This is what the WASG says. In practice, in most places in the world, slot allocation is the establishment of a property right/license to the airlines.

I'm not sure I fully understand. Can you expand on this? Why is this an important distinction? How is this different from assigning usage?

The WASG is written as if a slot is a revocable license to use a resource, but in practice, airlines treat it as a property right. It's essentially taking something that's owned by the public (airport capacity), divided up, and given to airlines for free, and then they are usually allowed to monetize it.

Unclear what is meant here. An airport can be declared L2 or L3 for runway ("ATC slots") or terminal constraints.Is this meant to distinguish the IATA seasonal slot coordination process from the practice of day-to-day takeoffs and landings, for example, in ground delay programs?

Yes, I plan on writing another piece on ATC (day-to-day actual takeoffs and landings). I made the distinction here in case people get confused when they search up slots on their own. I will remove this line for now.(Do let me know if there is a better term to reference the actual day-to-day operations, if not ATC slots.)

The confusing part is that in most countries, the ANSP is the slot coordinator - so one could argue that in those countries, all slots are ATC slots. I think that it would be more accurate to say that there are two types of slot controls: one for terminals, gates, or other ground-based constraints, and one for runway capacity. Then, there is an entirely different kind of "slot," which isn't a slot at all, and refers to (usually) a landing time when an airport is in a ground delay program. For what it's worth, I don't see this confusion much in the news. I see much more confusion about airlines being forced to divest "slots" at Level 1 and Level 2 airports. What they often mean to say is that they are required to divest gates or other resources, or stop flying on a certain route for a certain number of years. This misunderstanding was often repeated when Alaska bought Virgin, claiming that Virgin was going to have to "give up slots" at SFO - an airport that doesn't have slots.

ANSPs.

Interesting. Am I understanding this correctly: Level 3 airport (e.g. JFK) does capacity analysis (idk what the terminology is), and then ANSP (FAA in the US?) comes in, verifies capacity analysis, and announces to airlines? Or is everything capacity-/slot-related at a Level 3 airport completed by the FAA, and the airport itself doesn't get much say?

JFK is really weird because each terminal is owned/operated by a different company. FAA manages the runway slots, but each terminal (T1, T4, and possibly T8) have their own coordinators for gate/terminal slots. Runway capacity is exclusively FAA domain, although they are supposed to coordinate with airports.

Having been to many of these, they are not arguments. It's more like playing 4D chess because things are shifting at both airports and within the airline's network.

Love that analogy. I can only imagine that there’s so many factors involved. Can you paint a picture of roughly what percentage of the initial slot allocation changes at the conference? Once a slot changes hands from airline A to B, do the grandfathering rights in the next season apply to B and not A?

At a very busy airport, I would say that the requested times often need to change by 10-15 minutes to "make things fit." Then, there are cases where everything is full but the airline is looking at a new flight and might have 2 or 3 options they're studying. In the olden days, the conference was 10 days long because a lot was being done by hand. Even moving a departure 10 minutes earlier might have meant that the airline would miss a key connection at a hub, so then they'd have to check to see if they could retime the other flight, etc. Today, it's all computerized so it goes a lot faster. I don't recall how historics work after a transfer, but I'm guessing that they continue to apply as if the service were continuously operated by one airline - or else they would have less value.

changed to "runway": This is easier to comprehend. Building a new terminal may or may not change declared capacity - in the US, it's usually a level of service issue since our terminal sizes usually don't constrain, for example, our CBP capabilities.

Aviation in the U.S. was fully regulated by the Civil Aeronautics Board (CAB) from 1940 until deregulation in 1978. The CAB regulated frequency and price for all U.S. airports with interstate flights.

Oof! Thanks for catching that. I assume “airlines could come and go as they pleased” is also incorrect. Would you say aviation is less regulated now than the CAB era?

Yes, unequivocally. In the US, airlines no longer need to ask permission to change service levels, price, etc. Internationally, many countries, including the entire EU, have Open Skies agreements which allow airlines to start international service without seeking government permission first (other than CBP landing rights, which can't be unduly withheld). Only safety is still regulated, by the FAA.

This was not unintentional. It's called work to rule, and it's a negotiation tactic.

Interesting. So it was more like: “Hey, if we actually followed your safety rules, delays would worsen because we’re underfunded and understaffed. So fund and staff us ty.” Unrelated but curious: Was PATCO successful in advocating for their needs?

At the time, yes. Congress agreed to add staff and allow PATCO to collect dues.

The HDR was never fully repealed and remains on the books as 14 CFR part 94.123.

I read that “The HDR's applicability to JFK operations terminated as of January 1, 2007”. I can't seem to find CFR part 94.123, only 91.123 that doesn't seem to include HDR. I am probably missing something though! Let me know if there's a source I can read up on. This is my source:

Typo - 93.123. The rule was changed significantly but never completely repealed. Probably close enough for your purposes.

This isn't why LGA doesn't use IATA - it's simply because there is no need for worldwide coordination.

I see, is it correct to say that this is because slot allocation is for worldwide coordination and not used for domestic flight planning? And ANSPs are concerned mainly with international flight planning and not domestic? and Level 2 vs Level 3 airports are determined in the context of mainly international use and not domestic?

FAA does care about domestic activity, but there's really no reason to take LGA and DCA through the international slot process when they're wholly domestic airlines. They do essentially follow the IATA rules as a guideline, though. It's just a matter of choice on FAA's part. The US is an outlier because our domestic market is so huge and so deregulated, and we historically haven't bothered with the IATA process for our congested airports. Even an airport like FLL would be Level 3 in most of Europe, when you look at its level of activity. Therefore, I would say that the FAA in general is more interested in other means of capacity management, and since we're the largest domestic market in the world, it biases the sample so that it looks like the IATA process is mostly an international operation thing. Contrast that with Europe, where the countries are small and so most activity has always been international.

While private from the beginning, the entire U.S. airline system was subsidized by the government through air mail contracts. In other parts of the world, airlines were government-owned corporations from the beginning - or at the very least, operated under government charter.

Good point. Unrelated, but TIL Delta started in the crop dusting business! haha

Demand for air travel grew as a result of a growing middle class combined with improving economics (cheaper fares) enabled by larger aircraft and newer technology. I'm not sure that there is a direct line between state ownership and demand - except, for example, those mail routes.

This wasn't a function of ownership - US airlines were never state-owned. It was a function of the CAB needing to approve every route, and its policy being to protect against destructive competition. To wit, once the CAB was disbanded in 1978, many airlines were founded and went bankrupt due to destructive competition. American invented the hub in 1982. The old guard was upended. Pan Am and TWA - who were forbidden by the CAB from having strong domestic networks because it was believed they would outcompete the Americans and Easterns - essentially collapsing together a decade later. The industry arguably has taken until now to find its equilibrium.

That makes sense - upon more research, it does seem like WASG was written more as a helping hand for airlines, and, as you suggested, doesn’t have direct causal ties with public/private dynamics.

This is not true in industries with high barriers to entry.

Makes sense. I stated this coming from a purely theoretical standpoint, but obviously as with any statistical problem, reality is messier. Can you expand more on the reasoning behind why this is not true?

Successful auction environments depend on open markets with few concentration effects. When you have a closed market with high barriers to entry, the pricing signals break down. Think of the value to Continental in getting one more slot pair at EWR when it was Level 3. They get to exert more monopoly influence, which means that they can put pay virtually any other bidder. The consumer loses because the monopoly power means higher prices and less choice. The exception would be an agent which doesn't care about price at all. Think ME3 carrier - they have no obligation to turn a profit on the slot because their entire aviation business is a loss leader for their country. In theory, regulations solve this - but that's a process entirely outside of an auction. If the auction were the only mechanism, there would be perverse and anticompetitive outcomes.

(re: incorporating other factors into a total bid) Why? Wouldn't this simply exacerbate the incumbency issue because of the massive economy of scale benefits which would come through buying your way into a fortress hub?

That logic makes sense. From an online advertising standpoint (albeit a very different problem), this is addressed with proper weights and normalization (e.g. considering their existing market share, representing a given airline's potential good or potential harm would have on passengers/airports etc.). Aka it should be possible to develop a formula that can make sure that money isn't the main factor, and that all other factors can matter however much the regulators want them to matter.

Rhetorically, then what's the point of the auction? What you're suggesting is a classic anarchocapitalist concept, that if only every single externality were priced properly, the market would work perfectly. As above, this still doesn't apply to monopolists or those who are intrinsically insensitive to price.

This is not true. Airports in the U.S. are owned by the public and therefore their interest is the public interest. Airports in the rest of the world are often privately operated, and so their interest is in maximizing value to their shareholders.

Huh! Why do you think that’s the case? Would you say that private-owned is better when it comes to resource allocation because of fairness, or is it the opposite, where public welfare gets zero representation and is harmed in the process? Or I guess, is that the basis of the debate (assuming there is one)? I'm curious about the effects, direct and indirect, that public- vs private-owned causes, and what approach makes more sense.

My point is that airports and airlines do not have aligned incentives unless they share ownership. For example, in the US, public airports are required to serve all traffic, and to have operating and fee rules which encourage competition. If, say, Pan Am owned an airport, and if the government did not have a regulatory interest, it would be incentivized to keep out new entrants, attack competition, and fly as little as possible (because flying is expensive!). It's not a matter of which is better, but only the government has the public interest in mind.

That's an interesting way of putting it. I wonder why the US seems to have more of the public's interest in mind when it comes to aviation compared to other countries.

SFO has never participated in a "slot auction," and to my knowledge, none has taken place in modern times. It appears that this is referring to a public comment that a private company submitted on a request for public comment.

I see, I definitely misinterpreted that source. Do you happen to know if this has any factual footing/if Heathrow will actually have an auction? source

It's hard to tell what's going on with Heathrow. With the Starmer government, I would doubt it.

I believe that this undervalues the amount of innovation which has occurred over the last 10-15 years. The original system was constructed in an era of heavy regulation and relatively few open skies agreements, which meant that most international air service was the direct result of bilateral negotiation. Further, many airlines outside of the U.S. were state-owned, or were essentially granted a state monopoly on international flying ("flag carriers"). The original IATA system was born into this world. Essentially, ANSP coordinators (governments) were negotiating with government-controlled airlines on scheduling. There was no explicit role for airports in this process. WASG reform in the early 2010s modified, among other things, the makeup of the WASB, to add airports to the table formally - even if not necessarily as a coequal participant. There were also reforms in capacity declaration and how airports could/should move up or down the levels. It also underestimates that the fundamental reason why innovation is so difficult is because the existing procedure is set up by and for airlines, and essentially confers a valuable property right. Airlines have even taken out loans against their slot portfolios.

Wondering about the connection between these developments to slot reform? SSTs, if they can become commercialized, have the opportunity to induce new travel because of time savings, and that could exacerbate congestion. But changing block times and shifting around slots as a result is a relatively normal process - for example, the B787 (known as "Sonic Cruiser" during its development) cruises so much faster than the 777s and A330s that it sometimes replaces that airlines have needed to move slot times around to accommodate it. And some routes are even only enabled by the 787's speed, since it means that a certain flight might be able to hit a connecting bank. Slow, fixed-wing electric aircraft could present a capacity problem because if they need to fit into the mix at a large airport, that airport's capacity will be reduced due to wake turbulence. This is the same problem with turboprops mixing with A380s - you lose substantial efficiency because the TP can't follow the 380. The crux of the article to this point is an explanation of the slot process, why it's inefficient, and a couple of thoughts on how slots could be reallocated more efficiently. Is the point that these new technologies will require new entrants? If so, why? United has "ordered" Boom aircraft, for instance.

Hm, great point. There are three assumptions that led to my conclusion. 1) New tech makes room for new entrants who use the new tech as an entry point. But with the incredibly high barriers in aviation (i.e. its hard to start an airline even with fairer slot allocation), this assumption might not be too relevant, as you’ve stated. 2) The current process is anticompetitive, which hinders innovation in general. Aka a reformed process / increased competition is good to push incumbents into adopting new tech to differentiate themselves, whether new entrants embody new tech or not. 3) Unrelated to new entrants, airports represent consumers (better than airlines can) and have the power to lead clean aviation initiatives. In the context of clean aviation, when consumers start demanding sustainable flying (or if airports themselves prioritize that), airports can reflect that in various aspects, slot allocation included (this is probably overly simplistic, but some incentive program like you get to use these slots if you use SAF). For my blog pieces, I'd like them to focus on facts to help readers understand a) what's going on in a topic, b) why things are the way they are, and c) what the future of this area. I haven't written pieces explaining fast/clean aviation just yet, so my opinion at the end is meant to be kind of a teaser for what's to come. But do let me know if you think it has loopholes or invalid. Love the point on wake turbulence. Will definitely expand on that in future pieces.

I see where you're coming from - and it's your show - but I still see this as a stretch. Arguably the most innovative company in recent U.S. history was AT&T during the monopoly era, when Bell Labs essentially invented the technology needed for the 21st century to exist in the way it does. Ditto (pun partially intended) Xerox PARC, which existed in a monopoly - although not a government monopoly like Ma Bell. Other bleeding edge innovation often comes directly from government - examples include the space race and the basic scientific research that only governments provide. One could (and some do) make the reverse argument of the one that you are making: only under a very stable competitive environment or monopoly can a firm afford to innovate, because the risks are reduced. Whereas in a very competitive market, the emphasis is on mimicry and marginal gains in efficiency. This is arguably the state of aviation play post-consolidation: we had a few decades where airlines threw everything at the wall, the entire industry ate itself, and now you have four majors which are indistinguishable from each other and a bunch of LCCs and ULCCs which are either in a state of collapse or exist almost solely to serve as a sort of Megabus of the sky. Now - is the Megabus of the sky an innovation? And what would happen if they were unleashed - would we open up another round of destructive competition? I would also argue that government fiat - the ultimate will of the people - is much more effective at driving certain types of innovation, especially around public goods. Look at France banning flights on routes where a comparable HSR link exists. No amount of competition or slot liberalization would ever lead to that conclusion - or if it did, it would happen almost by accident and following the same destructive competition pattern I describe above (easyJet comes in and adds a bunch of Paris-Nice flights, Air France competes, the flights are massively wasteful and unprofitable but they end up competing on frequency, and then a regulator pops in and says, "stop that! I'm going to do something [price, ban, etc.] which forces you to stop competing with each other in this manner that's causing a menace to the public good."

Just to simplify it - is it easier for United to buy a hydrogen aircraft and replace a CRJ-200 with it, or for a new airline to start from scratch and buy a brand-new plane (with whose money, I'm not sure, because no one is going to lend money to a new airline to buy a new plane)?

I do agree that a monopolistic market would be beneficial for innovation in aviation. I guess it really just depends on the nature of the industry. Big tech is the exact opposite due to low costs in development for averagely innovative tech, so I’d say that my previous opinion was rooted in that. Government intervention/monetary support is also much needed as you said in scaling innovation that create societal benefits, as we see with SAF where risks are just too high. I do wonder what other factors make a monopolistic market more favorable than a competitive one (besides high costs, long development timelines and public safety concerns).I’ll remove this part for now to not dilute the content. Interesting to think about.