Armed with a novel legal idea--that FAA owns slots--the U.S. Transportation Dept. said Friday it wants to attack congestion in the New York air space with a package of flight caps and slot auctions, instantly drawing the ire of the airline industry and the Port Authority of New York and New Jersey.

DOT is planning to cap flights at Newark to 83 flights per hour until at least through October of next year and is proposing slot auctions at Newark and New York Kennedy, Secretary Mary Peters said today.

Incumbent airlines at Newark would get 20 slots a day, with 10% of the slots over that baseline available for auction during the five-year life of the rule. Airlines could bid on their own slots, and the proceeds of the auction would go toward New York air space improvements, Peters said.

The department is proposing two options for JFK. One, similar to Newark's, would take 10% of the slots above the baseline 20 for auction, plowing the proceeds back into the New York air space. The second option would make airlines auction 20% of the slots above the baseline but would allow carriers to keep the proceeds.

Flight caps alone would drive fares up and prevent new entrants from serving the market, Peters said. This proposal "strikes a balance" between incumbents, which have invested heavily in the airports, and new entrants, which want greater access, she told AVIATION WEEK. The competition spurred by auctions and new entrants will ultimately drive fares down.

Anticipating airline reaction to the proposal, D.J. Gribbin, DOT general counsel, told AVIATION WEEK that FAA has the legal authority to auction slots because the slots are intangible FAA property granted to airports. In other words, with the new proposal, FAA is essentially leasing the slots to carriers for 10 years. "Carriers have no authority or legal property interest in the slots," Gribbin said.

The airline industry shot back, calling the proposal ill-conceived and unlawful. "We must work to expand, not limit, capacity," said James May, ATA president. "Our members and their passengers are frustrated by the DOT's continued fixation on auctions, despite the overwhelming rejection by passengers, airlines and airports to such an experiment."

Slots are the property right of airlines, and any "attempt to take away that property would require due process and just compensation," said Douglas Lavin, IATA regional vice president for North America. "There is no legal authority that airline slots are the property of the government," Lavin said.

ATA, IATA and the Port Authority called on DOT to focus on air traffic modernization to boost capacity rather than on limiting it through caps and auctions. The Port Authority called the plan "poorly conceived" and vowed to "work with airlines to examine our options for prohibiting the federal government from implementing this auction plan."

Newark Liberty Airport photo: 'Floflo' via Wikipedia