The Government Accountability Office declared late Tuesday that FAA does not have the legal authority to auction slots, a decision welcomed by the airlines and the Port Authority of New York and New Jersey, but disputed by the U.S. Transportation Dept.

"We conclude that FAA currently lacks the authority to auction arrival and departure slots, and thus also lacks authority retain and use auction proceeds," the GAO report said. "FAA lacks a legal basis to go forward with the Newark auction or any other auction."

FAA argued that slots are intangible property that it owns and may lease. The GAO disputes this claim. "An examination of [applicable] statutes read as a whole, however, makes clear that Congress was using the term 'property' to refer to traditional forms of property... It was not referring to FAA's regulatory authority to assign airspace slots, no matter how valuable those slots may be in the hands of the regulated community." GAO says related case law confirms its conclusion.

DOT immediately responded. "Given the very limited amount of time Congress gave GAO to do their analysis as well as GAO's relative unfamiliarity with the complexities of aviation law, today's opinion was not unforeseen."

"However, should Congress give the agency an opportunity to conduct a more thorough review, we are confident that GAO will better understand both the validity and the effectiveness of our approach," DOT said.

The Air Transport Association and Continental, the largest carrier at Newark, applauded the GAO decision. "The GAO confirmed that FAA has no legal authority to proceed with slot auctions... The FAA is obligated to follow the law and should do so," a Continental spokesman said.

"We applaud the GAO and remain firmly committed to continuing to work with airlines, elected officials and passenger advocates to stop the DOT and FAA's proposal," the port authority said.

House Transportation Committee Chair James Oberstar (D-Minn.), one of the lawmakers who requested the report, said FAA should now reconsider its plan to auction slots, in light of the GAO finding.

Earlier in the day, FAA's Office of Dispute Resolution for Acquisition lifted its stay on the slot auction at Newark. The auction was originally scheduled for Sept. 3, but ODRA stayed the auction pending legal challenges.

New York La Guardia photo; Joseph Pries