Aviation and Airport Development Law : Aviation Lawyer & Attorney : Chevalier Allen & Lichman Law Firm : Airport Development, Environmental Law

On March 18, 2009, the U.S. House Subcommittee on Aviation held a hearing entitled "Air Traffic Control Modernization and the Next Generation Air Transportation System:  Near-Term Achievable Goals."  The Subcommittee and the FAA are placing much of their hopes and dreams on the viability and success of NextGen and Air Traffic Control Modernization.  In opening comments, it seemed that if ATC Modernization and NextGen are fully implemented all of the current ills of the FAA will be resolved and world peace will be achieved:  safety will be improved, delays will be diminished, air traffic controllers will be able to handle more operations more quickly and more efficiently, pilots will be able to fly better, and, oh, it is good for the environment, too.  While, only being a tad sarcastic, it seems that many dreams have been placed on NexGen's shoulders.

There can be no doubt that NextGen is needed.  All of the technical witnesses testified that ATC modernization and NextGen are absolutely critical to maintaining the U.S.'s airspace.  Captain Rory Kay, Executive Air Safety Chairman of ALPA, stated that:

NextGen has the potential to revolutionize the National Airspace System and our air transportation system . . . Forecasted increases in air traffic of two to three times today's traffic cannot be met in today's NAS.

So what are the problems?  First and foremost, it is a question of funding. As former FAA Administrator Marion Blakey stated, in testimony as President and CEO of Aerospace Industries Association:

Much of what is needed for NextGen falls under the category of "new starts" which, as you well know, are prohibited under funding extensions. A large number of FAA NextGen pre-implementation issues - including development and acquisition decisions, have been adversely affected.

Now that FAA Reauthorization has been put on the back burner with the passage of yet another continuing resolution, do not look for these new NextGen projects to see the light of day any time soon.

Another issue is human resources.  NextGen represents a fundamental shift in the responsibilities and practices of pilots and air traffic controllers.  As Patrick Forrey, President of National Air Traffic Controllers Association, stated:

Under the proposed system, air traffic control would shift to what the FAA is euphemistically referring to as "Trajectory Management."  Essentially, air traffic controllers would discontinue active air traffic control and shift instead to air traffic monitoring and route management.  This could have serious implications for the safety of the NAS.

NATCA worries that "air traffic managers" would rely heavily on an automated system and not how to handle an emergency situation should the automated system go down.

For the airlines and general aviation, the problem with NextGen is the "equipage."  NextGen relies on up-to-date technology not only on the ground, but on the aircraft.  In the early 2000's, for example, American Airlines retrofitted its fleet to install the Controller Pilot Data Link Communication system only to have FAA abandon its efforts in 2004.  Airlines probably will be reluctant to equip their fleets until the FAA is able to effectively address the legitimate concern that the technology is good investment.  And that is difficult to do when the funding for the programs to develop the technology is not in place and has not been in place for the past 2 years.

All this assumes that the FAA has in place the management infrastructure to effectively manage and implement NextGen.  Although the GAO pulled ATC Modernization off of its "High-Risk" list, NextGen, as soon as its implementation begins will land on the list.  The GAO has found that the JPDO and ATO have made progress in planning for and developing NextGen, but much is left to do.  As Calvin Scovel, the Department of Transportation Inspector General pointed out, the FAA needs to :

(1) establish[ ] priorities and Agency commitments with stakeholders and reflecting them in budget and plans; (2) manage[ ] NextGen initiatives as portfolios and establish[ ] clear lines of responsibility, authority, accountability; (3) acquire[ ] the necessary skill mix for managing and executing NextGen; and (4) examine[ ] what can reasonably be implemented in given time increments.

Transportation and Infrastructure Committee Chairman James Oberstar (D-Minn.) stated that this was a "foundational" hearing on a topic of importance.  While Congress debates FAA Reauthorization, NextGen and ATC Modernization must move forward.

Lists of Hearing Witnesses and Links to their written testimonies can be found by clicking on the "Continue Reading" link.

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The U.S. Court of Appeals for the District of Columbia Circuit granted a stay of the slot auctions that were scheduled to take place on January 12, 2009, pending arguments on whether the FAA has the legal authority to auction the slots.

Although the court's order does not go into any details as to why it is granting the Motion for Stay beyond stating that the Petitioners "have satisfied the stringent standards required for a stay pending court review," this is a significant victory for the Petitioners.  First, in order to obtain a stay one must show, among other things, "irreparable injury" and "likelihood of success on the merits."  This standard is a high one that is rarely surmounted.  Thus, it is an indication that the court is looking favorably upon the Petitioners' case.

Second, it pushes the date for the first slot auctions beyond the change of administrations.  The opponents of the slot auctions fervently hope that the Obama Administration will be more receptive to their pleas that slots auctions will not solve the problems at the New York/New Jersey airports.  With the change of administrations, there is hope among the opponents of the slot auctions that "a new, workable plan to reduce flight delays and give New York's airspace and airports the upgrade they need and deserve."

Petitioners' statements regarding the court's ruling:

• Port Authority of New York and New Jersey
• Air Transport Association of America

Neither the Department of Transportation nor the FAA have any press release or statement on their websites regarding the court's ruling.  However, the wire services and newspapers are reporting that Sarah Echols, a spokeswoman for the Department of Transportation, said:  "Today's court decision is bad news for travelers seeking a better flying experience in and out of the New York region.  We are committed to our goal of protecting travelers, giving passengers more options and improving the air travel experience, and will continue to assess our options to provide relief."

Previous blog posts regarding slot auctions:

• FAA Proposes Congestion Management Rule for JFK and Newark (May 21, 2008)
• FAA Issues Order Limiting Scheduled Operations at Newark Liberty (May 21, 2008)
• FAA Suspends Auction of Flight Slots at Newark (August 29, 2008)
• GAO Declares that the FAA Does Not Have Legal Authority to Auction Slots (October 1, 2008)
• Despite GAO Ruling FAA Issues Congestion Management Rules for JFK, LaGuardia and Newark (October 12, 2008)
• Legal Analysis of FAA's Slot Auction Rule for JFK and Newark, Part 1 (October 26, 2008)
• Legal Analysis of FAA's Slot Auction Rule for JFK and Newark, Part 2 (October 28, 2008)

Other news articles:

• The New York Times, Court Order Delays Auction of Landing Slots at Airports
• Business Week, Court blocks FAA plan to auction NYC-area slots
• The Dallas Morning News, Court blocks auction of NY airport slots
• The Associated Press, Court blocks FAA auction of airport slots
• The Wall Street Journal, Court Blocks Plan to Auction Landing Slots at New York Airports

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Analysis of Legal Issues Regarding Slot Auctions, Part Two.

Having established previously that the FAA does not have specific authority to lease or otherwise dispose of slots, FAA turns to its general power to dispose of property in order to justify its auctioning of the slots.  Under 49 U.S.C. 106 FAA is authorized to:

acquire, construct, improve, repair, operate, and maintain . . . real and personal property . . . and to lease to others such real and personal property . . .” as well as to enter into “such contracts, leases, cooperative agreements, or other transactions as may be necessary to carry out the functions of FAA.

49 U.S.C. 106(l).  In addition 49 U.S.C. 40110 authorizes FAA “[to] dispose of an interest in property for adequate compensation . . .”  Thus, the FAA theorizes, if a slot is “property,” then by virtue of these three provisions it has all the authority it needs to dispose of the “property.”  

Leaving aside the statutory construction arguments that the FAA’s property disposition authority does not extend to such evanescent and intangible property rights as “slots,” the real legal question comes down to this:  Are slots a property right owned by the FAA?  

The controversy turns an interpretation of Cleveland v. United States, 531 U.S. 12 (2000), which was mentioned in the GAO Legal Opinion, IATA’s comments and ATA’s comments.  Cleveland stands for the proposition that the government’s regulatory powers to issue licenses to do something which otherwise would not be permitted does not create a property right for the government.  It only becomes a property right to the licensee after the issuance of the license.  In Cleveland, Louisiana claimed that licenses it issued to run video poker devices were its “property.”  The U.S. Supreme Court saw it a little differently:

Without doubt, Louisiana has a substantial economic stake in the video poker industry.  The State collects an upfront “processing fee” for each new license application . . ., a separate “processing fee” for each renewal application . . ., an “annual fee” from each device owner . . ., an additional “device operation” fee . . ., and, most importantly, a fixed percentage of net revenue from each video poker device . . . It is hardly evident, however, why these tolls should make video poker licenses “property” in the hands of the State.  The State receives the lion share of its expected revenue not while the licenses remain in its own hands, but only after they have been issued to licensees.  Licenses pre-issuance do not generate an ongoing stream of revenue.  At most, they entitle the State to collect a processing fee from applicants for new licenses.  Were an entitlement of this order sufficient to establish a state property right, one could scarcely avoid the conclusion that States have property rights in any license or permit requiring an up front fee, including drivers’ licenses, medical licenses, and fishing and hunting licenses.  Such licenses, as the Government itself concedes, are “purely regulatory.”

531 U.S. at 22. In other words, absent a statutory provision, so long as the “property” (the license in Cleveland) is the product of the Government’s regulatory power, or its police powers, it is not property while it is in the Government’s hands.  In this case, it would seem, based on Cleveland, that since the FAA derives its authority to assign slots from its regulatory authority over “navigable airspace,” slots are not property rights in the hands of the FAA.

FAA attempts to get around Cleveland by asserting that “Section 40110(a)(2) does not speak to whether the FAA actually owns property that is being disposed of.  It only speaks to the disposal of a property interest.  Only the FAA has authority to assign the use of navigable airspace under section 40103.”  73 Fed.Reg. at 60549.  The FAA concludes that even though the property right is created “at the time of transference” of the slot, it still falls within its property disposition power under 40110(a)(2) since it is “disposing of” a “property right.”  This however, ignores the fact that the FAA has no property interest to “dispose of,” and that in assigning slots it carrying out its regulatory duties with respect to the airspace.

Similar to the FAA, in Cleveland, Louisiana tried to compare its interest in video poker licenses to a patent holder’s interest in a patent that she has not yet licensed.  The court rejected that argument:

Louisiana does not conduct gaming operations itself, it does not hold video poker licenses to reserve that prerogative, and it does not “sell” video poker licenses in the ordinary commercial sense.  Furthermore, while a patent holder may sell her patent . . ., the State may not sell its licensing authority.  Instead of patent holder’s interest in an unlicensed patent, the better analogy is to the Federal Government’s interest in an unissued patent.  That interest, like the State’s interest in licensing video poker operations, surely implicates the Government’s role as sovereign, not as property holder.

531 U.S. at 23-24.  In other words, if it is not a property right until after it is sold or licensed, you do not have a “property right” to “dispose of.”  The FAA’s assigning use of navigable airspace “implicates the Government’s role as sovereign, not as property holder.”  Thus, it seems that since the Supreme Court has spoken on this issue, the FAA will be hard pressed to successfully argue that it can auction slots by virtue of its property disposition authority.

Next Post: Even if slots are FAA property, does the FAA violate the IOAA by accepting money for them?

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Pt. 1: Setting The Stage

When the FAA adopted its slot auction rules for LaGuardia, JFK  and Newark Airports, it did so despite the fact that the GAO had issued a legal opinion stating that it believed that the FAA did not have a legal basis to conduct auctions of slots at the airports. 

Needless to say, the FAA's decision brought some criticism from Congress.  Rep. James Oberstar (D-Minn.) and Rep. Patty Murray (D-Wash.) sent a letter to the FAA Inspector General, Hon. Calvin Scovel, requesting that he look into the matter and assess whether the FAA's actions were "potential willful violations of the Purpose Statute [31 U.S.C. 1301(a)] and the Antideficiency Act [31 U.S.C. 1341(a)(1)(A)]." 

The stakes got higher when, on October 10, 2008, the Port Authority of New York and New Jersey filed a Petition for Review in the U.S. Court of Appeals for the District of Columbia.  That Petition was followed on October 14, 2008, by similar Petitions for Review filed by the International Air Transport Association and the Air Transport Association of America.  All of the Petitions for Review were consolidated by the Court on October 27, 2008.

There seems to be agreement among all of the parties that the FAA has the regulatory authority to impose caps on hourly arrival and departure slots based on its authority under 49 U.S.C. 40103(b)(1) and (2), which allows the FAA to "ensure efficient use of the airspace."  The issue that separates the FAA from GAO, IATA, ATA and PANYNJ is whether the FAA may raise funds in connection with its assignment of slots through a slot auction, imposing a user fee, assessing a tax, or by some other mechanism.

In analyzing this fundamental disagreement some consensus emerges.  It is agreed that Congress has granted FAA explicit statutory authority to collect fees in several different situations, but that FAA has no explicit authority to impose fees related to the assignment of slots.  Indeed, the FAA has long sought such explicit authorization from Congress, which Congress has not yet granted.  See, e.g., 71 Fed.Reg. 51362 (Aug. 29, 2006) ( ". . . the FAA currently does not have the statutory authority to assess market-clearing charges for a landing or departure authorization").  It is FAA's efforts to get around the fact that it lacks explicit authority that is at the heart of the matter.

In order to claim authority to collect funds in connection with its assignment of slots, FAA makes two connected arguments.  First, FAA claims that a "slot" is an "intangible" form of property that it may lease pursuant to its "property disposition" power granted to it by Congress under 49 U.S.C. 106(l)(6) and (n) and 40110(a)(2).  Second, since the slot is a property right being leased, it is not an "user fee" or "tax."  Therefore, it is not subject to the Independent Offices Appropriations Act (IOAA), 31 U.S.C. 9701 et seq.  The opposing parties have claimed that the FAA is wrong on both counts.

Next Post:  Analysis of FAA's claims that it possesses a property interest in slots at airports.

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The GAO, in a legal opinion issued September 30, 2008, declared that "FAA currently lacks the authority to auction arrival and departure slots, and thus also lacks authority to retain and use auction proceeds."  This legal opinion came as a result of a Congressional request.

In April and May, 2008, the FAA issued proposed regulations to conduct auctions of the airport arrival and departure slots at LaGuardia, JFK and Newark airports. (See, FAA Proposes Congestion Management Rule for JFK and Newark Liberty).  Since then, the FAA indicated in August that that it was proceeding with an auction of two specific slots at Newark airport on September 3, 2008.  Although that action was administratively stayed (See, FAA Suspends Auction of Flight Slot at Newark Airport), the stay (issued by the FAA's Office of Dispute Resolution for Acquisition) was subsequently lifted on September 30, 2008.  Moreover, the FAA, on September 16, 2008, announced that it "may" auction slots at Newark, LaGuardia and JFK starting on January 12, 2009.

The FAA claimed that the slots are "intangible property" that it "constructs, owns, and may lease" for "adequate compensation under 49 U.S.C. 106(l)(6) and (n) and 40110(a)(2).  The GAO stated:

An examination of those 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.  Related case law confirms our conclusion.

The GAO concluded that if the auctions were to go ahead, and the FAA retained the proceeds that the the GAO "would raise exceptions under its account settlement authority for violations of the 'purpose statute,' 31 U.S.C. 1301(a), and the Antideficiency Act, 31 U.S.C. 1341(a)(1)(A)."

Needless to say the Department of Transportation was not too pleased with the outcome, stating that the GAO did not have time to do a thorough review given the "complexities of aviation law."  If the GAO had the opportunity to reflect, the DOT was "confident that GAO will better understand both the validity and the effectiveness of [the FAA's] approach."

On the other side of the fence, both the Air Transport Association and the Port Authority of New York and New Jersey issued press releases applauded the GAO's legal opinion.  Rep. James Oberstar (D-Minn.), the Chairman of the U.S. House Transportation and Infrastructure Committee, said in a press release that the "FAA should now reconsider its plan to auction slots in light of the GAO finding."

(For my commentary on the situation, see the blog post The "Tragedy of the Commons" and Airport Congestion Management)

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It is being reported by several news outlets that the FAA has suspended its auction of flight slots at Newark Airport.  The auction was slated for September 3, 2008.  According to Bloomberg News the Order, issued by FAA Chief Counsel, Kerry Long, stated that "[t]he protesters have demonstrated compelling reasons to maintain the status quo'' pending a study of their objections. 

This is just the latest in a series of events that all relate to the FAA's redesign of the airspace in the New Yor, New Jersey and Philadelphia area.  It began with the Airspace Redesign decision last September, continued through the "congestion management" rules for JFK and Newark as well as  for LaGuardia, and on the "written re-evaluation" of those rules that the FAA tied back to the Airspace Redesign.

The Order was in response to a Protest filed five major airlines, Northwest, Delta, Continental, US Air, and United, along with the Air Transport Association (ATA) with the FAA's Office of Dispute Resolution for Acquisition. Click here for the New York Times article.  Click here for the Forbes article.

The Air Transport Association issued the following statement in response to Chief Counsel Long's Order:

We are pleased that the FAA Office of Dispute Resolution Acquisition has granted our request for suspension of the September 3 auction of two slots at Newark airport and fully expect that the process will result in a determination that FAA lacks the legal authority to conduct the auction.

The Air Transport Association had previously, on August 11, 2008, filed a Petition for Review in the D.C. Circuit asking the court to overturn the FAA's decision to hold slot auctions for Newark.

Secretary of Transportation Mary Peters issued a statement through her spokeman, Brian Turmail, indicating that "[t]oday's disappointing delay means travelers will have to wait a little longer for relief from the high fares, stagnant service and limited competition."  However, the FAA "remain[s] highly confident of a speedy and favorable ruling in this matter.''

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