May 25, 2010

Congestion Management Rule for John F. Kennedy International Airport and Newark Liberty National Airport

Proposed Rule
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Additional details
Agency
Department of Transportation
Regulatory Identification Number
2120-AJ28
Agency Name
Department of Transportation
Rule Publication Date
05/21/2008

RULE SUMMARY

The rule caps flights at both airports and auctions some landing slots at each.

METHODOLOGY

There are twelve criteria within our evaluation within three broad categories: Openness, Analysis and Use. For each criterion, the evaluators assign a score ranging from 0 (no useful content) to 5 (comprehensive analysis with potential best practices). Thus, each analysis has the opportunity to earn between 0 and 60 points.

Criterion Score

Openness

1. How easily were the RIA , the proposed rule, and any supplementary materials found online?
The RIA is in the NPRM, which can be found from the DOT home page via 5 intuitive clicks to the FAA home page, FAA recent rulemaking documents, and a search page for older rulemaking documents. It is also available on regulations.gov.
5/5
2. How verifiable are the data used in the analysis?
The RIA shows benefits and costs for both auctions and capacity caps. However, it just lists the results and a few of the assumptions without specifying where most of the data came from or how the calculations were performed.
1/5
3. How verifiable are the models and assumptions used in the analysis?
A few assumptions are presented and sourced. But since models and calculations are not explained or shown, the reader cannot verify them.
2/5
4. Was the analysis comprehensible to an informed layperson?
Results—benefits and costs, including reductions in delay—are presented. The reader can somewhat understand that the results are related to reductions in delays and better allocation of slots, but the RIA does not do a good job of explaining how it achieved the reported results.
2/5

Analysis

5. How well does the analysis identify the desired outcomes and demonstrate that the regulation will achieve them?
2/5
Does the analysis clearly identify ultimate outcomes that affect citizens’ quality of life?
The analysis identifies reduction in flight delays, more efficient allocation of slots, and increased competition.
4/5
Does the analysis identify how these outcomes are to be measured?
Reduction in delay is measured. Benefits are monetized, but the RIA does not explain what the dollar values mean. Minimal value of reallocation is calculated. The effect on competition is not explicitly measured.
2/5
Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes?
The cap reduces delays by reducing flight operations. Auctions allocate slots to airlines that value them most highly. These are asserted but not really explained.
2/5
Does the analysis present credible empirical support for the theory?
Historical discussion suggests caps will reduce delays. Little empirical information is presented on the effects of auctions; vast literature on auctions in other contexts could have been cited.
2/5
Does the analysis adequately assess uncertainty about the outcomes?
Unexplained ranges are presented for benefits of auctions.
1/5
6. How well does the analysis identify and demonstrate the existence of a market failure or other systemic problem the regulation is supposed to solve?
2/5
Does the analysis identify a market failure or other systemic problem?
The RIA claims airlines schedule flights beyond optimal level, but doesn’t explain why. A weak secondary market is explained as a result of vague property rights in slots.
3/5
Does the analysis outline a coherent and testable theory that explains why the problem (associated with the outcome above) is systemic rather than anecdotal?
Motivation for scheduling excessive flights is not explained well, but explanation for weak secondary market is insightful.
3/5
Does the analysis present credible empirical support for the theory?
Delays at JFK have increased as operations have increased. Delay at Newark has increased despite a 3 percent reduction in operations, and carriers have planned to add more flights. Carriers want to schedule more flights at peak times than the peak capacity. Delays at JFK cascade into delays at other airports in the region and nationally, and the RIA cites a major study of this. But there is no explanation of why this delay is sub-optimal.
2/5
Does the analysis adequately assess uncertainty about the existence or size of the problem?
The analysis does not address this topic.
0/5
7. How well does the analysis assess the effectiveness of alternative approaches?
3/5
Does the analysis enumerate other alternatives to address the problem?
There are four options: no action, caps, or caps plus two different auction scenarios for JFK.
5/5
Is the range of alternatives considered narrow (e.g., some exemptions to a regulation) or broad (e.g., performance-based regulation vs. command and control, market mechanisms, nonbinding guidance, information disclosure, addressing any government failures that caused the original problem)?
Alternatives cover a decent range: status quo, caps without auctions, and caps with auctions.
4/5
Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved?
One could infer different benefits from the different options, but the results are presented in a way that makes this difficult. Separate benefit figures are asserted for caps and auctions, with no explanation of whether or how one could combine them.
1/5
Does the analysis adequately address the baseline? That is, what the state of the world is likely to be in the absence of federal intervention not just now but in the future?
The baseline is an estimate of airline operations with no caps. The calculation for this is not very well documented.
1/5
8. How well does the analysis assess costs and benefits?
1/5
Does the analysis identify and quantify incremental costs of all alternatives considered?
Cannot tell, because the RIA simply presents results.
1/5
Does the analysis identify all expenditures likely to arise as a result of the regulation?
The analysis claims principal expenditures will be cost of auctions.
3/5
Does the analysis identify how the regulation would likely affect the prices of goods and services?
The analysis does not address this topic.
0/5
Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation?
The RIA claims it nets out lost consumer surplus from reduced number of flights.
1/5
If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis?
The analysis does not address this topic.
0/5
Does the analysis identify the alternative that maximizes net benefits?
One could infer from the information presented that caps plus the auction options maximize net benefits, but the RIA does not explicitly say this.
2/5
Does the analysis identify the cost-effectiveness of each alternative considered?
No, but it could be calculated from the information in the RIA.
1/5
Does the analysis identify all parties who would bear costs and assess the incidence of costs?
The analysis lists people affected by the regulation and calculates reduced delay, but incidence of costs is not discussed. Costs of auctions would be financed from auction proceeds.
1/5
Does the analysis identify all parties who would receive benefits and assess the incidence of benefits?
The RIA lists affected parties. It mentions that under one auction option, carriers owning slots would retain proceeds; under the other, proceeds would be used to expand capacity. But it does not assess which option creates higher net benefits.
1/5

Use

9. Does the proposed rule or the RIA present evidence that the agency used the analysis?
The rule appears to be seeking to maximize net benefits by choosing an auction option, but it is not clear if the RIA drove this decision or if DOT decided to adopt the auction model before doing the RIA.
3/5
10. Did the agency maximize net benefits or explain why it chose another alternative?
DOT seeks comment on two auction options, both of which would produce net benefits exceeding those that stem from merely capping operations.
4/5
11. Does the proposed rule establish measures and goals that can be used to track the regulation's results in the future?
Preamble explicitly states that the rule will terminate in 2019 to allow for re-evaluation. Topics for reevaluation include whether a cap is still needed, whether changes in allocation are needed, and the distribution of slots and effects on entry. Neither the rule nor the RIA explicitly set out measures or quantitative goals for these results.
2/5
12. Did the agency indicate what data it will use to assess the regulation's performance in the future and establish provisions for doing so?
Language implies that DOT will examine delays and competition. Effects of regulation on delays and on efficiency of slot allocation could be measured ex post using methods in the analysis. DOT did not specifically say how it would measure effects on competition.
3/5
Total 30 / 60