Carriers May Sue U.S. Over Slot Swap Ruling | AVIATION WEEK


One of [Delta/LCC] primary arguments was that the law only gives the FAA the authority to promote the safe and efficient use of airspace, not to assess and address impacts on competition. Another, as argued by Delta, US Airways and Continental, is that the conditions would violate the U.S. Constitution’s Fifth Amendment protection against the government taking private property (slots) for public use without “just compensation.”
On the latter, the FAA continues to argue, as it and the U.S. Transportation Department have done before, that the slots are an “operating privilege,” not a property right. In any case, it argues, the FAA is not “taking” the slots, but instead “regulating the ability of the petitioning carrier to transfer slot interests in a manner that results in unreasonable industry concentration.”
On the former, the FAA rejects the argument that is must confine itself to safety issues. FAA regulations, it asserts, require the applicants to also address why their request “would be in the public interest, that is, how it would benefit the public as a whole.”


Lawsuit Raises Slot Ownership Issue | AVIATION WEEK
The FAA’s conditions for approval of the slot swap between Delta Air Lines and US Airways would deprive the carriers of their constitutional protection against the government taking property for public use without “just compensation,” the airlines argued in a court filing Aug. 9.
The argument was one of several made in the “statement of issues” the carriers filed with the U.S. Court of Appeals for the District of Columbia Circuit (case number 10-1153). Raising the issue could compel the court to clarify whether slots are airline or government property, which has been a point of contention for years and has important government policy and airline business implications. Slot ownership, for example, was a key point of contention in 2007, 2008 and 2009 when the FAA and U.S. Transportation Department (DOT) proposed, and ultimately abandoned, a plan to auction off slots at the three major New York metropolitan area airports.
Under the slot swap agreement signed by Delta and US Airways last August, Delta would transfer 42 of its slot pairs at Reagan Washington National Airport to US Airways; in turn, US Airways would transfer 125 and lease 15 of its New York LaGuardia Airport pairs to Delta.
The FAA approved the plan, but—citing competition concerns—but with conditions: Delta would have to agree to sell 14 of the 42 National slot pairs to U.S. or Canadian carriers with less than 5% market share at the airport, and US Airways would have to do the same with 20 of the LaGuardia slot pairs.
Under the FAA conditions, the slots would have to be sold in a blind auction to the highest bidders among the airlines qualified to make bids. Any slots not purchased in the auction would revert to the FAA, not the carriers.
During that FAA proceeding, however, Delta and US Airways agued they cannot obtain “just compensation” if the bidding is limited to certain carriers, and if those carriers know they can low-ball bids because Delta and US Airways stand to lose the slots.
The FAA countered that the slots are an “operating privilege” provided to carriers—not their “property.” It also argued it would not be “taking” the slots, but instead “regulating the ability of the petitioning carrier to transfer slot interests in a manner that results in unreasonable industry concentration.”
All of those arguments are likely to be repeated as the lawsuit proceeds.
Delta and US Airways are challenging the slot swap conditions on more than constitutional grounds.
The carriers also argue in the lawsuit—as they did during the FAA proceeding—that Congress did not give FAA the authority to consider the effects on competition of a waiver of the government’s temporary ban on the transfer of slots at LaGuardia. Nor did Congress grant that authority to the DOT for the review of asset transfers, instead leaving it to the Justice Department (DOJ) to consider the competitive impact, they say.
Delta and US Airways also argue that the FAA is improperly placing conditions on slot transfers at National, although the airlines only needed a waiver for slot transfers at LaGuardia. FAA regulations allow slots to be transferred freely at National, subject only to DOJ antitrust review and possible court challenge under the Clayton Act, the carriers say.
The airlines also argue that the FAA insisted upon the slot divestiture condition even though the slot swap would improve service and benefit consumers.
Delta and US Airways might not be facing off solely against the FAA and DOT in this case. On July 30, Southwest Airlines filed for court permission to intervene in support of the FAA and DOT. Southwest told the court that the FAA and DOT consented to the motion, but Delta and US Airways did not.
Southwest says it has a “significant and unique interest in the outcome of this proceeding” because it has long sought LaGuardia and National slots and the proposed slot auction could enable to expand its “minimal presence” at LaGuardia and start service at National.
Southwest argues its interests in the case are not “adequately represented” by the FAA and DOT because Southwest “is concerned with its own economic and competitive interests,” while the government’s obligation is to “ensure that the broader public interest is vindicated regardless of the impact on individual parties.”