 5 ,1 5 9

MXP $14,228 MXP $13,90 5

NAP $38, 5 86 MYR $3,043

NAS $1,837 NAS $2,172

N C E $18,241 NRT $32,6 5 4

NO C $16,632 OK C $1,739

NRT $17,297 OMA $627

OAK $2,072 OPO $29,246

### 41 ONT $ 5 ,819 ORD $243

ORD $1,061 ORF $121

ORF $ 5 92 ORY $8,427

OTP $22,743 OSL $14,413

PAP $10,440 PBI $3,038

PBI $2,201 PDX $2,864

PDX $10,380 PEK $34,187

PEK $41,788 PHX $1,016

PHL $132 PIT $1,2 5 7

PHX $3,3 5 0 POP $6,361

PIT $728 POS $9,8 5 9

PLS $7,28 5 PSE $4,9 5 3

PMO $38 ,9 5 1 PTY $7,818

POS $4,132 PUJ $6,240

PPT $40,766 PVD $614

PRG $17,233 PWM $171

PSA $23,978 RDU $1,124

PSE $4,923 RI C $147

PTY $4,311 RO C $122

PUJ $ 5 ,262 RSW $3,9 5 9

PVD $43 RZE $28,791

PVG $ 5 0, 5 34 SAN $2,298

PWM $638 SAT $2,342

RDU $608 SAV $ 5 60

RI C $724 SDF $481

RIX $16,17 5 SDQ $9,433

RO C $7 5 3 SEA $1,296

RSW $1,274 SFO $1,184

SAL $ 5 ,366 SIN $48,618

SAN $ 5 ,647 SJ C $6,144

SAP $10,1 5 2 SJO $3,910

S C L $17,79 5 SJU $1, 5 6 5

SDQ $2,046 SL C $2,430

SEA $ 5 ,709 SNA $2,623

SFO $2,423 SNN $8,428

SJ C $3, 5 48 SRQ $3,168

SJO $7,718 STI $9,161

SJU $2,9 5 0 STL $238

SL C $ 5 ,28 5 STT $4,802

SMF $ 5

, 808 SXM $ 5 ,0 5 6

### 42 SNN $10,173 SYR $127

SRQ $3,633 TLV $16,40 5

STI $1,782 TPA $2,738

STL $ 55 2 TUL $1,808

STN $ 5 ,221 TUS $4,266

STT $6,972 TXL $13,36 5

SVO $16,041 TYS $6 55

SXM $7,288 WAW $23,720

SYR $862 XNA $1,023

TLV $1 5 ,984 YHZ $2,662

TPA $2,066 YOW $207

TUS $4,247 YQB $280

TXL $1 5 ,911 YQM $1,338

V C E $17,086 YTM $98 5

VIE $21,163 YUL $96

WAW $19,464 YVR $6,426

YHZ $692 YYT $1,137

YUL $1 79 YYZ $1,3 5 8

YVR $6,703 ZRH $7,067

YY C $6,696

YYZ $228 Average $ 5 ,86 5

ZRH $7,412

Average $9,874

### 43 Methodology to Determine Additional Flights needed to meet the Proposed Use

- or - Lose Requirements

The FAA’s task in the data analysis was to determine how many additional flights, if any, would be needed for carriers at the 3 NY airports to comply with the proposed new use

- or

- lose requirement s

. I f all flights assigned to a slot were a ctually operated at 80% over a season that would net a minimum of 995 flights at EWR for the 1,244 allocated slots, 1,026 flights at JFK for the 1,283 allocated slots and 908 flights at LGA for the 1,136 allocated slots. In aggregate,
current traffic exce eds the minimum but when looking at slots by carrier by day of week and by hour the FAA found specific hours where carriers would need additional actual flights. The calculation of these additional flights is discussed below.

For the purpose of this anal ysis the FAA reviewed flights from August 2009. Although 2010 is the most current data, the runway closure at JFK airport in 2010 affected all operations into and out of the New York region and a use

- or

- lose waiver at JFK was in effect during the runway

c onstruction.

In 2009 , based on the new definition of a series of flights per slot, there are flights being flown in particular slots that would not meet the new use

- or

- lose requirement. Although the analysis looked at actual flights by scheduled hour, the analysis was not done by origin and destination pairs or by flight numbers. However, the FAA expects that carriers c ould modify the origin and destination pairs or make other adjustments to these flights to meet the pro posed rule. Moreover, this analysi s assumes that carriers would meet the new 80% use

- or

- lose requirement by adding the fewest number of operations to comply since the current allocation of flights provides the highest profit for the carriers under today’s regulatory scheme

.

The FAA looked at both scheduled flights and actual flights flown. A carrier’s schedule is indicative of a carrier’s intended usage of slots. However, although carriers are required to schedule a flight before a flight can be flown, a carrier has the ability to cancel flights making the analysis of scheduled data misleading. A carrier can schedule up to a 100% of their allocated
slots and cancel 20% of those flights and still meet the 80% usage requirement of this proposed rule. Moreover, only flights that actually o perate count toward the usage requirements. Therefore, the FAA looked at actuals for a more accurate estimate of the number of flights needed to meet the requirement of the proposed rule.

T o determine the additional flights that may be added by carriers to meet the 80% usage requirements for a slot, the FAA gathered a sample of actual flight data from the Aviation System Performance Management system (ASPM). The sample consisted of actual flights flown for all Mondays in August of 2009. The FAA selected the month of August because that was the

pe ak month of operations for 2009 where each additional flight would result in the highest delay

### 44 cost for that year. Monday was selected because there were 5 Mondays in August compared to 4 days for all the other d ays of the week. By having five Mondays, a carrier’s flight that was
scheduled for departure at 9 AM would need to actually operate at least four of the five Mondays to meet the proposed 80% usage requirement for that particular slot. Actual flight data was matched with allocated slot data for that scheduling season, by carrier, by day of week (Monday) and by hour (the actual flight’s scheduled departure or arrival hour). However, regional and commuter operators and alliance partners also fly under contr act to the seller and share the slots. Therefore, for a proper count of slot utilization, the FAA had to cross reference schedule data since the schedule data lists other operating carrier s scheduled to fly on behalf of a seller carrier. These were gener ally alliances and code shares. After matching the operating carriers with the seller carriers, the FAA then matched the seller’s allocated slots with the actual traffic by hour.

The next step was to extract each carrier’s actual flights for all Mondays in August 2009 by hour. An example of the actual flight data collected for each carrier can be seen in the table below under the column “Actual Flights Flown”. In t hat same table, the FAA also tracked each carrier’s allocated slots for all Mondays in Aug ust by hour. The FAA then calculated the number of actual flights needed based on the number of allocated monthly slots for each hour to meet the proposed 80% usage requirement. This was compared to the number of actual flights flown and
where there was a surplus of actual flights above the 80% requirement the FAA recorded a negative number in the column labeled “ Usage N eeded to M eet 80%” reflecting an excess in flights. If there was a shortage of actual flights this was recorded as a positive number.

Th e above process identifies those hours where there were insufficient flights. For those hours, the FAA looked at the adjacent hours

— before and after

— to see if there was an excess. If an adjacent hour had excess flights the FAA assumed the carrier would s mooth their traffic activity levels across hours to meet the proposed 80% usage requirement. The FAA also assumed that

c arriers with a large number of flights needed in some less desirable hours (hour 0 6 00 and 21 00 )
would return or sell those slots

.

After smoothing, the FAA summed up the remaining insufficient flights for hours where there were not enough excess flights in adjacent hours to smooth out the deficiency. The sum of the remaining flights which could not be smoothed were divided by five to obtai n an average amount of additional flights that would be nee ded to be flown for carrier XXX on Monday to meet the proposed 80% usage requirement. In the Appendix, for the example of c arrier XXX, there were
an additional 2 flights that would be needed to me et the proposed 80% usage requirement, after smoothing, for all Mondays in August 2009. On average, this would require about an additional

.4 flights per Monday for Carrier XXX to meet the proposed 80% usage requirement. Moreover,
the FAA assumed that carriers with slots in consecutive hours could reschedule flights between adjacent hours to minimize the number of additional flights needed to meet the new requirement. The FAA continued the process for all carriers and for all three airports. Based on the 80% usage requirement the FAA calculated 10 additional flights for EWR, 20 for JFK and 2 for LGA.

### 45 Smoothing Example of Carrier XXX:

Example : EWR Allocated Departures Compared to Actual Departures. The sample includes all 5

M ondays in August 2009. The FAA assume d that Carriers will change their flights to meet the new use

or

- lose with the least amount of additional flights . The tan color rows represent the adjacent hours where carriers will smooth traffic to meet the new use or lose requirement. After smoothing, for the

M onth, Carrier XXX needs an additional 2 flights so it can keep all its slots. So, on an a verage M onday that equates to an additional .4 Flights

.



## Table Description:

YYYYMM : data is from August 2009 Day of Week : numerical code for M ond ay in the database Dep. Hour : actual flights binned by their schedule departure hour
Carrier : Selling carrier Actual Flights Flown : actual flights that were flown for the seller carrier for all the M ondays in August
2009 Monthly Slots : states how many slo ts were allocated for that seller carrier for that season for M onday
for that hour for the month Usage Needed to Meet 80% : states how many actual flights are needed to operate to meet 80% of the
slots for M onday for that hour for the month

NET : a negative number signifies the number of flights in excess of the 80% minimum and a positive number signifies an insufficient number of flights to meet the 80% minimum

### 46