DOT Issues Recommendations for Reducing Delays

(MoneyWatch)  I know, we've heard this one before. Once again, the DOT has issued a few changes to try and help reduce delays and generally make traveling better. Most of them are snoozers - not anything new or exciting but rather firming up of old proposals. But there is one in particular that has drawn a good deal of outrage -- slot auctions. First, let's start with a description from the DOT.

. . . all airlines operating at Newark and JFK would be given up to 20 slots a day for the 10-year life of the rule. The proposal offers two options for JFK. Under the first, 10 percent of the airline's slots above the 20-slot baseline would be made available via an auction. The revenue from those auctions would then be invested in congestion and capacity improvements in the region.

Under the second option for JFK, the airlines would auction 20 percent of slots above the 20-slot baseline and keep all of the proceeds. The Secretary noted that, depending on the option, between 91 and 179 slots would be affected out of 1,245 total slots at the airport.

The proposal also calls for auctioning 10 percent of slots at Newark Airport above the baseline annually for the first five years of the rule. As a result, only 96 slots out of a total of 1,219 slots at the airport would be auctioned over the 10-year span of the proposal.

Ok, this one is a mouthful. In short, a handful of total slots at each airport will be auctioned off to, I assume, the highest bidder. These are slots that airlines currently use, and the government has decided to take them away from those airlines and open them up for bidding by others.

Why would they want to do that? Well, to allow for increased competition. They have this crazy idea that opening up these slots will draw a ton of low cost carriers into the airport and make fares low for all. Not so fast there, DOT.

Now, I don't know how the mechanics of this proposal are going to work, but I have to assume that it's a standard auction. The highest bidder gets the slots. The airlines that already hold slots are going to want to keep them, but some can afford to pay more than others. At a place like Newark, you have to think that Continental can pay the most because they have a larger loyal local base as well as a hub to fill those flights.

So, what will we end up seeing? In the end we'll probably see airlines like Continental bid high for Newark slots so they can keep the ones they have now and possibly even gain some more. The low cost carriers? Well, there's a reason they're low cost. They probably won't be able to afford the price of entry. Even if they can (I'm looking at you, Southwest), I can't imagine that they'd WANT to pay that much for a handful of slots. No matter who ends up winning the auction, I'd be surprised to see tremendous downward fare pressure. The cost of operating these slots will be much higher than before, I'd assume, so fares will have to support that.

And how exactly does this help congestion? It's still the same number of slots they'd have without the auction, but they say the proceeds from the auctions will go back into reducing congestion. Yeah, I'll believe it when I see it.