Airport Landing Slots: Barriers to Entry and Impediments to Competition

Abstract

Rationing scarce resources has never been an easy task. In a market system, resources are allocated to their highest valued use based upon the law of supply and demand - consumers bid for goods they want through the pricing system; producers promptly provide them to those bidding highest. In contrast, public resources, particularly infrastructure built by government for public use, typically are rationed by government. At many congested airports, where demand arguably exceeds capacity, governments have divided runway utilization into time-defined segments known as slots. A slot is the right to take off or land an aircraft at an airport - in effect, a 'reservation' for takeoffs and landings. By the end of the 1990s, more than 130 airports around the world were slot controlled. In the United States, four major US airports are slot-constrained by federal decree - Chicago O'Hare, Washington National, and New York LaGuardia and Kennedy. A number of others (such as John Wayne Orange County Airport, California) are slot controlled by local airport proprietors, usually for purposes of reducing noise.Landing slots are similar to gates in the sense that both carry with them the economic equivalent of an operating certificate. Without a slot and a gate, an airline cannot operate. Where there is a finite number of such gates or slots, their value lies, in part, in their ability to create, on the one hand, or circumscribe, on the other, competition. Therein lies the rub. Deregulation was supposed to eliminate operating certificates as barriers to entry.Yet slots and gates are today's equivalent of operating certificates. The ability to hoard landing slots and gates translates into the opportunity to erect barriers to entry and monopolize markets.