Overview: Airport Congestion Management Concepts

Regional Airport Planning CommitteeApril 27, 2007

Oakland, California

AIRPORTS COUNCIL INTERNATIONALNorth America

1775 K Street, NW, Suite 500Washington, DC 20006

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Discussion Topics

• Framework for thinking about congestion management

• Who plays what role?

• What are the tools available?

• What are the experiences and lessons learned?

• Some observations in the context of other presenters

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Understanding the Playing Field

Administrative and Regulatory Approaches

“Market-based” Approaches

Federal Government

•Slots – DCA, LGA, ORD, JFK•Slot “Offspring” – ORD,

LGA•Lottery-oriented solutions•Conceptual discussions

about aircraft size minimums

• No federal authority since deregulation

• LGA auctions or fees run by FAA

– would be experiment– authority sought in FAA

reauthorization

Local Airport Operator

• Local limits – Long Beach, White Plains

• Concepts for minimum aircraft size

• “Up-gauging” incentive concepts

• Lease-based incentives – Possible PANYNJ route for LGA

• Regionalism solutions

• Minimum landing fees – various airports

• Auction and peak hour concepts floated by the PANYNJ in 2001 - LGA

• PACE program and the environmentally driven peak period pricing concept not yet activated – BOS

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How to Implement?

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How - Administrative and Regulatory

Who - Federal Role and Limitations

• FAA has historically leaned toward administrative/regulatory solutions

– No FAA authority from Congress to impose fees

– Whatever federal agencies may have had was lessened by the Airline Deregulation Act

– Slots under the HDR fell out of favor...Slot “offspring” emerge

• FAA has some authority by virtue of the charge to run ATC efficiently – FAA has not really been challenged here

– When FAA has sought administrative authority to manage congestion it has been granted to some extent

– Often the measures are implemented as “short-term fixes”

• ORD “transitional” program effective?

– The measurements of effectiveness are usually incomplete

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How - Administrative and Regulatory

Who - Airport Perspective

• Airline Deregulation Act limits airports too, although differently than federal agencies

• Airport Noise and Capacity Act of 1990 (“ANCA”) explicitly seeks to minimize or eliminate airport access “restrictions”

– Part 161 for noise purposes only?

– Part 161 path is not an easy or obvious one

• No doubt that an airport has a very high burden of proof both in taking action and in explaining why the proposed solution is acceptable

– Catch-22 problem: If the FAA has not initiated corrective action for congestion and is responsible for “efficiently” running ATC, how can FAA find that an airport is acting reasonably ?

• May be a “programmed failure” approach in the absence of FAA asking the airport to act

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How - Administrative and Regulatory

Who - PANYNJ’s Concept for LaGuardia ManagementA New Path?

1. Finite capacity - Universal agreement that LGA is congested and there is no material capacity enhancing alternative

2. Regionalism has been and continues to be actively pursued – Perimeter rule, G.A. designated airports, JFK marketing and growth, ground access to less congested airports (e.g., AirTrain), airport acquisition (Stewart)

3. FAA limitations - Seems unlikely FAA will move forward on its NPRM that would give FAA control of LGA access terms, and legislation giving FAA new authority seems a limited probability

4. “Clear” Authority - Airports have more legal control over the leasing of facilities than airfield access regulations

Concept - The PANYNJ is considering a concept under which a lease obligation would include certain operation performance factors that manage congestion

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How - “Market-Based”

Starting Point for Airport Fees: Rate-Setting vs. “Pricing”

1. Use of “pricing” to allocate aeronautical resources or to manage congestion is rare

2. Airport fees are generally established as cost-recovery rates

3. Airport fees are analogous to public utility rates (e.g., electricity), but without any time-of-day differentials

4. U.S. DOT has become a “reactive regulator” of airport fees over the years

5. U.S. DOT has not clearly endorsed concepts generating revenue in excess of “historical cost”

– Various concerns about “revenue positive” solutions

– Inherent limitation on effectiveness of “revenue neutral” solutions

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How - “Market-Based”

Baseline Landing Fees in Context

• Fees are based on aircraft size, in particular the gross weight of an aircraft

• Weight-based fees are a product of evolution

– Today, weight-based fees are supported from an “ability to pay” perspective

• The range of payments among users is enormous

– For example, between a commuter aircraft and a wide-body aircraft a fifteen-fold difference is common

• There is generally no difference between peak, off-peak, or nighttime fees

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How - “Market-Based”

Two General Approaches

1. Set the price at a level to produce the desired results

• Generally referred to as “peak pricing” or “congestion pricing”

• Minimum fees are the most simplified version of this

• Massport has been down this path twice for Logan International Airport

2. Define the results sought and use an auction to determine allocation of supply

• Lots of non-airport experience in auctions

• Given “segmented authority”, would appear to require the cooperation of both FAA and an airport on many fronts

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Massport’s PACE Program - Goals

Delay Reduction - Customer service and environmental drivers

Aircraft Size - Encourage the use of larger aircraft

Hubbing - Minimize Logan’s traditional role as a New England connecting hub to reduce local impacts

Regionalism – Hanscom, MHT, PVD, ORH

Aircarrier

Com-muter

G.A.

Logan’s Traffic Mix

PACE “shifted” the fee schedule, but did not have time-of-day variations in Phase 1

Phase 1 was “revenue neutral”

Phase 2 never happened

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Massport’s PACE Program - Results

• Limited experiment—Program was in place for only 6 months.

• Demand effects—In line with estimates

– General aviation: 30 - 50% of traffic eliminated

– Commuter/regional: roughly 10% reduction in traffic

• Flights reduced in “saturated” routes

• Few flights eliminated in peak periods

– Air carriers: no changes, as expected

• Delay reduction—Results confirmed that small reductions in demand produce large decreases in delays

• Regional effects—Not determined in short period of implementation

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Logan Demand Management Over a Decade Later

Prospective Peak Fees

• Adoption of a “Demand Management Plan” was a condition of environmental permits for a new runway

• Key feature of the plan is a “revenue neutral” peak hour fee

• The actual levying of the fees is triggered by traffic levels, which have not yet been achieved

– Post 9/11 downturn

– Regionalism success story

– Key airlines in Chapter 11

• Well conceived monitoring and early warning programs

• Untested in terms of effectiveness and “longevity” in the context of revenue neutrality

• Small community issues unresolved

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Why is Congestion Pricing Appealing?

Part 1

• The traditional weight-based fee approach to landing fees:

– Contradicts most experiences in society

– Pretends that resources are not scarce

– Cannot be explained, except by historical accident

Part 2

• Limited congestion pricing experience makes it often perceived as a panacea

• Complexities are often ignored regarding:

– Establishing a defensible pricing model

– Modeling and quantifying the potential benefits

– Estimating the potential negative effects of peak-spreading

– Addressing regional and corporate economic impacts

– Administrative and legal challenges

– Recognizing the relative costs of aircraft operations

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Congestion Pricing Not for LGA?

The PANYNJ is “by-passing” congestion pricing, with good reason…

• Constraint of “revenue neutrality” makes little sense:

– The “peak hour” is all day

– Demand may be greater than any other airport

• Ample evidence that an unconstrained LGA would be unmanageable

• Complexities of establishing the “price” in a changing and reacting market are overwhelming

• No solution offered for smallest communities

• Perceived effects on ticket prices and airline finances

• User support appears to be zero

• Concerns about public perception, especially in regard to volume of “positive” revenue generated for this method to approach effectiveness

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• No one-size fits all

• LaGuardia is different – Probably has limited “portability”

• Massport’s prospective approach for Logan has merit, but may prove insufficient as currently defined

• Ultimately, a mix of administrative and market-based tools would be needed

• Effectiveness means solutions cannot be “pain free”

• FAA participation/cooperation is essential with current uncertainties

• A federally authorized pilot program is the best way to cut through the complexities and test what works and what does not

Observations for Today’s Program