EvidEncE that airport pricing Works

• w w w . r e a s o n . o r g introduction This paper describes the results of research that analyzed mechanisms for reducing congestion and delays at LaGuardia Airport (LGA) in New York. The findings should be equally applicable to any similarly congested airport such as John F Kennedy (JFK), Newark International (EWR) or Chicago O’Hare (ORD). Slot allocation has historically been limited at LGA by a High Density Rule (HDR) first employed in1968. Thus, airlines were provided with “slots” (rights to takeoff and land), with a use-it-or-lose it rule that returned slots to a pool for reallocation if the slots were not used 80 percent of the time. Since 1985 operators have been able to trade slots in a secondary market of sorts, but few have been sold other than during bankruptcy proceedings. In 2004, The NEXTOR universities were requested by the Federal Aviation Administration (FAA) and the U.S. Department of Transportation (DOT) to design and conduct a series of government-industry strategic simulations (“strategic games”) to help the government evaluate policy options for airport congestion management. We were directed to evaluate alternative allocation approaches for LGA, since the HDR rule was legislated to be removed by January 2007. (In fact, LGA is now operating under an interim continuation of slot controls.) George Mason University (GMU) and the University of Maryland (UMD) undertook the task of leading this research effort. UC Berkeley, MIT, Harvard, and GRA, Inc. played major roles in the design and analysis of the two games. The first took place on Nov. 3-5, 2004 and the second on Feb. 24-25, 2005. The purpose of the games was to test a range of government policy options designed to reduce the expected congestion that was likely to result from the expected expiration of the HDR on January 1, 2007. While a central issue in this research project was the replacement of the slot lottery (the “slottery”) and HDR at LGA, it was recognized that the policies being tested could have potential applicability to a number of U.S. airports that are operating at or close to their maximum operating limits. Conventional economic wisdom suggests that market-based mechanisms such as congestion pricing and auctions are efficient in allocating scarce resources. Both options charge higher fees for peak periods than for off-peak periods, discouraging low-value flights EvidEncE that airport pricing Works