Overview: Airport Congestion Management Concepts Regional Airport Planning Committee April 27, 2007 Oakland, California AIRPORTS COUNCIL INTERNATIONAL North America 1775 K Street, NW, Suite 500 Washington, DC 20006

2 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

3 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 LGA PACE program and the environmentally driven peak period pricing concept not yet activated – BOS Who Implements? How to Implement?

4 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

5 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

6 How - Administrative and Regulatory Who - PANYNJ’s Concept for LaGuardia Management A 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

7 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

8 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

9 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

10 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 Air carrier 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

11 Massport’s PACE Program - Results Limited experiment—Program was in place for only 6 months. Demand effects—In line with estimates –General aviation: % 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

12 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

13 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

14 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

15 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