Reagan National Airport was built by the federal government and opened on June 16, 1941, on the western bank of the Potomac River, across from Washington, D.C. Reagan National currently has three runways and two terminals with a total of 44 gates or passenger loading ramps for use by air carriers. The airport currently handles 400 daily departures to 75 cities, offered by 20 different airlines (this includes commuter airlines, which operate solely for the major carriers). Terminal A, the original terminal, has 9 gates, and Terminal B/C, which opened in 1997, has 35 gates, 100 ticket counters, and 12 baggage claim areas. In 2005, 17.8 million passengers used Reagan National. The airline with the largest number of flights at Reagan National is US Airways, which controls 44 percent of the commercial slots. The next largest operators are Delta Airlines and American Airlines, which have 14 percent of the commercial slots each. During 2005, these three airlines together accounted for nearly 60 percent of total passenger enplanements at the airport. In 1969, FAA applied special air traffic rules to certain airports facing increasing delays and congestion that it designated as high-density airports: Chicago-O’Hare; New York’s LaGuardia and Kennedy; Newark, New Jersey; and Reagan National (DOT dropped Newark’s designation as a high-density airport in October 1970). Because of the restricted number of allowable flights, these airports are generally known as slot-controlled, and the special air traffic rules governing the allowable number of flights are referred to as slot rules, or high-density rules. The number of hourly slots at Reagan National is controlled by the federal government. Since 1969, the federal government has restricted the number of commercial takeoffs and landings at Reagan National. Currently, the number allowed is 48 per hour: 37 for air carriers and 11 for commuter aircraft. Table 1 shows the number of slots per hour by type of aircraft permitted under the slot rule. FAA authorizes general aviation or unscheduled aircraft to make an additional 12 takeoffs or landings during each hour for a total of 60 slots per hour. A perimeter rule has been in place at Reagan National since May 1966 restricting airlines from operating nonstop flights between Reagan National and airports further than a specified distance. The FAA previously had concerns that allowing long-range jets to fly into Reagan National would create a noise problem and hamper growth of the newly built Dulles International Airport. As a result, with the airlines agreeing, the Civil Aeronautics Board approved a 650-mile perimeter, with exceptions of seven cities between 650 and 1,000 miles away that enjoyed grandfather status as of December 1, 1965. In 1986, the Congress codified the slot and perimeter rules into federal statute as part of the Metropolitan Washington Airports Act of 1986. The act led to the transfer of authority over Reagan National and Dulles from the federal government to the Metropolitan Washington Airports Authority and set the perimeter at 1,250 miles, which allowed nonstop flights as far as Houston and Dallas. Two federal statutes enacted in 2000 and 2003 modified the slot and perimeter rules at Reagan National Airport. AIR-21 and Vision 100 effectively added up to three commercial slots per hour and for the first time designated some slots for flights beyond the 1,250 mile perimeter. AIR-21 and Vision 100, combined, allowed the Secretary of Transportation to award 22 roundtrips, 12 with service to airports beyond the perimeter and 10 with service to airports within the perimeter. Figure 2 shows each market by number of slots and airline. Two other commercial airports serve the Baltimore-Washington metropolitan area—Dulles International Airport and Baltimore- Washington International Thurgood Marshall Airport (BWI). Dulles opened on November 19, 1962. The federal government built Dulles, located approximately 30 miles west of Washington, D.C., in part to provide a facility for nonstop and connecting and international air carrier traffic into the Washington, D.C. area. In 2005, Dulles handled 27 million passengers. BWI, built by the city of Baltimore and originally named Friendship International Airport, was opened on June 24, 1950. BWI, which is owned and operated by the state of Maryland, is located 10 miles southwest of Baltimore and approximately 30 miles northeast of Washington, D.C. In 2005, BWI handled 19.7 million passengers. According to FAA officials, whose estimate is based on airside capacity (principally runways) and not landside infrastructure (such as terminals and parking facilities), Reagan National can presently accommodate four additional slots per hour. Airport officials disagree on the basis for FAA’s estimate and cite the unknown future course of general aviation at the airport and the limited capacity of airport infrastructure (such as gates, baggage handling areas, and parking) to handle more commercial flights. Airport officials were unsure of how many additional flights, if any, the airport could accommodate. Even without increasing the number of slots, there are opportunities to accommodate more flights and passengers. Some current slots remain unused during early morning or late evening hours, and some slots designated for air carriers are being used for smaller commuter aircraft. According to FAA, Reagan National’s overall runway capacity can presently accommodate about four additional hourly slots above the current slot allocation under the high-density rule. FAA continues to rely on the DOT’s study of the high-density rule that it conducted in 1995. The study estimated that the airport’s balanced capacity is 67 flights per hour, or 4 more than what is currently in place, resulting in an additional 60 flights per day based on an 15-hour operating period. The study predated the exclusion of general aviation after September 11. The study concluded that FAA’s traffic programs and procedures could safely accommodate the increase, but it also said the increase was likely to result in more delays. In 2004, the most current year for which this data are available, Reagan National experienced an average delay time of 5 minutes, one of the lowest in the nation for large hub commercial airports. Airport officials disagree with FAA’s estimate because it assumes balanced capacity, whereas the airport prefers to measure capacity differently. Airport officials stated any measurement of capacity should be based on poor weather conditions and Instrument Flight Rules (IFR). FAA and GAO believe balanced capacity is a more appropriate method for determining an airport’s capacity than the method suggested by the airports authority. The 1995 DOT study points out that estimating capacity under IFR conditions, when the airfield is at the lowest level of available capacity does not ensure steady airfield availability. In practice, this approach would leave large amounts of airfield capacity unused because a significantly higher capacity could be achieved during the better weather conditions under which Visual Flight Rules (VFR) apply. According to data from DOT, less than 1 percent of air traffic operations at Reagan National from November 2005 to November 2006 were delayed because of weather conditions. Assuming capacity under IFR conditions, airport officials raised two issues that would limit growth at the airport. The first issue is the potential return of general aviation flights. Airport official said the absence of general aviation flights helped the airport to absorb the additional slots that were authorized under AIR-21 and Vision 100. After September 2001, DHS banned general aviation flights around the national capital region. Prior to the September 11 terrorist attacks, the airport handled 40,000 to 50,000 unscheduled aircraft flights including general aviation, annually. Since October 2005, general aviation flights have been allowed to return, but only under very restrictive conditions, resulting in very little activity at Reagan National. According to airport officials, between October 2005 and August 2006, for example, the airport had fewer than 200 general aviation flights. Figure 3 shows the level of flights of all types of aircraft since January 2001. As the figure shows, traffic for all types dropped after September 11, 2001, but commercial traffic (commuter and air carrier) has basically returned to pre-September 11 levels. By contrast, general aviation has not done so. According to airport officials, as a result of the significantly diminished presence of general aviation, some airside capacity remains, but commercial aviation might not be able to use it all. A key reason is that commercial aircraft require the longer main runway for takeoff and landings, while many general aviation aircraft can use the shorter runways for takeoff and landing. The second issue airport officials raised as limiting capacity is infrastructure limitations. These limitations involve several aspects of the airport’s infrastructure. Passenger Loading Gates. According to airport officials, the number of gates affects the ability to add more slots. Every gate at the airport is currently leased to airlines with flights at the airport, known as tenant airlines. Airlines wishing to begin flights at the airport, known as new entrants, can make arrangements with tenant airlines to share a gate, but a tenant airline is not required to share its gate if its schedule does not allow it. A recent analysis by the airport shows that some gates are available during certain parts of the day. For example, during October 2006, some gates were unused during both peak and nonpeak times, primarily those in the older and less desirable terminal A. During the 18-hour operating period, gates in terminal A were unused 46 percent of the time, while gates in terminal B/C were unused 22 percent of the time. Most of the available time periods are during nonpeak hours. Terminal Facilities. Officials said Reagan National has limited capacity to expand terminal facilities such as ticket counters and baggage handling areas due to the lack of space on the airport property. If additional slots are permitted, existing tenant airlines might be able to use their existing facilities more fully, but new entrant airlines may have difficulty obtaining the necessary terminal facilities, especially at peak periods during the day. For the recent slots awarded under AIR-21 and Vision 100, the airports authority has been able to accommodate new entrants with gates and other facilities. However, airport officials said that such accommodation has become increasingly difficult. Officials from Alaska Airlines, one of the newer airlines at Reagan National, told us that its experience in getting the needed facilities has been positive. Parking Facilities. According to airport officials, limited parking at the airport could make it difficult to accommodate additional passengers, resulting from increased slots. Passengers have a variety of ways to access the airport terminal, including rail transit, taxis, shuttle services, and private car. For those who drive their own cars, the airport provides over 7,900 parking spaces. According to airport officials, the parking facility is running at or near capacity with the existing flight schedule. For example, over a 12-month period from November 2005 to October 2006, two of the four parking garages reached capacity 100 days or more. In order to help mitigate some of this pressure, the airport plans to add an additional deck to the current parking structure. This additional parking deck would provide 850 more spaces and is slated for completion in 2010. In two ways, Reagan National’s current capacity under the existing slot limits could be expanded. First, the airport has available slots during certain parts of the day, though they are for less desirable times. Of the total 912 daily slots available for airlines, 834 are currently allocated and approximately 78 slots are unused. Each of these unused slots falls either in the early morning (between 6:00 and 7:00) or in the late evening (between 9:00 and midnight), which suggests that no existing airlines and most likely no new entrants wish to initiate new service with a schedule limited to these hours. According to airport officials, these slots remain unallocated because there is less demand for passenger service during these hours and because noise restrictions after 10 p.m. require quieter aircraft. The second way in which current capacity could be expanded is to reduce the number of smaller commuter planes using slots that are allocated for larger jet planes that carry more passengers. For example, FAA data show that in August 2006, commuter flights used nearly double the slots that were designated for commuter flights (see table 2). For example, on one route, between Raleigh-Durham and Reagan National, DOT data show that in November 2006, two carriers operated an average of 26 daily flights using commuter jets, which have a maximum capacity of 76 seats, although larger jets were designated for the slots used for the commuter flights. FAA and airport officials acknowledged that commuter aircraft often use air carrier slots, but noted that this practice is permissible under federal regulation. Airlines awarded slots for nonstop service between Reagan National and airports beyond the 1,250 mile perimeter have been able to gain a significant market share of traffic for routes. The price they charge for this direct service is generally higher than the price for flights requiring a connection. We did not find evidence that Dulles or BWI traffic or fares were affected by the beyond perimeter flights to Reagan National. For each of the six beyond-perimeter airports, the airlines awarded slots for nonstop service between Reagan National and those airports gained significant market share of passenger traffic over a short period of time. For example, in the Denver market, Frontier Airlines, had no nonstop passenger traffic between Denver and Reagan National before it was awarded two slots (one daily roundtrip) in August 2000 and four additional slots (two more daily roundtrips) in 2004, and it now has garnered nearly 60 percent of the passenger traffic to Reagan National from Denver (see table 3). United Airlines, which was awarded two slots (one daily roundtrip) in the same market in 2004, now has 15 percent of the market. Between Frontier and United Airlines, the two carriers’ nonstop routes have nearly three-fourths of the Denver-Reagan National traffic. Airlines with beyond-perimeter slots generally charge higher fares than are charged for connecting flights to and from Reagan National (see table 4). In half of the cases the nonstop fare was on average $25 to $50 higher than the connecting flight fares to and from Reagan National. Los Angeles is the only market in which the average direct fare is less than the average fare for flights with connections. We did not find evidence that beyond-perimeter flights to and from Reagan National affected flights from the same airports to or from Dulles or BWI. We analyzed fare and passenger data for flights between Dulles and BWI and those airports and for all traffic serving Dulles and BWI. In doing so, we observed that the data did not produce any distinguishable trends or patterns that would indicate that beyond-perimeter slots at Reagan had any effect on fares or passenger levels at either Dulles or BWI. Overall, Dulles has experienced growth in traffic and a decline in fares, while BWI has experienced little overall change in traffic or fares from 1999 to 2005. To assess whether the introduction of new nonstop beyond- perimeter routes into Reagan National affected service between the same six airports and Dulles or BWI, we compared the percentage change in average fares and total passengers, from 1999 through 2005 for travel between each of the six beyond-perimeter airports and Dulles and BWI against the overall percentage change in annual average fares and passengers for all traffic serving Dulles and BWI. As the figures below illustrate, some routes experienced greater or lesser changes relative to overall changes at the airport, but no consistent trends were apparent. Dulles annual airport passenger traffic grew from 1999 to 2005, from 19.7 million to 27 million, a 37 percent increase. We did not find any patterns or trends that would suggest that the changes to the perimeter rule at Reagan National had affected fares or service between Dulles and these six airports. (See figs. 4 and 5). Airports authority officials stated they had no reason to believe that these limited beyond-perimeter awards affected Dulles. Rather, the officials noted, the airport’s fares and passenger traffic were significantly affected by its experience with low-fare carrier, Independence Air, which had a large growth of flights at Dulles but has now gone out of business. For overall passenger traffic between Dulles and the six airports, as figure 4 shows, we did not find evidence that the beyond-perimeter slots at Reagan National affected passenger levels. For example, passenger traffic between Dulles and some airports grew faster than overall airport traffic despite the introduction of nonstop flights to Reagan National. BWI airport passenger traffic grew from 17.4 million in 1999 to 19.7 million in 2005. But, similar to Dulles, we found no patterns or trends in passengers or fares between BWI and the six airports that would suggest that changes to the beyond-perimeter rule at Reagan National had an impact on flights at BWI. (See figs. 6 and 7). Officials from BWI stated that changes to the slot and perimeter rule did not adversely affect BWI and noted other factors, notably US Airways reduction of its commuter service at BWI. We provided copies of this report to DOT and the airports authority. We received comments from the Office of the Deputy Assistant Secretary for Aviation and International Affairs, Department of Transportation. DOT acknowledges that all available slots at Reagan National Airport are not used to maximum effect and agreed that there are a number of reasons for this, including curfew restrictions, the commercial viability of slots in the early morning or late evening under current regulations, and the concentration of the majority of slot holdings among a relatively small number of carriers. DOT also recognizes that the underutilization of slots is exacerbated by the fact that carriers can use commuter aircraft in slots designated for large aircraft but are legally prohibited from using large aircraft in slots designated for commuter aircraft. In addition, other statutory restrictions, such as the perimeter rule, contribute to the underutilization of slots and prevent market forces from producing the maximum public benefit from these scarce assets. For example, the early departure and late arrival times at other airports are often used by airlines to operate overnight “red eye” or other long-haul flights. Regulations governing operations at Reagan National, such as the perimeter rule, prevent carriers from using such scheduling and fleet assignment techniques to maximize the value of slots and facilities at that airport. While we do not disagree with DOT’s observations, we also recognize that any changes in the commuter slot or perimeter rules at Reagan National would have competitive implications for airlines and the communities they serve. Assessing these effects was beyond the scope of our study. Finally, DOT offered technical comments, which we have incorporated as appropriate. The airports authority commented that with one exception the report accurately reflects the situation at Reagan National. While the airports authority believes that the airport can accommodate some additional capacity, it is something less than the 4 slots per hour as suggested by DOT. The airports authority still disagrees with the basis for DOT’s 1995 estimate of 67 slots per hour under the High-Density Rule, just as it did in response to our 1999 report on this matter. The airports authority believes that maximum capacity should be based on IFR conditions, that is, capacity under adverse weather conditions. Instead, DOT bases its estimate of maximum capacity on a mix of IFR and VFR traffic, a methodology that we endorsed in 1999 and still do today. We believe, as does DOT, that balanced capacity is a superior method for determining the airport’s capacity because it accounts for the operation of aircraft during all weather conditions. The airports authority offered technical comments, which we have incorporated as appropriate. The airports authority’s comments, along with our responses to them appear in appendix II. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan on no further distribution until 3 days from the date of this letter. At that time, we will send copies of this report to the Secretary of Transportation and the Administrator of the FAA. We will also make copies available to others upon request. In addition, the report will be available at no charge on the GAO Web site at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4803 or dillinghamg@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Staff who make key contributions to this report are listed in appendix II. To determine how many additional slots Reagan National Airport can accommodate, we analyzed Federal Aviation Administration (FAA) and Metropolitan Washington Airports Authority (airports authority) operational data, reviewed prior capacity studies, and interviewed airports authority, FAA, and Department of Transportation (DOT) officials. This analysis included reviewing data on the number and type of aircraft using the slots and how this usage was dispersed during the day and by which runway. We also reviewed the data contained in the 1995 study done by the DOT on the high-density rule and reviewed the basis for DOT’s capacity estimates. In addition, we analyzed airports authority gate utilization data and airline leases to determine the extent to which gate space at the airport is unused. Finally, we interviewed officials from the DOT, FAA, airports authority and other stakeholders about Reagan National’s current and future capacity. To assess traffic between Washington, D.C., area airports and the six beyond-perimeter airports for which nonstop service to Reagan National was awarded since 1999, we analyzed DOT’s Origin and Destination ticket data; we used these data to examine changes in fares and passenger levels between Reagan National, Dulles International (Dulles) and Baltimore- Washington Thurgood Marshall International Airport (BWI), and these airports. We also interviewed airports authority and BWI officials. For this analysis, we conducted a historical look at traffic between the six airports and the three Washington-Baltimore area airports. We obtained the ticket data from BACK Aviation Solutions, a private contractor that provides these data to interested parties. We used these data to examine trends in passenger and fares to identify any changes in traffic and fares between the six beyond-perimeter airports and Reagan National, Dulles and BWI airports. To assess the reliability of these data, we reviewed the quality control procedures applied to these data, and subsequently determined that the data were sufficiently reliable for our purposes. We conducted our review from July 2006 through February 2007 in accordance with generally accepted government auditing standards. The following is GAO’s comment on the Metropolitan Washington Airports Authority’s (airports authority) February 1, 2007, letter. We believe, as does DOT, that “balanced capacity” is a more appropriate method for determining an airport’s capacity than the method suggested by the airports authority. While the airports authority contends that Instrument Flight Rules (IFR) should be used to measure capacity, DOT’s Technical Supplement No. 3 to its 1995 report points out that IFR airfield capacity is indicative of the lowest level of available capacity, and thus virtually ensures constant availability of an airfield. In practice, this approach would leave large amounts of airfield capacity unused because a significantly higher capacity could be achieved during the better weather conditions under which Visual Flight Rules apply. According to data from FAA, less than 1 percent of all air traffic operations at Reagan National from November 2005 to November 2006 were delayed because of weather conditions. Because setting the number of slots on the basis of balanced capacity reflects both bad and good weather conditions, we did not revise our report. In addition to the individual named above, Ed Laughlin, Assistant Director; Paul Aussendorf; Jay Cherlow; Dave Hooper; Nick Nadarski; Josh Ormond; and Stan Stenersen made key contributions to this report.

Summary: In 1999, GAO reported that Reagan National Airport could accommodate at least 36 more slots, which are authorizations from the Department of Transportation (DOT) for a takeoff or landing. In 2000 and 2003, two federal statutes, known as AIR-21 and Vision 100, permitted DOT to award 44 new slots to airlines, 24 of which could be used for flights to cities more than 1,250 miles, which was the statutorily mandated limit for non stop flights from Reagan National. The DOT awards went to airlines serving six cities (Denver, Las Vegas, Los Angeles, Phoenix, Salt Lake City, and Seattle). For this year's reauthorization of the Federal Aviation Administration (FAA), GAO was asked for an update on the capacity of Reagan National to accommodate additional slots and the effect of relaxing the perimeter rule. GAO updated its 1999 study to answer these key questions: (1) To what extent can Reagan National accommodate additional flights? (2) Since AIR-21 and Vision 100, what changes have occurred in market share and fares for flights operating between the six beyond-perimeter cities and the three Washington, D.C., area airports? In commenting on this report, DOT and the airports authority generally agree with our findings but with one exception, the airports authority disagrees with DOT's estimate of slots because it disputes their methodological assumptions. We believe the department's methodology for estimating airport capacity is appropriate. Reagan National Airport can accommodate some additional in capacity, but airport infrastructure constrains how much can be added. FAA officials believe that some additional slots can be added, while airport officials have not made an estimate. FAA, using the results of a 1995 DOT capacity study, determined that the airport's airside infrastructure (e.g., runways) could accommodate four additional slots per hour. Airport officials said they were unsure how many additional slots, if any, the airport could accommodate but cited several factors that could limit the airport's capacity to absorb additional slots including the limited number of gates currently available for loading airplanes and other infrastructure constraints. GAO's work shows that even if the number of slots is not increased, there is some opportunity to expand current capacity by filling unused slots and increasing the size of aircraft on existing slots to increase the number of flights and the number of passengers served. Currently, nearly 80 slots are unused because they are at early morning or late evening times and airlines have not applied to use these time slots. In addition, many of the slots reserved for large passenger jets are currently being used by smaller regional jets. Airlines awarded slots for direct flights between Reagan National and the six beyond-perimeter cities gained significant market share in those selected cities, but the effect of these slots on competing flights operating between these cities and the other Washington, D.C. area airports is not evident. For each of the six beyond-perimeter cities, the direct flights to and from Reagan National captured the majority of passengers flying between that city and Reagan National. In most cases, the airlines charged higher fares than competing connecting flights. GAO did not find evidence in passengers or fare data that would indicate that the new service between Reagan National and the six beyond perimeter cities had substantially affected service from Dulles or Baltimore-Washington International airports to these cities.