II

105TH CONGRESS

1ST SESSION S. 1331

To amend title 49, United States Code, to enhance domestic aviation competition by providing for the auction of slots at slot-controlled airports,

and for other purposes.

IN THE SENATE OF THE UNITED STATES

OCTOBER 29, 1997

Mr. MCCAIN introduced the following bill; which was read twice and referred

to the Committee on Commerce, Science, and Transportation

A BILL

To amend title 49, United States Code, to enhance domestic

aviation competition by providing for the auction of slots

at slot-controlled airports, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Aviation Competition

5 Enhancement Act of 1997’’.

6 SEC. 2. FINDINGS.

7 The Congress finds that—
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1 (1) the Airline Deregulation Act anticipated the

2 opening of markets and the growth of competitive

3 airline service throughout the United States;

4 (2) airline competition benefits communities

5 and consumers and should be promoted by the Fed6 eral government;

7 (3) the introduction of low-fare competition into

8 certain markets has enabled more consumers to fly

9 in those markets, resulting in enormous economic

10 growth for those communities;

11 (4) although the deregulation of the domestic

12 airline industry has led to better service and lower

13 fares for most air travelers, the full benefits of air14 line deregulation have yet to be realized, particularly

15 in communities served by small hub airports and

16 medium hub airports;

17 (5) the Secretary of Transportation has the au18 thority to promulgate and enforce standards of fair

19 competition in the airline industry under section

20 41712 of title 49, United States Code;

21 (6) studies by the General Accounting Office

22 (GAO) and independent concerns show that con23 centration in the domestic airline industry continues

24 to increase and that, where such concentration ex-
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1 ists, fares have increased, with a significant impact

2 on communities and their residents;

3 (7) the GAO has identified operating limits, to

4 include slot controls, perimeter rules, and other air5 port restrictions that continue to block airline entry

6 at key airports in the East and upper Midwest, that

7 have an impact on air transportation service

8 throughout the country;

9 (8) of the over 3,100 domestic air carrier slots

10 at the 4 slot-controlled airports, which are known as

11 ‘‘high density airports’’—

12 (A) fewer than 45 slots are held collectively

13 by air carriers started after deregulation; and

14 (B) foreign carriers hold approximately

15 twice as many slots as new entrant air carriers;

16 (9) the Department of Transportation allowed

17 the established air carriers to retain a large portion

18 of their slots free-of-charge when the current ‘‘Buy19 Sell Rule’’ was instituted in 1985;

20 (10) access to slot-controlled airports is crucial

21 to establishing new air service in the heavily-traveled

22 eastern and midwestern markets and if carriers are

23 going to be able to increase services to markets

24 served by small hub airports and medium hub air25 ports, particularly in the Southeast and the Midwest;
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1 (11) the 1993 National Commission to Ensure

2 a Strong Competitive Airline Industry recommended

3 that the Federal Aviation Administration (FAA)

4 ‘‘review the rule that limits operations at high den5 sity airports with the aim of either removing these

6 artificial limits or raising them to the highest prac7 ticable level consistent with safety requirements’’;

8 (12) the GAO reports that additional action is

9 needed because the Department of Transportation is

10 limited in the number of new slots it can grant

11 through the current exemption process;

12 (13) the perimeter rule at Washington National

13 Airport is Federally-mandated; and

14 (14) increasing competition by removing bar15 riers would not increase noise at Washington Na16 tional Airport due to the continued applicability of

17 limitations on the number of hourly air carrier oper18 ations, and noise restrictions that are in effect at

19 Washington National Airport after 10:00 p.m.,

20 which further restrict operations by certain Stage 3

21 aircraft, the standard for the quietest aircraft tech22 nology.
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1 SEC. 3. REDISTRIBUTION OF SLOTS BY AUCTION.

2 (a) IN GENERAL.—Subpart II of part A of subtitle

3 VII of title 49, United States Code, is amended by adding

4 at the end thereof the following:

‘‘CHAPTER 455—SLOT AUCTIONS

‘‘Sec.

‘‘45501. General authority to create, withdraw, and auction slots.

‘‘45502. Auction.

‘‘45503. Special rules.

‘‘45504. Definitions.

5 ‘‘§ 45501. General authority to create, withdraw, and

6 auction slots

7 ‘‘(a) IN GENERAL.—The Secretary of Transportation

8 shall allocate slots at each slot-controlled airport for as9 signment to new entrant air carriers and limited incum10 bent carriers in accordance with this chapter.

11 ‘‘(b) APPLICATION PROCESS.—

12 ‘‘(1) REQUEST FOR SLOTS.—An air carrier with

13 appropriate Federal Aviation Administration safety

14 certification and Department of Transportation eco15 nomic certification may submit a request to the Sec16 retary for slots at a high density airport. The appli17 cation shall include—

18 ‘‘(A) the markets to be served;

19 ‘‘(B) the times requested;

20 ‘‘(C) information on the passenger demand

21 for the service to be provided; and
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1 ‘‘(D) such additional information as the

2 Secretary may require.

3 ‘‘(2) ACTION ON REQUEST; FAILURE TO ACT.—

4 Within 45 days after a request under paragraph (1)

5 is received by the Secretary, the Secretary shall—

6 ‘‘(A) approve the request for processing if

7 the Secretary believes that—

8 ‘‘(i) the applicant can operate the

9 service for a period of not less than 180

10 days; and

11 ‘‘(ii) the service will improve the com12 petitive environment; or

13 ‘‘(B) return the request to the applicant

14 for further information.

15 If the Secretary neither approves the request under

16 subparagraph (A) nor returns the request under

17 subparagraph (B) within the 45-day period begin18 ning on the date it is received, then a request under

19 paragraph (1) is deemed to have been approved on

20 the 45th day.

21 ‘‘(3) PRIORITY FOR CERTAIN MARKETS.—In

22 carrying out this subsection, the Secretary shall give

23 priority to the consideration of applications that pro24 pose to provide service to communities served by

25 small hub airports, medium hub airports, and other
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1 airports that do not have service to the high-density

2 airport to which the application relates.

3 ‘‘(c) ALLOCATION PROCESS.—

4 ‘‘(1) IF SLOTS ARE AVAILABLE.—If an applica5 tion under subsection (b) is approved for processing,

6 the Secretary first shall allocate slots within 60 min7 utes of the requested times if—

8 ‘‘(A) unused slots are available; or

9 ‘‘(B) slots may be awarded through the ex10 emption process in accordance with the Federal

11 Aviation Administration’s air traffic priorities.

12 ‘‘(2) IF SLOTS ARE UNAVAILABLE.—If an appli13 cation under subsection (b) is approved for process14 ing but the requested slots are not available for allo15 cation under paragraph (a) of this subsection, then

16 the Secretary may withdraw slots, under subsection

17 (d), for auction under section 45502 or create new

18 slots.

19 ‘‘(d) WITHDRAWAL OF SLOTS FOR AUCTION.—

20 ‘‘(1) WITHDRAWAL OF EXISTING SLOT ASSIGN21 MENTS.—The Secretary shall withdraw, from major

22 carriers at each airport—

23 ‘‘(A) for the first auction under this sec24 tion, not more than 10 percent of the
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1 auctionable slots assigned to such carriers at

2 that airport; and

3 ‘‘(B) for any subsequent auction under this

4 section, not more than 5 percent of the

5 auctionable slots assigned to such carriers at

6 that airport.

7 ‘‘(2) FREQUENCY.—Auctions under this section

8 shall not be held more frequently than 24 months

9 after the preceding auction.

10 ‘‘(3) AUCTIONABLE SLOTS.—For purposes of

11 this subsection, an auctionable slot is—

12 ‘‘(A) a slot assigned to an air carrier in

13 1985 that is still assigned to that air carrier, or

14 a slot received in even exchange with another

15 air carrier for a slot assigned to that air carrier

16 in 1985; and

17 ‘‘(B) any slot other than a slot—

18 ‘‘(i) used by a major carrier to provide

19 service to an airport that is a small or me20 dium hub airport; or

21 ‘‘(ii) acquired for value by an air car22 rier before July 1, 1997.
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1 ‘‘§ 45502. Auction

2 ‘‘(a) GENERAL AUTHORITY.—The Secretary of

3 Transportation shall assign a slot to a qualified applicant

4 through the use of a system of competitive bidding.

5 ‘‘(b) USES TO WHICH BIDDING MAY APPLY.—A slot

6 may be assigned under this subsection if the Secretary de7 termines that the assignment of such slot will, or is rea8 sonably likely to, increase competition among air carriers

9 nationally, regionally, or in the markets affected by the

10 slot assignment in accordance with section 45501(b).

11 ‘‘(c) DESIGN OF SYSTEMS OF COMPETITIVE BID12 DING.—In identifying slots to be withdrawn for auction

13 under section 45501(d)(1), in specifying eligibility and

14 other characteristics of such slots, and in designing the

15 methodologies for use under this subsection, the Secretary

16 shall include safeguards to protect the public interest in

17 the use of the slots and shall seek to promote the following

18 objectives:

19 ‘‘(1) increasing competition in the provision of

20 air transportation in a way that benefits the public,

21 including those residing in rural areas;

22 ‘‘(2) promoting economic opportunity and com23 petition and ensuring that air transportation at com24 petitive rates is readily accessible to the American

25 people by avoiding excessive concentration of slots

26 among major air carriers;
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1 ‘‘(3) recovery for the public of a portion of the

2 value of the slots made available by competitive bid3 ding and the avoidance of unjust enrichment

4 through the methods employed to award slots; and

5 ‘‘(4) efficient and intensive use of slots.

6 ‘‘(d) BIDDER QUALIFICATION.—No air carrier other

7 than a new entrant air carrier or a limited incumbent car8 rier may participate in a system of competitive bidding

9 under this section. No license shall be granted to an appli10 cant selected pursuant to this section unless the Secretary

11 determines that the applicant is qualified to utilize the slot

12 or slots to be so assigned.

13 ‘‘(e) RULES OF CONSTRUCTION.—Nothing in this

14 section, or in the use of competitive bidding, shall—

15 ‘‘(1) alter slots allocation criteria and proce16 dures established by the other provisions of this sub17 title;

18 ‘‘(2) diminish the authority of the Secretary

19 under the other provisions of this Act to regulate or

20 reclaim slots;

21 ‘‘(3) be construed to convey any rights, includ22 ing any expectation of renewal of a slot assignment,

23 that differ from the rights that apply to other slots

24 at the same airport that were not issued pursuant

25 to this section; or
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1 ‘‘(4) be construed to prohibit the Secretary

2 from issuing additional slots.

3 ‘‘(f) CONSIDERATION OF REVENUES IN PUBLIC IN4 TEREST DETERMINATIONS.—

5 ‘‘(1) CONSIDERATION PROHIBITED.—In making

6 a decision to assign slots pursuant to this section,

7 and in prescribing regulations pursuant to this sec8 tion, the Secretary may not base a finding of public

9 interest, convenience, and necessity on the expecta10 tion of Federal revenues from the use of a system

11 of competitive bidding under this section.

12 ‘‘(2) CONSIDERATION LIMITED.—In prescribing

13 regulations pursuant to this section, the Secretary

14 may not base a finding of public interest, conven15 ience, and necessity solely or predominantly on the

16 expectation of Federal revenues from the use of a

17 system of competitive bidding under this section.

18 ‘‘(3) CONSIDERATION OF DEMAND FOR

19 SLOTS.—Nothing in this subsection shall be con20 strued to prevent the Secretary from considering

21 consumer demand for slots-based services.

22 ‘‘(g) TREATMENT OF REVENUES.—

23 ‘‘(1) GENERAL RULE.—Except as provided in

24 paragraph (2), all proceeds from the use of a com25 petitive bidding system under this subsection shall
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1 be deposited in the Airport and Airway Trust Fund

2 established under section 9502 of the Internal Reve3 nue Code of 1986.

4 ‘‘(2) DEPOSIT AND USE OF AUCTION ESCROW

5 ACCOUNTS.—Any deposits the Secretary may require

6 for the qualification of any person to bid in a system

7 of competitive bidding pursuant to this subsection

8 shall be deposited in an interest bearing account at

9 a financial institution designated for purposes of this

10 subsection by the Secretary (after consultation with

11 the Secretary of the Treasury). Within 45 days fol12 lowing the conclusion of the competitive bidding—

13 ‘‘(A) the deposits of successful bidders

14 shall be paid to the Treasury;

15 ‘‘(B) the deposits of unsuccessful bidders

16 shall be returned to such bidders; and

17 ‘‘(C) the interest accrued to the account

18 shall be transferred to the Airport and Airway

19 Trust Fund.

20 ‘‘(h) EVALUATION.—Not later than March 1, 1999,

21 the Secretary shall conduct a public inquiry and submit

22 to the Congress a report—

23 ‘‘(1) containing a statement of the revenues ob24 tained, and a projection of the future revenues, from
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1 the use of competitive bidding systems under this

2 section;

3 ‘‘(2) describing the methodologies established

4 by the Secretary pursuant to subsections (c) and

5 (d);

6 ‘‘(3) comparing the relative advantages and dis7 advantages of such methodologies in terms of attain8 ing the objectives described in such subsections; and

9 ‘‘(4) recommending any statutory changes that

10 are needed to improve the competitive bidding

11 process.

12 ‘‘§ 45503. Special rules

13 ‘‘(a) RESALE OR REVERSION OF PURCHASED

14 SLOTS.—

15 ‘‘(1) RESALE.—A slot assigned by competitive

16 bidding under section 45502 may be—

17 ‘‘(A) sold by the air carrier to which it was

18 assigned only to a new entrant air carrier or

19 limited incumbent carrier within 24 months of

20 the slot acquisition; or

21 ‘‘(B) leased to any air carrier, except that

22 any such leased slot shall be sold to a new en23 trant air carrier or limited incumbent air car24 rier that offers to purchase it.
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1 ‘‘(2) REVERSION.—A slot assigned by competi2 tive bidding under section 45502 that is lost by the

3 air carrier to which it was assigned under section

4 93.227 of the Federal Aviation Administration’s reg5 ulations (14 C.F.R. 93.227), shall be returned to the

6 Federal Aviation Administration.

7 ‘‘(b) OTHER EXISTING SLOTS.—

8 ‘‘(1) EXPIRATION.—Any slot not withdrawn for

9 assignment under this chapter shall continue in ef10 fect until the earlier of—

11 ‘‘(A) the date on which it is subsequently

12 withdrawn for such assignment; or

13 ‘‘(B) the date on which it expires or is

14 withdrawn according to the terms of its assign15 ment.

16 ‘‘(2) FUTURE REVENUES.—Any amount paid

17 for assignment or use of an expired slot shall be

18 treated in accordance with the provisions of section

19 45502(h) as if received under that section.

20 ‘‘(c) APPLICATION OF 80-PERCENT RULE.—

21 ‘‘(1) IN GENERAL.—In applying section

22 93.227(a) of the Federal Aviation Administration’s

23 regulations (14 C.F.R. 93.227(a)), the Secretary of

24 Transportation shall take such action as may be nec25 essary to maximize slot usage.
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1 ‘‘(2) STUDY.—The Secretary of Transportation

2 shall initiate a study to determine whether the appli3 cation of the high density rule contained in subpart

4 S of part 93 of title 14, Code of Federal Regula5 tions, promotes or hinders airline competition or has

6 no effect on airline competition, and the impact of

7 changes to the rule on safety.

8 ‘‘(3) USE OF SLOTS BY COMMUTER OPERA9 TORS.—The Secretary of Transportation shall limit

10 the use of air carrier slots by commuter air carriers.

11 In carrying out this paragraph, the Secretary shall

12 weigh the benefits of the use of air carrier slots by

13 commuter air carriers against the use of those slots

14 by other air carriers, taking into account the provi15 sions of section 93.227 of the Federal Aviation Ad16 ministration’s regulations (49 C.F.R. 93.227).

17 ‘‘§ 45504. Definitions

18 ‘‘For purposes of this chapter—

19 ‘‘(1) HIGH DENSITY AIRPORT.—The term ‘high

20 density airport’ has the meaning given it by section

21 41714(h)(2) of this title.

22 ‘‘(2) NEW ENTRANT AIR CARRIER; LIMITED IN23 CUMBENT CARRIER.—The terms ‘new entrant air

24 carrier’ and ‘limited incumbent carrier’ have the

25 meaning given such terms by section 93.213 of the
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1 Federal Aviation Administration’s regulations (14

2 C.F.R. 93.213).

3 ‘‘(3) COMMUTER AIR CARRIER.—The term

4 ‘commuter air carrier’ has the meaning given that

5 term by section 41714(h)(1) of this title.

6 ‘‘(4) MAJOR CARRIER.—The term ‘major car7 rier’ means an air carrier to which Part 121 of title

8 14, Code of Federal Regulations, applies.

9 ‘‘(5) MEDIUM HUB AIRPORT.—The term ‘me10 dium hub airport’ means an airport that each year

11 has at least 0.25 percent, but less than 1.00 percent,

12 of the total annual boardings in the United States.

13 ‘‘(6) SLOT.—The term ‘slot’ has the meaning

14 given that term by section 41714(h)(4) of this title.

15 ‘‘(7) SMALL HUB AIRPORT.—The term ‘small

16 hub airport’ has the meaning given that term by sec17 tion 41731(a)(3).’’.

18 SEC. 4. SECRETARY MAY GRANT EXEMPTIONS TO PERIM19 ETER RULE.

20 (a) IN GENERAL.—The Secretary of Transportation

21 shall by order grant exemptions from the application of

22 section 6012 of the Washington Metropolitan Airport Au23 thority Act of 1986 (49 U.S.C. App. 2461) to all air car24 riers to operate limited frequencies and aircraft on select
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1 routes between Washington National Airport and other

2 airports if the Secretary finds that the exemption will—

3 (1) provide air transportation service with net4 work benefits; and

5 (2) increase competition in multiple markets.

6 (b) CRITERIA.—The Secretary shall apply the criteria

7 set forth in section 45502(c) of this title in granting ex8 emptions under subsection (a).

9 (c) LIMITATIONS.—Any exemption granted under

10 subsection (a)—

11 (1) may not affect the number of hourly com12 mercial operations permitted at Washington Na13 tional Airport; and

14 (2) may not be granted with respect to any air15 craft that is not a Stage 3 aircraft (as defined by

16 the Secretary).

17 (d) The Secretary shall not approve applications that

18 propose to relinquish service to small hub airports and me19 dium hub airports in return for long haul service beyond

20 the perimeter rule. The Secretary shall subsequently pro21 hibit the holder of the exemption from shifting service

22 among slots at Washington National Airport in order to

23 provide the high frequency service that it relinquished to

24 provide long haul service under the exemption.
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1 (e) REPORT.—Within 1 year after the date of enact2 ment of this Act, and biannually thereafter, the Secretary

3 shall certify to the United States Senate Committee on

4 Commerce, Science, and Transportation and the United

5 States House of Representatives Committee on Transpor6 tation and Infrastructure that noise standards, air traffic

7 congestion, airport-related vehicular congestion, safety

8 standards, and adequate air service to communities within

9 the perimeter described in section 6012 of the Washington

10 Metropolitan Airport Authority Act of 1986 (49 U.S.C.

11 App. 2461) have been maintained at levels that are the

12 same as, or better than, the levels maintained in 1997.

13 SEC. 5. COMPLAINTS CONCERNING PREDATORY BEHAVIOR.

14 Section 41712 of title 49, United States Code, is

15 amended—

16 (1) by inserting ‘‘(a) GENERAL.—’’ before ‘‘On

17 the initiative’’; and

18 (2) by adding at the end thereof the following:

19 ‘‘(b) PREDATORY BEHAVIOR COMPLAINTS.—If an air

20 carrier files a complaint under subsection (a) that another

21 air carrier has engaged in predatory behavior, then the

22 Secretary of Transportation shall respond to that com23 plaint within 90 days by—
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1 ‘‘(1) finding that the air carrier that is the sub2 ject of the complaint has engaged in predatory be3 havior;

4 ‘‘(2) finding that such air carrier has not en5 gaged in such behavior; or

6 ‘‘(3) requesting additional information from the

7 parties; or

8 ‘‘(4) finding that there is insufficient evidence

9 on which to base a finding under paragraph (1) or

10 (2) of this subsection.’’.

Æ