FOR YOUR INFORMATION............................NOVEMBER 18, 1991
                      FTC STAFF ADVISE FAA:
              DATA EXAMINED DO NOT SUGGEST CHANGING
CURRENT MARKET-BASED SYSTEM FOR ALLOCATING AIRPORT LANDING SLOTS
                        AT FOUR AIRPORTS
     Federal Trade Commission staff today advised the Federal
Aviation Administration (FAA) that a study using FAA data from
May and June 1990 on the usage of landing slots at four high-
density traffic airports -- Chicago's O'Hare, Washington's
National, and New York's LaGuardia and Kennedy airports -- does
not suggest that changing the current market-based system for
allocating and transferring the slots will necessarily result in 
an increase of slot usage at those airports.  The staff's views
were submitted in response to a September 1991 notice in which
the FAA requested comments on several proposed changes to the
current slot allocation and transfer system at the four airports. 
The staff study deals only with these airports, and does not
consist of any findings that can be applied to other airports.
     A "slot" is the right to take off and land during a speci-
fied period of time during the day.  Slots were first defined at
the four airports in 1968 to deal with excess demand and noise
problems.  Current regulations allow slot holders to sell, trade
or lease their slots, after a prescribed miniminum period of
usage, and permit slots to be held by any party meeting certain
FAA qualifications.  The regulations also require that slots be
used at least 65 percent of the time over a two-month period --
slots not meeting this requirement are withdrawn by the FAA.  The
FAA holds lotteries to distribute slots that have been voluntar-
ily transferred back to it, or are otherwise not currently
allocated.
                            - more -
FAA Slot Allocation--11/18/91)
     The proposed changes would modify the percentage of time
carriers are required to use their slots to 90 percent, based on
weekday usage; require the air carrier to operate for two years
before selling slots obtained through the lottery; alter the
definition of new-entrant or "limited incumbent" carriers who can
participate in the lotteries; and alter the role of large car-
riers in the lotteries.  According to the FAA, the proposed
changes are designed to encourage competition by making margin-
ally-used slots available to new entrants or limited participants
in the airline markets at the four airports.
     According to the FTC staff comments, available FAA data on
the pattern of slot use in May and June 1990 under the current,
market-based slot-transfer system do not support two possible
theories of anticompetitive effects at the four airports.  Thus,
the findings do not suggest that the proposed changes to the
existing slot allocation and transfer rules will necessarily
increase slot usage.  The staff offered three principal findings,
based on the examined data:
1)  First, the data indicate that a comparison of slot-usage
rates by carriers does not suggest that carriers with a rela-
tively large share of the slots at a high-density traffic airport
hoarded their slots or used them at a lower rate than carriers
with smaller shares.  "In general," staff said, "the data from
the period studied do not support the anticompetitive theories
about carriers' patterns of slot holding and usage." 
2)  According to the examined data, most carriers, on average,
already used their slots as much as would be required under the
proposed amendments and, thus, the higher requirement may only
affect a few slots.  "But because carriers with more slots and
operations may enjoy greater flexibility in allocating flights
among slots and rearranging schedules to ensure their slots meet
the minimum 'use or lose' standard, the [proposed change] could
have a greater effect on the carriers with fewer slots," staff
said. 
3)  The vast majority of slots allocated in the 1986 lottery were
traded or sold within two years, the staff said, adding that
almost all the carriers that received slots in that lottery have
exited the industry by virtue of mergers or bankruptcy.  The
staff concludes that, in the absence of market power, imposing
significant delays or other restrictions on slot transfers may
impede the efficient reallocation of slots from lower to higher-
valued uses.  The staff also suggests that a more efficient
manner of encouraging high slot use might be to disqualify air
carriers from participating in slot lotteries in the future if
they sell lottery slots too quickly.
FAA Slot Allocation--11/18/91)
     These comments represent the views of the staff of the FTC's
Bureau of Economics, and not the Commission or any individual
Commissioner.
     Copies of the staff's comments are available from the FTC's
Public Reference Branch, Room 130, 6th Street and Pennsylvania
Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY 202-326-
2502.
                              # # #
MEDIA CONTACT:      Bonnie Jansen, Office of Public Affairs
                    202-326-2161
STAFF CONTACT:      Bruce Kobayashi, Bureau of Economics
                    202-326-3363
(faaslots)