oversight

Reagan National Airport: Capacity to Handle Additional Flights and Impact on Other Area Airports

Published by the Government Accountability Office on 1999-09-17.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                  United States General Accounting Office

GAO               Report to the Secretary of
                  Transportation



September 1999
                  REAGAN NATIONAL
                  AIRPORT
                  Capacity to Handle
                  Additional Flights and
                  Impact on Other Area
                  Airports




GAO/RCED-99-234
      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Resources, Community, and
      Economic Development Division

      B-282375

      September 17, 1999

      The Honorable Rodney Slater
      Secretary of Transportation

      Dear Mr. Secretary:

      Over two decades ago, the Congress deregulated the airline industry,
      phasing out the federal government’s control over fares and service and
      allowing market forces to determine the price, quantity, and quality of
      domestic air service. As we have reported,1 fares have declined and
      service has improved overall since deregulation, but deregulation’s
      benefits have not been evenly distributed throughout the United States.
      Furthermore, the federal high-density rule, which controls the number of
      takeoffs and landings that may occur each day within hourly time periods,
      and perimeter rules, which limit the distance of nonstop flights that can
      serve an airport, have created barriers to entry for new airlines wishing to
      begin service and for established airlines seeking to serve new markets,
      and can influence competition. Ronald Reagan Washington National
      Airport (Reagan National) is subject to both types of rules. To take off or
      land during any given hour at Reagan National, an airline must first obtain
      a “slot,” which is an authorization from the federal government to do so.
      In addition, under current restrictions, no airline may operate a nonstop
      flight that exceeds 1,250 miles to or from the airport.

      Several legislative proposals currently before the Congress address these
      slot and perimeter restrictions by allowing additional flights at Reagan
      National. However, questions have been raised about the impact of adding
      flights and extending the perimeter at Reagan National on the operations
      at the other two airports in the Washington, D.C., metropolitan
      area—Washington Dulles International (Dulles) and Baltimore/Washington
      International (BWI).

      To examine the potential impact of these proposals on Dulles and BWI, we
      (1) described the most prominent proposals that would allow an increased
      number of takeoffs and landings at Reagan National and create
      exemptions to the perimeter rule, (2) examined the extent to which
      Reagan National could safely accommodate more takeoffs and landings,
      and (3) analyzed whether adding flights at Reagan National to and from
      destinations beyond the current perimeter would cause passengers to shift
      their travel from Dulles or BWI.

      1
       See list of related GAO products at the end of this report.



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                   This study did not evaluate the potential congestion and noise that could
                   result from an increase in operations at Reagan National.2 Ultimately, as it
                   has done previously in changing the rules governing operations at Reagan
                   National, the Congress must balance the benefits that additional flights
                   may bring to the traveling public against the local community’s concerns
                   about the effect of those flights on noise, the environment, and the area’s
                   other two major airports.


                   To improve the access that various communities have to Washington, D.C.,
Results in Brief   and to increase competition in some of those markets, three major
                   legislative proposals introduced during 1999 would provide exemptions to
                   the number of commercial jet flights allowed at Reagan National. Current
                   law permits 37 jet flights per hour. The proposals would add between 6
                   and 36 jet flights per day. In addition, two of the proposals would permit
                   flights to destinations beyond the existing 1,250-mile perimeter. These two
                   bills also contain provisions that would require reviews of whether the
                   additional flights affect noise, safety, and the environment around Reagan
                   National.

                   According to an analysis by the Department of Transportation (DOT),
                   Reagan National could accommodate up to seven additional flights per
                   hour without compromising safety. Above that number, Reagan National’s
                   infrastructure—such as its gates and runways—begins to limit the number
                   of takeoffs and landings, increasing flight delays. Airport officials
                   acknowledge that Reagan National could handle additional hourly flights
                   without incurring significant delays, but they believe the number of flights
                   to be less than seven per hour. Thus, DOT and airport officials agree that
                   Reagan National could accommodate 36 new jet flights per day, as
                   proposed in one bill. Moreover, DOT has some flexibility to allow airlines to
                   operate flights in slots that are currently available but unused by
                   effectively moving the slots to times that are more compatible with
                   commercial interests and consumer demand.

                   According to our analysis of the impact of four new airlines on
                   competition among the area’s airports, adding nonstop flights from Reagan
                   National to destinations beyond the existing 1,250-mile perimeter, as
                   proposed in the Congress, would likely cause only a limited number of
                   passengers to switch from BWI or Dulles to Reagan National. While we did

                   2
                    GAO has separate reviews under way examining noise and environmental issues related to airport
                   operations. These include broad reviews of the Federal Aviation Administration’s noise mitigation
                   programs and responsibilities, the effect of airport operations on the environment, and the monitoring
                   and enforcement of noise abatement procedures at Reagan National.



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             not directly estimate the demand for nonstop travel between Reagan
             National and destinations outside the perimeter, our analysis indicates that
             many travelers currently using BWI or Dulles for travel beyond the
             perimeter are likely to continue to prefer them because of price or
             convenience and would not switch to Reagan National. That is, business
             travelers who prefer BWI or Dulles because these airports are closer to
             their homes or businesses are likely to continue to use them. However,
             other business travelers are likely to switch if longer-distance nonstop
             flights become available at Reagan National because that is their preferred
             airport. With respect to leisure travelers, the fares at Reagan National for
             nonstop flights beyond the perimeter may be higher than for similar flights
             at the other airports because low-fare airlines may have difficulty gaining
             access to Reagan National’s facilities. Consequently, leisure travelers are
             generally unlikely to switch in large numbers. Finally, even if all of the 12
             to 24 nonstop flights per day to and from destinations beyond the
             perimeter suggested by the proposed legislation moved from BWI or Dulles
             to Reagan National, they would represent between 1 and 2 percent of the
             total flights at those airports (11 and 21 percent of the nonstop flights from
             BWI and Dulles to destinations beyond the perimeter).



             Reagan National Airport,3 built by the federal government, opened on
Background   June 16, 1941, on the western bank of the Potomac River, across from
             Washington, D.C. The airport has three runways and 42 air carrier gates.4
             The airline with the largest number of operations at Reagan National is US
             Airways, which in 1998 had over 40 percent of all large air carrier
             operations, expressed in terms of aircraft departures.5 The next largest
             operators at Reagan National are Delta Air Lines and American Airlines,
             with 16 percent and 15 percent of departures, respectively. During 1998,



             3
             The airport’s official name was changed from Washington National Airport to Ronald Reagan
             Washington National Airport under P.L. 105-154, 112 Stat. 3 (1998).
             4
              Air carrier (that is, jet) gates are those that are designed to accommodate large air carriers, generally
             defined as jet aircraft seating 56 passengers or more. In contrast, gates designed for use by smaller
             commuter aircraft are referred to as commuter gates. Commuter aircraft are generally turboprop
             aircraft seating fewer than 56 passengers. Within the past few years, several commuter airlines have
             begun using small jet aircraft (“regional jets”) in their fleets. To avoid confusion throughout the
             remainder of this report, we will refer to all commuter aircraft, regardless of whether they are regional
             jets or turboprops, as commuter aircraft.
             5
              Smaller commuter carriers, which often serve as regional affiliates for major airlines, are not required
             to report these data and are not included. For example, Atlantic Coast Airlines, which flies as United
             Express and serves as a regional commuter carrier for United Airlines, is not required to report these
             data. Thus, figures for the number of departures for United Airlines do not include those made by
             United Express.



             Page 3                                                  GAO/RCED-99-234 Reagan National Airport
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these three airlines together accounted for 68 percent of total passenger
enplanements6 at the airport.

Since May 1966, a perimeter rule has been in place at Reagan National
restricting airlines from operating nonstop flights between it and airports
of a particular distance. At first, the Federal Aviation Administration (FAA)
had concerns that allowing jets to fly into Reagan National would create a
noise problem and would conflict with further development at newly built
Dulles Airport. As a result, with the airlines agreeing, the Civil Aeronautics
Board approved a 650-mile perimeter, with exceptions for seven cities
between 650 and 1,000 miles away that enjoyed grandfather status as of
December 1, 1965.7 In 1981, FAA formalized the perimeter rule, setting the
perimeter at 1,000 miles.

Similarly, since 1969, the federal government has restricted the number of
commercial takeoffs and landings at Reagan National to 48 per hour: 37 for
jets and 11 for commuter aircraft. FAA authorizes general aviation
users—primarily operators of small corporate aircraft—to make an
additional 12 takeoffs or landings during each hour.8 In 1986, the Congress
elevated the slot and perimeter rules from FAA regulation to federal statute
as part of the Metropolitan Washington Airports Act of 1986.9 The act also
led to the transfer of authority over Reagan National and Dulles from the
federal government to the Metropolitan Washington Airports Authority
(MWAA) and set the perimeter at 1,250 miles, which allowed nonstop flights
to Houston and Dallas. Notwithstanding the regulatory limits on
operations, FAA used other authority granted it to permit an exemption to
enable Braniff Airlines to resume operations at Reagan National with four


6
 “Passenger enplanements” represent the total number of passengers boarding an aircraft. A
passenger who must make a single connection between his or her origin and destination counts as two
enplaned passengers because he or she boarded two separate flights. To estimate the total number of
passengers using an airport, the number of passenger enplanements is doubled to account for those
passengers disembarking at the airport as well.
7
 Civil Aeronautics Board Order E-23743, May 25, 1966. The seven cities included hubs for major
airlines during that period, such as Miami, Minneapolis-St. Paul, and St. Louis.
8
 In 1969, facing increasing delays and congestion, FAA applied special air traffic rules to certain
airports that it designated as high-density airports: Chicago’s O’Hare; New York’s LaGuardia and
Kennedy; Newark, New Jersey; and Reagan National. (DOT dropped Newark International Airport’s
designation as a high-density airport in October 1970.) Because of the restricted number of allowable
operations, these airports are generally known as “slot-controlled,” and the special air traffic rules
governing the allowable number of operations are referred to as “slot rules,” or “high-density rules.”
The total number of slots allowed at Reagan National has remained unchanged since the slot rule was
put in place in 1969, although the original limit on the number of jet slots was 40 per hour. FAA
reduced it to 37 in 1981.
9
 P. L. No. 99-591, 100 Stat. 3341-376, title VI.



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slots, even though all air carrier slots were already allocated.10 These four
slots were later allocated to America West Airlines.11

Dulles opened on November 19, 1962. The federal government built Dulles
in part to provide a facility for nonstop “long-haul” air carrier traffic (that
is, flights bound to or from locations beyond Reagan National’s perimeter)
in the Washington, D.C. area. Among major carriers, United Airlines has
the largest number of jet operations at Dulles (over 36 percent of large
carrier departures in 1998), and its regional affiliate, Atlantic Coast
Airlines, has the largest number of commuter operations. The other major
carriers with significant numbers of operations at Dulles in 1998 were
Delta (13 percent of departures), US Airways (12 percent of departures),
and American (10 percent of departures). Until the mid-1980s, Dulles was
relatively underutilized. More recently, however, the number of air carrier
operations at Dulles has greatly expanded. During the early 1990s, “new
entrant” airlines, such as ValuJet and Western Pacific, initiated service
there. Since early 1999, United has increased by more than one-third the
number of its departures at Dulles to 118 per day. US Airways’ low-cost
subsidiary, MetroJet, began operations in December 1998 and by June 1999
offered 39 daily flights from Dulles.

BWI, built by the city of Baltimore and originally named Friendship
International Airport, was opened on June 24, 1950. BWI is located 10 miles
southwest of Baltimore and approximately 30 miles northeast of
Washington, D.C. US Airways and Southwest Airlines were the airport’s
dominant airlines in 1998, with 36 percent of departures and 28 percent of
departures, respectively. Figure 1 shows the location of each of the three
airports in the metropolitan Washington, D.C., area. Appendix I shows the
configurations of Reagan National, Dulles, and BWI, illustrating the number
of runways, the size of terminals, and the restrictions on expansion at
Reagan National.




10
  FAA Exemption No. 2927, Feb. 24, 1984. FAA used its statutory authority, since amended, under 49
U.S.C. section 40109 to grant this exemption from its high-density rules on the basis of a public interest
finding.
11
  FAA Exemption No. 5133, Jan. 12, 1990.


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Figure 1: Location of Reagan National, Dulles, and BWI Airports Around the Washington, D.C., Metropolitan Area




                                                                                            Baltimore




                                                   MARYLAND




                                                                                      Baltimore-Washington
                                                                                           International
                                                                                              Airport
                   Potomac R
                             iver



                                                                                             MARYLAND



                                                   Washington,
                                                      D.C.
      Dulles                                                                                              River
   International                          Reagan
      Airport                             National                                                        Major highway
                                          Airport

            VIRGINIA
                                                                                               5 miles




                                          Until recently, more of the region’s passengers used Reagan National than
                                          the other two airports. Reagan National has handled about 15 million



                                          Page 6                                      GAO/RCED-99-234 Reagan National Airport
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                                      passengers per year since the late 1970s. Using its latest available statistics
                                      on passenger enplanements, FAA estimated that BWI would surpass Reagan
                                      National in total passengers in 1999 and that Dulles would surpass Reagan
                                      National in 2004 (see fig. 2). However, by 1998, other data indicated that
                                      BWI already was handling more passengers than either Reagan National or
                                      Dulles.


Figure 2: Number of Actual and
Projected Passengers at Reagan
National, Dulles, and BWI Airports,
1976 Through 2010




                                      Source: FAA.



                                      During this Congress, several bills have been introduced that would
Recent Legislative                    provide exemptions to Reagan National’s slot and perimeter rules. The
Proposals Would Add                   bills vary in the total number of jet flights (takeoffs and landings) that they
Flights at Reagan                     would add at Reagan National, ranging from 6 to 36.12 They also differ on
                                      whether and how many flights would be permitted to and from
National                              destinations beyond the existing 1,250-mile perimeter. No pending bill

                                      12
                                        Two of these bills would also allow an additional 12 daily commuter flights.



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                                         proposes eliminating the slot and perimeter rules at Reagan National.13
                                         Table 1 summarizes the key provisions of the major bills pending as of
                                         August 31, 1999, including their provisions on maintaining air service to
                                         communities inside the perimeter and assessing the Washington, D.C.,
                                         area’s concerns about possible environmental impacts, including noise.


Table 1: Summary of Major Pending Legislation That Would Modify Reagan National’s Slot or Perimeter Rules
                                                  Proposed modifications                           Status as of August 31,
Pending legislation      Sponsor                  to slot and perimeter  Other key provisions      1999
S. 82                    Senator John McCain,       Permits 36 new jet flights     New service must not            Passed the Senate
                         Chairman, Senate           daily (18 takeoffs and 18      reduce travel options to        Committee on
                         Committee on               landings). Two-thirds of       communities within the          Commerce, Science, and
                         Commerce, Science, and     all new jet flights could      perimeter; DOT must             Transportation; pending
                         Transportation             serve destinations             assess the impact on            with full Senate.
                                                    beyond the perimeter.          noise, safety, and the
                                                                                   environment.
H.R. 1000                Representative Bud         Permits 6 new jet flights      Requires DOT to grant           Passed the House of
                         Shuster, Chairman,         daily (3 takeoffs and 3        slots only for service to       Representatives; referred
                         House Committee on         landings). No new flight       airports where service is       to the Senate Committee
                         Transportation and         could serve a destination      insufficient and fares are      on Commerce, Science,
                         Infrastructure             beyond the perimeter.          high.                           and Transportation.
S. 536                   Senator John Warner        Permits 12 new jet flights     New service must not            Pending with the Senate
                                                    daily (6 takeoffs and 6        reduce travel options to        Committee on
                                                    landings). All new jet         communities within the          Commerce, Science, and
                                                    flights could serve            perimeter; DOT must             Transportation.
                                                    destinations beyond the        assess the impact on
                                                    perimeter.                     noise, safety, and the
                                                                                   environment.
                                         Source: GAO’s analysis of legislative proposals.



                                         In our 1996 report and in testimony this past January,14 we suggested that
                                         the Congress consider granting DOT the authority to modify the perimeter
                                         rule at Reagan National when proposed new service would substantially
                                         increase competition. We did not recommend that the rule be eliminated
                                         because doing so could have unintended consequences, such as reducing
                                         the amount of service to smaller communities in the Northeast and
                                         Southeast. This could happen if the airlines serving Reagan National were

                                         13
                                           In addition, S. 545, introduced for the Clinton administration by Senator Ernest Hollings, has
                                         proposed revisions to increase competition at the nation’s three other slot-controlled
                                         airports—Chicago O’Hare, New York Kennedy, and New York LaGuardia—by phasing out slot controls.
                                         This bill does not suggest similar revisions to the rules governing Reagan National. H.R. 1000 also calls
                                         for a phaseout of slot controls at O’Hare, LaGuardia, and Kennedy. Slot controls are to be completely
                                         phased out at O’Hare by 2002 and at LaGuardia and Kennedy by 2007.
                                         14
                                          Airline Deregulation: Barriers to Entry Continue to Limit Competition in Several Key Domestic
                                         Markets (GAO/RCED-97-4, Oct. 18, 1996) and Federal Aviation Administration: Issues Concerning the
                                         Reauthorization of Aviation Programs (GAO/T-RCED-99-68, Jan. 20, 1999).



                                         Page 8                                                 GAO/RCED-99-234 Reagan National Airport
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                            to shift their service from these communities to take advantage of more
                            profitable, longer-distance routes. In addition, in our January testimony,
                            we recognized that the communities in which the airports are located will
                            be concerned with any proposals to accommodate additional service
                            because of potential noise, safety, and congestion problems. Provisions in
                            some of the pending legislation seek to mitigate these concerns.


                            If the slot and perimeter rules were revised, the constraints of Reagan
Reagan National Has         National’s infrastructure, such as its relatively short runways and limited
the Capacity to             number of gates, would prevent it from accommodating a significantly
Absorb a Limited            larger number of flights. According to a 1995 DOT study, the airport could
                            absorb seven more flights per hour (for a total of 126 per day) above the
Number of Additional        current number allowed by law, but flights above that number could result
Flights                     in significant airport congestion and delay.15 MWAA officials believe that the
                            airport could accommodate fewer flights before delays become significant.
                            However, some flights could be added at Reagan National without
                            increasing the total number of currently available slots because not all
                            slots at the airport are allocated and because some slots that are allocated
                            are not fully used.


Reagan National’s           Even if the slot and perimeter rules were revised, Reagan National’s ability
Infrastructure Limits Its   to support an increased number of flights is limited by the ability of its
Capacity to Handle Much     runways and gates to accommodate a significantly larger number of jet
                            aircraft.16 A 1995 DOT study on the slot rule found that, because of
Additional Air Traffic      improvements to air traffic management, Reagan National’s infrastructure
                            could support more flights per hour without affecting air safety. The DOT
                            report indicated that while removal of the slot rule would result in an
                            increase in operations, air safety would not be affected because FAA’s air
                            traffic control staff would continue to apply programs and procedures that
                            ensure safety.




                            15
                               U.S. DOT, Report to the Congress: A Study of the High Density Rule, May 1995. This report contained
                            no recommendations but provided a factual basis for making decisions pertaining to slot-controlled
                            airports.
                            16
                              Reagan National’s geographic boundaries also combine to limit the airport’s ability to accommodate
                            a significant number of additional flights. Reagan National is bordered on the east by the Potomac
                            River and on the west by National Park Service land. The existence of these features makes adding or
                            lengthening the airport’s runways virtually impossible.



                            Page 9                                                GAO/RCED-99-234 Reagan National Airport
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The study estimated that the airport’s “balanced capacity”17 was 67 flights
per hour, or 7 flights per hour more than the 60 currently permitted. (This
would result in an additional 126 flights per day.) It did not specify how
these flights could be divided among jets, commuter aircraft, or general
aviation aircraft. The study projected that if the number of slots were
increased by 7, delays of 15 minutes or more as a percent of total
operations could increase from about 0.5 percent to 3 percent and cause
the airlines to experience a decreased profit. (The average delay for the
other slot-controlled airports in fiscal years 1997 and 1998 was about
3.6 percent.) At the same time, however, the costs associated with the
increase in delays would be partially offset by consumer benefits. Should
the slot rule be eliminated, the demand for air service could exceed the
airport’s balanced capacity for 10 hours each day, and delays would be
much greater. An FAA official told us that the report’s key findings are
generally still applicable.

MWAA  officials thought that Reagan National could accommodate a few
more flights per hour but perhaps not as many as seven. They said that the
number of flights the airport could handle per hour was in the “low- to
mid-60s” (for a total of about 70 additional flights per day) before delays
became significant. They emphasized that they remained concerned about
any possible noise-related impact that additional flights might have on the
area. However, MWAA has not conducted its own analysis to determine how
many additional flights per hour could be safely accommodated without
an undue increase in delays.

The length of Reagan National’s runways is a key factor restricting the
number of takeoffs and landings. Only one of its three runways is long
enough to routinely accommodate most jet aircraft. FAA and MWAA officials
observed that the use of this longest runway is increasing because
commuter airlines are replacing traditional propeller aircraft, which can
use the shorter runways, with regional jets, which must use the longest
runway.

Furthermore, should the perimeter be expanded, airlines would find that
Reagan National has a limited capacity to accommodate large aircraft. To
date, only narrow-body aircraft, such as the Boeing 737 and MD-80, have
been used at the airport. Should flights beyond the perimeter be allowed,




17
 “Balanced capacity” refers to the average ability of an airport’s runways to support a certain number
of operations per hour under varying weather and wind conditions.



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airlines could use wide-body aircraft no larger than the Boeing 767-300.18
Reagan National’s renovation allowed airlines to use wide-body aircraft as
large as the Boeing 767-300, but only in limited numbers. 19 Because of the
size of their wingspans (156 feet each), two Boeing 767s could not pass
each other on adjacent taxiways or use adjacent gates. Furthermore,
Reagan National has only five gates that could accommodate a Boeing 767,
and the use of these gates would require that aircraft using adjacent gates
be smaller in size than could otherwise be used. In addition, even some
newer narrow-body aircraft, such as the Boeing 757-300, could have
difficulty using some of the airport’s gates because their length would
hamper aircraft movements.

The limited availability of gates and other facilities at Reagan National
provides incumbent airlines with little opportunity to add service or shift
flights from Dulles or BWI, as some industry observers have suggested
could happen if the perimeter rule were changed. For instance, if United
were allowed to begin operating nonstop service to destinations beyond
the perimeter, it would find that shifting a significant number of its
transcontinental flights from Dulles to Reagan National would be difficult.
This is because the airline is already using its three gates at Reagan
National on a frequent basis throughout the day and because the number
of slots to be offered under proposed legislation is limited. In addition,
United has no slots and gates at Reagan National for its regional commuter
affiliate to bring passengers in from other eastern markets that would
connect with those transcontinental flights.

Moreover, if any of the proposed legislation is enacted and airlines that do
not already serve Reagan National are awarded slots, they may have
difficulty obtaining the gates, ticket counters, baggage handling areas, and
other facilities necessary to initiate new service, especially at key periods
during each business day. Reagan National currently has 42 gates available
for jet operations. According to MWAA, all of these gates are leased to the
incumbent “tenant” airlines until 2014.20 MWAA may make a gate available
to another airline when it is not needed to support the tenant airline’s
scheduled operations. While a tenant airline cannot prevent another airline
from using the gate when it does not need it, the only effective opportunity


18
  We found no standard definition of a wide-body aircraft. According to an MWAA official, a wide-body
aircraft is generally considered to be an aircraft with two aisles, such as a Boeing 747. For scale
comparisons of this aircraft and other aircraft used at Reagan National, Dulles, or BWI, see app. II.
19
 Reagan National now has five gates that can accommodate wide-body aircraft, but it will have an
additional gate when its renovation is complete. In comparison, Dulles has more than 60 gates that can
serve wide-body aircraft.
20
  Under certain conditions, MWAA may terminate leases in 2004.


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for a new entrant to initiate service at key business times of the day—or
for an incumbent to expand service—is through a contractual arrangement
with the tenant airline. To date, this is how new entrants have gained
access to the airport. Until 1996, for instance, Midwest Express had
gate-use agreements, initially with United and later with Northwest
Airlines, to support its daily nonstop service to Milwaukee and Omaha. In
August 1996, Midwest Express began leasing its own gate directly from
MWAA. Today, similar opportunities exist for new entrants to share daytime
gate space with incumbents whose “turn rates” are relatively low.21
Opportunities may exist, for example, to sublease from Trans World
Airlines, Northwest, and Continental Airlines, none of which makes more
than six daily turns per gate.

Several incumbent airlines are unlikely to sublease their gates to new
competitors because they use them frequently each day to support their
own operations. Collectively, the major airlines use Reagan National’s 42
jet gates at a high rate relative to the industry average. Airline analysts
consider Southwest to be the most efficient major U.S. airline because it
averages 10 turns per gate per day at airports where it operates. At Reagan
National, US Airways makes nearly 200 daily flights from its 12 jet gates,
for an average of eight turns per gate per day.22 Several of Reagan
National’s other major airlines also use their gates frequently throughout
the day; Delta and United, for example, make an average of eight turns and
six turns per gate per day, respectively.23 Measured against the typical
industry rate of seven aircraft turns per gate per day, these three airlines
have little or no ability to sublease these gates to new entrants, especially
during peak business hours.

Although MWAA has no plans to increase the number of gates at Reagan
National, MWAA officials emphasized that they will work with incumbent
airlines to ensure that any new entrant wishing to serve Reagan National
can do so. MWAA officials stated that they address gate access whenever
necessary. Since 1986, for instance, MWAA has helped two airlines—Midway
and Midwest Express—to gain access to gates and other facilities at the
airport. In addition, every 3 years, MWAA undertakes a broad, formal
assessment of the airlines’ use of gates and associated facilities at Reagan

21
  A “turn” is an informal industry term referring to one aircraft’s combined inbound and outbound
flight operations at a given gate.
22
 This excludes US Airways’ shuttle flights to New York City, which operate out of two separate gates.
Each day, the airline operates 15 shuttle flights from each of these gates (approximately eight turns per
gate).
23
  By comparison, at Dulles, United operates approximately 118 flights from 36 gates, thus averaging
fewer than four turns per gate per day.



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                              National. Reagan National’s next formal reassessment is scheduled for the
                              summer of 2000.


Some Existing Slots at        FAA controls the allocation of available jet and commuter slots at Reagan
Reagan National Have Not      National during an 18-hour period every day, from 6:00 a.m. until midnight.
Been Allocated to Airlines,   Specifically, FAA makes 868 slots available per day to jet and commuter
                              airlines—37 jet slots available each hour during the 18-hour period, for a
While Others Are Not          total of 670 daily available jet slots, and 11 commuter slots per hour during
Efficiently Used              the 18-hour period, for a total of 198 daily available commuter slots.24

                              Of the 670 available jet slots, 86 have not been requested for allocation.
                              Each of these 86 jet slots falls either in the early morning (between 6:00
                              and 7:00) or in the late evening (between 9:00 and midnight). According to
                              MWAA officials, these jet slots remain unallocated because there is less
                              demand for passenger service during these hours and because the airlines
                              do not use aircraft that comply with MWAA’s stricter noise requirements in
                              effect after 10:00 p.m. To date, the airlines also have not requested that FAA
                              allocate 35 commuter slots for their use.25

                              In addition, not all allocated slots are being used in the most efficient
                              manner. Each day, small commuter aircraft use 36 slots designated for jet
                              traffic during busy times of the day. US Airways Express, a commuter
                              airline, uses 20 of these 36 jet slots to serve a variety of nearby cities with
                              small propeller aircraft during the mid-day hours. An FAA official
                              acknowledged that commuters often operate flights in jet slots but
                              emphasized that this practice is permissible under federal regulation.


                              24
                                In addition to the 37 hourly jet slots, FAA makes available 4 jet slots to America West under a special
                              slot exemption authority. America West uses these jet slots to operate flights to its Phoenix hub via
                              Columbus, Ohio, at 8:00 a.m., 3:00 p.m., 4:00 p.m., and 9:00 p.m. FAA includes these four additional jet
                              slots in its count of available daily jet slots. The total number of jet slots available each day equals 670.
                              25
                                Current law defines the peak-hour period as between 7:00 a.m. and 9:59 p.m. In certain
                              circumstances, DOT has the authority to “re-time” (i.e., change the assigned hour) up to two slots per
                              hour. 49 U.S.C. section 41714(d) permits the Secretary of Transportation to allow air carriers holding
                              or operating slots to re-time them, but only under specified conditions and upon a finding that
                              exceptional circumstances exist. The most important of these conditions are that the total number of
                              slots during peak hours are not increased and that the number of operations in any 1-hour period not
                              be increased by more than two. The law does not allow DOT to “re-time” off-peak slots to peak hours.
                              For example, in September 1994, DOT allowed Midwest Express to obtain two jet slots that were
                              available at 9:00 p.m., and then re-time them for use at 7:00 p.m. DOT took this action primarily to
                              allow Midwest Express to accommodate passengers demanding convenient nonstop service to and
                              from Omaha, Nebraska. DOT’s decision to provide this exemption to Midwest Express means that the
                              total number of slots currently allocated to all airlines at 7:00 p.m. exceeds the limit of 37 jet
                              operations per hour at Reagan National by 2, as is permitted under 49 U.S.C. section 41714(d)(1)(C). In
                              addition, Midwest Express has applied for Reagan National’s two remaining unallocated 9:00 p.m.
                              slots.



                              Page 13                                                   GAO/RCED-99-234 Reagan National Airport
                           B-282375




                           Finally, some weekday peak-hour slots at Reagan National are not being
                           fully used, resulting in fewer flights at certain times than are permitted
                           under the current slot limits. FAA regulations require that an airline use
                           each slot a minimum of 80 percent of the time over a 2-month reporting
                           period, or the agency will withdraw it. According to FAA’s May 1999
                           analysis of slot-use data recently submitted by the major airlines, some
                           airlines report operating flights in a staggered manner among allocated
                           slots during the standard 2-month reporting periods to ensure compliance
                           with the minimum-use regulations for each slot. For example, because the
                           regulations allow a slot to go unused for up to 20 percent of the time, a
                           carrier with five slots in 1 hour must operate only four flights in that hour
                           on any day to obtain 80-percent use for each of its five slots. The carrier is
                           allowed to “rotate” its four flights across the five slots over the 2-month
                           period to prevent FAA from withdrawing the slot. The practice of a carrier’s
                           rotating actual flights among its allocated slots is commonly referred to as
                           “babysitting.” FAA officials emphasized that babysitting is not prohibited by
                           existing regulation, provided that a slot meets the minimum-use
                           requirements.


                           Only a limited number of passengers might switch from using BWI or Dulles
Only a Limited             to Reagan National to take advantage of nonstop service to destinations
Number of Passengers       beyond the perimeter should the Congress provide the opportunity.
Are Likely to Switch       Previous experiences in the Washington, D.C., metropolitan area with
                           airlines introducing new or low-fare service suggest that relatively few
to Reagan National for     passengers are likely to switch from using BWI or Dulles to Reagan
Service Beyond the         National. Furthermore, the amount and type of service provided by
                           additional flights at Reagan National as a result of the proposals before the
Perimeter                  Congress would affect the number and mix of passengers most likely to
                           switch.


Previous Washington Area   To gain insight into whether passengers who currently use BWI or Dulles
Airport Experiences        might switch to using Reagan National, we determined the extent to which
Provide Insight Into the   passengers switched from one area airport to another when provided with
                           an incentive. Typically, passengers prefer to fly from the airport that is
Extent to Which            most convenient for them. For the purpose of our analysis, we used the
Passengers Might Switch    introduction of “low-fare” service at BWI and Dulles as an incentive that
to Reagan National         could attract passengers from one area airport to another. (During the
                           1990s, no airline introduced “low-fare” service to or from Reagan
                           National.) We did this because the effect of price changes at one airport on
                           the passenger traffic and fares at another airport is frequently used as a



                           Page 14                                  GAO/RCED-99-234 Reagan National Airport
B-282375




measure of the extent to which passengers view airports as substitutes for
one another.26

In our analysis, we distinguished between the reactions of passengers
traveling for leisure and for business purposes.27 As a general rule,
individuals traveling for leisure purposes tend to be more sensitive to price
differences than those traveling for business. That is, leisure passengers
are more likely than business passengers to change their travel plans (that
is, switch—or substitute—airports) in response to differences in airfares.
However, various other factors, such as the availability of low fares or
nonstop service at one airport that is not provided at another, may
persuade travelers to switch from the airport that they might otherwise
use.28

To evaluate the impact of low-fare service on passenger choice, we
identified three cases in which an airline new to an airport (a “new
entrant”) introduced low-fare service at an area airport and one case in
which an airline introduced new service without offering low-fare service.
We then determined how these “entry events” affected passenger traffic
and fares for both leisure and business travelers at all three area airports.
The four entry events we examined were (1) ValuJet’s entry into the
Dulles–Atlanta market during 1994, (2) Southwest’s entry into the
BWI–St. Louis market during 1994, (3) Western Pacific’s entry into the
Dulles–Denver market during 1997, and (4) Midway Airlines’ entry into the
Reagan National–Raleigh/Durham market during 1995. Appendix III
contains a more complete description of our methodology.

Our analysis indicated that, for a number of reasons, relatively few
passengers switched airports in response to the service offered by the new

26
 This general approach is widely accepted by the economics profession and used by the Department
of Justice and the Federal Trade Commission to determine whether two similar products compete
with each other or whether they are in distinct markets.
27
  Airline ticket data do not indicate whether passengers are traveling for business or leisure purposes.
To simplify our analysis, we assumed that travelers purchasing cheaper tickets, which normally
require advance purchase and a Saturday-night stayover, were leisure travelers and those who
purchased more expensive tickets, often fares available at the last minute, were business travelers.
28
  Passenger preference surveys also provide valuable insight into this issue. About every 5 years, the
Metropolitan Washington Council of Governments surveys passengers at each of the three major
airports. This survey includes questions on which airport passengers prefer to use. The 1992 survey
reported that 43 percent of locally originating passengers preferred to use Reagan National, 22 percent
preferred Dulles, and 23 percent preferred BWI, with 12 percent expressing no opinion. The Council of
Governments conducted its most recent passenger survey in 1998 but has not had the funding needed
to analyze the data and publish the results. We believe the more recent survey might reflect changes in
passenger preferences that could have taken place since 1992, especially those that reflect the notable
increase in employment and population in the vicinity of Dulles Airport, along with the introduction of
low-fare service discussed in this section and the renovation of all three area airports.



Page 15                                                 GAO/RCED-99-234 Reagan National Airport
B-282375




entrant. Although the entry of a new carrier substantially lowered the fares
between the two airports served by the new entrant, the low fares at one
airport had, at most, only a small effect on the number of passengers
paying high fares (generally, business travelers) at the other area airports.
This indicates that passengers who pay high fares have a strong preference
for the airport that is most convenient for them. For those passengers, the
airports are poor substitutes for one another. In contrast, passengers who
traveled at low fares (generally, leisure travelers) showed some
willingness to switch among the area’s three airports. Yet even this group,
which is more sensitive to price changes than business travelers,
demonstrated some preference for one airport. This indicates that for
leisure travelers, these airports may be modest substitutes for each other.
In addition, the lower fares increased the total number of passengers
flying. The results of our analyses are summarized in table 2 and described
in more detail in appendix IV.




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                                         B-282375




Table 2: Summary of the Effects on Passengers and Fares of New Entry at the Three Washington-Area Airports
Entrant airline/Airport-pair market entered Airport/Previous Provider             Effect of entry
ValuJet/Dulles-Atlanta                   Dulles/Delta                            Low fares substantially increase the total
                                                                                 traffic between Dulles and Atlanta.
                                                                                 Little change in number of high-fare
                                                                                 passengers.
                                         Reagan National/                        Increase in the number of low-fare
                                         Delta and TWA                           passengers.
                                                                                 Little change in the number of high-fare
                                                                                 passengers.
                                                                                 TWA exited market.
                                         BWI/ Delta, US Airways, and TWA         Large decrease in the number of low-fare
                                                                                 passengers, who probably switched to other
                                                                                 airports.
                                                                                 Little effect on high-fare passengers.
Southwest/BWI—St. Louis                  Dulles/TWA                              Slight decline in the number of low-fare
                                                                                 passengers who possibly switched to BWI.
                                                                                 Small increase in the number of high-fare
                                                                                 passengers.
                                         Reagan National/TWA                     Large decline in the number of low-fare
                                                                                 passengers, who probably switched to BWI.
                                                                                 Little effect on high-fare passengers.
                                         BWI/TWA and US Airways                  Large increase in the total number of
                                                                                 passengers, most at low fares.
                                                                                 Decline in the number of high-fare
                                                                                 passengers. US Airways exited market.
Western Pacific/                         Dulles/United                           Low fares increased the number of travelers.
Dulles—Denver                                                                    Large decline in the number of high-fare
                                                                                 passengers.
                                         Reagan National/none                    No nonstop service; Denver is outside the
                                                                                 current perimeter.
                                                                                 Little change in connecting service.
                                         BWI/United                              Lower fares increase both the number of
                                                                                 low-fare and total passengers; no apparent
                                                                                 switch of passengers.
                                                                                 Modest decline in the number of high-fare
                                                                                 passengers.
Midway/Reagan National—Raleigh-Durham    Dulles                                  No nonstop service at the time of Midway’s
                                                                                 entry.
                                         Reagan National/US Airways              Low fares increased the number of travelers.
                                                                                 Decline in the number of high-fare
                                                                                 passengers, who then traveled at lower
                                                                                 fares.
                                         BWI/US Airways                          Modest decrease in the number of low-fare
                                                                                 passengers.
                                                                                 Large increase in the number of high-fare
                                                                                 passengers, probably because of American
                                                                                 Airlines’ exit.




                                         Page 17                                    GAO/RCED-99-234 Reagan National Airport
B-282375




We believe there is an unmet demand for nonstop travel between Reagan
National and destinations outside the perimeter. However, we were unable
to directly estimate the size of this unmet demand. Precise estimates of the
number of travelers who might switch from using Dulles or BWI to Reagan
National would depend on a number of major assumptions about airline
behavior and the markets that would be served. For example, United
officials noted that an airline’s reaction to changes in the slot and
perimeter rules would depend on a variety of conditions, such as the way
the perimeter rule was changed, the availability of sufficient facilities at
Reagan National, and other competitive pressures. If some version of the
legislative proposals under consideration were enacted, the effect on
Reagan National air travelers would depend on which airlines received
exemptions to the perimeter rule (along with the necessary slots and
facilities at Reagan National), the amount and type of service they
provided, and the markets they served.

If exemptions allowed the major airlines already serving Reagan National
to operate to and from large western cities, those airlines could capitalize
on the scarcity of their new nonstop service and charge a premium fare.
This would tend to restrict the benefits from such service to travelers
doing business in downtown Washington, D.C., rather than to the more
price-sensitive leisure travelers, who would be unlikely to switch because
lower fares might still be available at BWI or Dulles. Nevertheless, our
analysis of the market entries by these four airlines indicates that if new
nonstop service to locations outside the perimeter is allowed, not all
business passengers are likely to switch to Reagan National from BWI or
Dulles. Business travelers who prefer BWI or Dulles because these airports
are closer to their home or business are likely to continue to use these
airports. Other business travelers are likely to switch if longer-distance
flights become available because they would prefer to use Reagan
National. Leisure travelers are generally unlikely to switch in large
numbers because, under this scenario, the fares at Reagan National for
nonstop flights beyond the perimeter may be higher than for similar flights
at the other airports.

If exemptions were awarded to low-cost airlines, more leisure travelers
would be likely to benefit. Often lacking national networks and alliance
agreements with the major airlines, low-cost carriers tend not to attract as
many business travelers and thus depend more on leisure passengers. As
we pointed out earlier, however, the lack of available facilities at Reagan
National may inhibit the ability of new entrants to initiate service at
commercially viable times. MWAA officials told us that they have always



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                              B-282375




                              been able to accommodate airlines that wanted to initiate new service at
                              Reagan National. Nonetheless, the experience of Midwest Express
                              indicates that gaining reasonable access to its own facilities at Reagan
                              National can take some time.


Limited Shift in Airline      Airline industry experts with whom we spoke said that the impact on
Operations and Passenger      Dulles or BWI of modifying the perimeter rule would depend on how the
Traffic Unlikely to Affect    rule was changed and how many additional flights would be added at
                              Reagan National. Nevertheless, they generally dismissed the notion that
Dulles or BWI Significantly   moderate changes in the slot and perimeter rules at Reagan National
                              would adversely affect BWI or Dulles because they do not view the
                              Washington, D.C., metropolitan area as a single market for the three
                              airports. Rather, they believe that the market for each of the area’s three
                              commercial airports is largely different. Furthermore, some of the experts
                              did not believe that the number of passengers switching would be
                              detrimental to Dulles because of the sizable growth of business in the
                              vicinity of Dulles. They said that unlike years ago, when Dulles needed the
                              protection afforded by the slot and perimeter rules at Reagan National,
                              Dulles is now an established airport with a natural customer base in its
                              geographic area.

                              The airline experts we spoke with speculated that Dulles would lose some
                              business travelers if nonstop long-haul flights to cities beyond the
                              perimeter were offered at Reagan National. However, even if all of the 6 to
                              12 roundtrip nonstop flights per day to destinations beyond the perimeter
                              suggested by the proposed legislation moved from BWI or Dulles to Reagan
                              National, they would represent between 1 and 2 percent of the total flights
                              at those airports (11 to 21 percent of the nonstop flights to destinations
                              beyond the perimeter). We believe it is unlikely that the 6 to 12 flights
                              would move to Reagan National because the existing long-haul service at
                              Dulles relies in part on connecting traffic. In addition, such a scenario
                              would be unlikely because some of the passengers flying on new nonstop
                              flights from Reagan National would be the same passengers who are
                              currently using one-stop service from the airport. Only US Airways—which
                              does not have major long-haul service at Dulles—has a significant
                              commuter operation at Reagan National. United operates more
                              transcontinental flights than any other airline at Dulles but has no
                              commuter flights into Reagan National to bring connecting passengers in
                              from other East Coast locations. In addition, because of the constraints on
                              the size of Reagan National’s runways, taxiways, and gates, the airport
                              could accommodate only some of the aircraft that airlines now use at



                              Page 19                                 GAO/RCED-99-234 Reagan National Airport
                  B-282375




                  Dulles or BWI for transcontinental service. Thus, we believe that changes to
                  the slot and perimeter rules at Reagan National would not result in a
                  significant shift of passenger traffic or service among the three area
                  airports and that neither BWI nor Dulles would experience significant
                  adverse effects.


                  We provided copies of our draft report to DOT, FAA, MWAA, and the Maryland
Agency Comments   Aviation Administration. We met with officials from DOT and FAA, including
                  DOT’s Deputy Assistant General Counsel and FAA’s Assistant Manager, Air
                  Traffic Operations. These agencies generally agreed with our findings and
                  provided several comments to clarify technical issues concerning slot
                  allocation and use. We spoke with the Director, Policy Development,
                  Maryland Aviation Administration, who also agreed with the report’s
                  findings and provided us with technical comments. We incorporated the
                  comments on clarity and technical issues as appropriate.

                  MWAA  agrees that Reagan National Airport could support a modest number
                  of additional flights and asserts that its reasons for wishing to retain
                  existing limits stem primarily from policies that it deems important to the
                  operation of the airports in the Washington, D.C., region. MWAA commented
                  that we did not clearly place Reagan National’s slot and perimeter rules in
                  the context of these policies. In addition, MWAA suggested that our use of
                  “balanced capacity” to measure the number of flight operations that
                  Reagan National should be able to accommodate overstates the airport’s
                  capacity. We believe, as does DOT, that balanced capacity is a superior
                  method for determining what the airport’s capacity ought to be because it
                  accounts for the operation of aircraft during all weather conditions. MWAA
                  had several other technical comments, which we addressed in the report,
                  as appropriate. MWAA’s comments, along with our responses to them,
                  appear in appendix V.


                  We conducted our work from March 1999 through August 1999 in
                  accordance with generally accepted government auditing standards.




                  Page 20                                 GAO/RCED-99-234 Reagan National Airport
B-282375




If you or your staff have any questions about this report, please call me or
Steve Martin at (202) 512-2834. Staff contacts and others who made key
contributions to this report are listed in appendix VI.

Sincerely yours,




John H. Anderson, Jr.
Director, Transportation Issues




Page 21                                  GAO/RCED-99-234 Reagan National Airport
Contents



Letter                                                                                             1


Appendix I                                                                                        26

Configuration of the
Three Airports in the
Washington, D.C.,
Metropolitan Area
Appendix II                                                                                       30

Comparison of the
Sizes of Various
Aircraft That Use
Reagan National,
Dulles, and BWI
Airports
Appendix III                                                                                      32

Scope and
Methodology
Appendix IV                                                                                       36
                        Valujet’s Entry at Dulles During 1994 Suggests That Reagan                36
Additional                National and Dulles May Be Substitutes for Leisure Passengers
Information on            but That Business Passengers Regard Each Airport as Separate
                        Southwest’s Service Between BWI and St. Louis Suggests That               40
Substitutability of       Reagan National, Dulles, and BWI Are Substitutes for Leisure
Airports                  Passengers but Not for Business Passengers
                        Western Pacific’s Service Between Dulles and Denver Suggests              45
                          That New Long-Haul Service at Dulles Had Little Effect on
                          Passengers’ Preferences for Reagan National or BWI
                        Midway’s Service Between Reagan National and Raleigh-Durham               48
                          Suggests That Passengers Do Not Treat Reagan National, Dulles,
                          and BWI as Substitutes




                        Page 22                               GAO/RCED-99-234 Reagan National Airport
                       Contents




Appendix V                                                                                        51

Comments From the
Metropolitan
Washington Airports
Authority and Our
Evaluation
Appendix VI                                                                                       58

GAO Contacts and
Staff
Acknowledgments
Related GAO Products                                                                              59


Tables                 Table 1: Summary of Major Pending Legislation That Would                    8
                        Modify Reagan National’s Slot or Perimeter Rules
                       Table 2: Summary of the Effects on Passengers and Fares of New             17
                        Entry at the Three Washington-Area Airports

Figures                Figure 1: Location of Reagan National, Dulles, and BWI Airports             6
                         Around the Washington, D.C., Metropolitan Area
                       Figure 2: Number of Actual and Projected Passengers at Reagan               7
                         National, Dulles, and BWI Airports, 1976 Through 2010
                       Figure I.1: Ronald Reagan Washington National Airport                      26
                       Figure I.2: Dulles International Airport                                   27
                       Figure I.3: Baltimore/Washington International Airport                     28
                       Figure IV.1: Change in the Distribution of Fares and the Number            38
                         of Passengers Flying on Delta Between Dulles and Atlanta,
                         Before and After, ValuJet’s Entry Into the Dulles-Atlanta Market
                       Figure IV.2: Change in the Distribution of Fares and Number of             39
                         Passengers Flying on Delta Between Reagan National and
                         Atlanta, Before and After ValuJet’s Entry into the Dulles-Atlanta
                         Market
                       Figure IV.3: Change in the Distribution of Fares and Number of             40
                         Passengers Flying on Delta Between BWI and Atlanta, Before and
                         After ValuJet’s Entry Into the Dulles-Atlanta Market




                       Page 23                                GAO/RCED-99-234 Reagan National Airport
Contents




Figure IV.4: Change in the Distribution of Fares and Number of             42
  Passengers Flying on TWA Between BWI and St. Louis, Before
  and After Southwest’s Entry Into the BWI-St. Louis Market
Figure IV.5: Change in the Distribution of Fares and Number of             43
  Passengers Flying on TWA between Reagan National and St.
  Louis, Before and After Southwest’s Entry into the BWI-St. Louis
  Market
Figure IV.6: Change in the Distribution of Fares and Number of             44
  Passengers Flying on TWA Between Dulles and St. Louis, Before
  and After Southwest’s Entry Into the BWI-St. Louis Market
Figure IV.7: Change in the Distribution of Fares and Number of             46
  Passengers Flying on United Between Dulles and Denver, Before
  and After Western Pacific’s Entry Into the Dulles-Denver Market
Figure IV.8: Change in the Distribution of Fares and Number of             47
  Passengers Flying on United Between BWI and Denver, Before
  and After Western Pacific’s Entry Into the Dulles-Denver Market
Figure IV.9: Change in the Distribution of Fares and Number of             49
  Passengers Flying on US Airways Between Reagan National and
  Raleigh-Durham, Before and After Midway’s Entry Into the
  Reagan National-Raleigh-Durham Market
Figure IV.10: Change in the Distribution of Fares and Number of            50
  Passengers Flying on US Airways Between BWI and
  Raleigh-Durham, Before and After Midway’s Entry Into the
  Reagan National-Raleigh-Durham Market




Abbreviations

BWI        Baltimore/Washington International Airport
DOT        Department of Transportation
FAA        Federal Aviation Administration
GAO        U.S. General Accounting Office
IFR        Instrument Flight Rules
MWAA       Metropolitan Washington Airports Authority


Page 24                                GAO/RCED-99-234 Reagan National Airport
Page 25   GAO/RCED-99-234 Reagan National Airport
Appendix I

Configuration of the Three Airports in the
Washington, D.C., Metropolitan Area

Figure I.1: Ronald Reagan Washington National Airport




                                         Source: Metropolitan Washington Airports Authority.




                                         Page 26                                               GAO/RCED-99-234 Reagan National Airport
                                           Appendix I
                                           Configuration of the Three Airports in the
                                           Washington, D.C., Metropolitan Area




Figure I.2: Dulles International Airport




                                           Source: Metropolitan Washington Airports Authority.




                                           Page 27                                               GAO/RCED-99-234 Reagan National Airport
                                           Appendix I
                                           Configuration of the Three Airports in the
                                           Washington, D.C., Metropolitan Area




Figure I.3: Baltimore/Washington International Airport




                                           Source: Maryland Aviation Administration.




                                           Page 28                                      GAO/RCED-99-234 Reagan National Airport
Appendix I
Configuration of the Three Airports in the
Washington, D.C., Metropolitan Area




Page 29                                      GAO/RCED-99-234 Reagan National Airport
Appendix II

Comparison of the Sizes of Various Aircraft
That Use Reagan National, Dulles, and BWI
Airports

                         107 ft 8 in




                                  16 ft 7 in


                          94 ft 9 in




                                  17 ft 2 in



                         124 ft 10 in




                                   24 ft 0 in


                         156 ft 1 in




                                       30 ft 6 in



                         195 ft 8 in




                                        36 ft 1 in




               Page 30                               GAO/RCED-99-234 Reagan National Airport
Appendix II
Comparison of the Sizes of Various Aircraft
That Use Reagan National, Dulles, and BWI
Airports




                                                             29 ft 6 in
MD-80
                                   147 ft 9 in




                                                         36 ft 6 in
737-300

                                 109 ft 7 in




                                                                      44 ft 6 in
757-200

                                           155 ft 3 in




                                                                             52 ft 0 in
767-300


                                           180 ft 3 in




                                                                                          63 ft 4 in

747-400


                                                    231 ft 10 in


Source: The Boeing Corporation




Page 31                                            GAO/RCED-99-234 Reagan National Airport
Appendix III

Scope and Methodology


               To examine the potential impact of several legislative proposals currently
               before the Congress that would address restrictions on flights at Ronald
               Reagan Washington National Airport (Reagan National), we (1) described
               the most prominent proposals that would allow an increased number of
               takeoffs and landings at Reagan National and create exemptions to the
               perimeter rule, (2) examined the extent to which Reagan National could
               safely accommodate more takeoffs and landings, and (3) analyzed whether
               adding flights at Reagan National to and from destinations beyond the
               current perimeter would cause passengers to shift their travel from Dulles
               or BWI.

               To address the first objective, we reviewed the three leading legislative
               proposals that have been introduced in the 106th Congress and compared
               their similarities and differences. We also examined the legislative history
               of the federal government’s involvement with the Washington, D.C., area
               airports. This review included various laws and regulations, such as the
               Metropolitan Washington Airports Act of 1986, in which the federal
               government ceded control of Reagan National and Dulles to the newly
               created Metropolitan Washington Airports Authority (MWAA). Finally, we
               reviewed exemptions to the slot and perimeter rules that have been
               permitted over time.

               For the second objective, we determined how airlines are using existing
               slots. We did this to gain insight into the extent to which Reagan National
               may be able to absorb additional air traffic and passengers if the slot and
               perimeter rules change and if airlines operating at Dulles and BWI decide
               either to initiate service at Reagan National or move service from those
               airports to Reagan National. We analyzed data from the Federal Aviation
               Administration (FAA) on the actual use of allocated air carrier (jet) and
               commuter slots in terms of the existing slot limitations to determine if
               slots are being used in an economically efficient manner.29 This analysis
               included reviewing data on which airlines operated commuter aircraft in
               jet slots and how airlines met the federal regulatory requirements that
               slots be used 80 percent of the time during 2-month periods.

               We also examined Reagan National’s capacity in terms of the maximum
               number of flights allowed by the slot rule. We determined the limitations
               presented by the airport’s runways, taxiways, gates, and terminal areas to
               accommodate not only more flights (with more passengers) but also
               flights by aircraft larger than those normally operating there now—aircraft

               29
                We define an “economically efficient manner” to mean the extent to which the scarce slot resources
               are used to serve the greatest number of passengers. We recognize that holders of slots may have
               different perspectives on what they consider to be the best use of those slot resources.



               Page 32                                              GAO/RCED-99-234 Reagan National Airport
Appendix III
Scope and Methodology




capable of flying long-range or transcontinental routes. We reviewed the
data contained in a 1995 study by the Department of Transportation (DOT)
on the high-density rule,30 as well as data provided by FAA on the runway
lengths needed to accommodate different aircraft capable of flying
long-range routes. We also determined from MWAA the number and location
of gates at Reagan National that had been constructed to accommodate
larger, heavier aircraft than are now used at the airport. We interviewed
FAA and MWAA officials about the effect on Reagan National’s operations of
the introduction of long-range aircraft, along with the substitution by
commuter carriers of regional jets for turboprop aircraft.

Finally, for the third objective, we analyzed the extent to which passengers
would shift their travel from any one of the area’s three airports to another
in response to new travel options. To do so, we analyzed cases in which
airlines that previously did not fly to and from one airport (defined here as
“new entrants”) introduced service to destinations already served by
other airlines (defined here as incumbent airlines). Using data originally
provided to DOT by the airlines, we identified all new entrants that began
operations at one of the three airports during the 1990s. Because
individuals traveling for leisure are known to be more sensitive to changes
in prices than individuals traveling for business, we separately analyzed
the distribution of passengers and the fares they paid for each airport.

We restricted our analyses to cases in which the new entrants initiated
service at a significant level. We eliminated those new entrants that served
only as commuter affiliates to a major airline, along with those that failed
to carry the equivalent of at least two planeloads daily (approximately
20,000 passengers per quarter). We further limited our analysis of those
cases to destinations that the new entrant served on a nonstop basis. Thus,
we examined the effects on passenger traffic and fares that may have been
produced by four new entrants during the 1990s: Southwest Airlines’ 1993
introduction of service at BWI; ValuJet’s 1994 introduction of service at
Washington Dulles; Western Pacific’s 1994 introduction of service at
Washington Dulles; and Midway’s 1994 introduction of service at Reagan
National. Between the time that they began service in the Washington area
and the time of our review (through the fourth quarter of 1998), according
to the most recent available data, Southwest and ValuJet (now operating
as AirTran Airlines) began nonstop service to a number of destinations.
We selected only one market for each carrier. In general, we excluded
destination cities that are served by more than one airport. We did this
because we would not be able to determine whether changes in air traffic

30
  U.S. DOT, Report to the Congress: A Study of the High Density Rule, May 1995.



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Appendix III
Scope and Methodology




and fares between the Washington, D.C., area airports and the destination
city were due to the new competition in the Washington, D.C., area, or to
competitive effects from the second airport in the destination city (for
example, we excluded an analysis of the effect of Southwest’s entry into
the BWI-to-Chicago Midway Airport market because we would not be able
to separately identify any effect that Chicago’s O’Hare International
Airport may exert on traffic and fares in the market).31

In measuring the number of passengers traveling in a market and the fares
they paid, we also excluded itineraries involving (1) flights making an
intermediate stop between their origin and destination, except in the case
of travel between Denver and the three area airports; (2) flights making
any stop outside the continental United States; (3) nonrevenue flights
taken by airline employees or passengers using frequent flyer awards;
(4) flights for which the fare was unknown (for example, charters); and
(5) flights with certain missing data, such as those on fares, segments,
date, or operating airline. We also excluded itineraries involving more than
one airline. We reported fares on a one-way basis.

To determine whether the entry by these airlines produced an effect on
(1) the number of passengers carried by incumbent airlines at the airport
where the entry took place; (2) the number of passengers carried at either
of the other two area airports in the same airport-pair market; or (3) fares
paid by those passengers, we analyzed traffic and fare data for those
particular routes, beginning 2 quarters prior to the new entrants’ service
and 2 quarters afterward. For example, if an entrant began service in the
second quarter of 1995, we examined changes in competitors’ fares at each
of the three area airports between the fourth quarter of 1994 and the
fourth quarter of 1995. We selected this 4-quarter interval to minimize any
effects that seasonal air travel might introduce into the analysis (during
the winter, fewer passengers fly on most routes, and fares are generally
lower; the situation is reversed during the peak summer travel months).

We obtained these data from DOT’s Bureau of Transportation Statistics,
Office of Airline Information. These data are reported originally by the
operating airlines and constitute a 10-percent sample of all tickets.
Because they are drawn from a sample, they are subject to sampling error
(that is, the likelihood that the result produced from analyzing the sample
is different from the “true” value). We did not calculate the sampling


31
 These airlines may have provided nonstop service to other cities as well, but we excluded those
routes from our analyses because, for example, they did not meet our criterion for the minimum
passenger load.



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Scope and Methodology




errors during this review. In the past, however, when we have used these
data, we have found the sampling errors to be very small.32

Finally, we examined whether the entry events exerted different effects on
leisure and business travelers, who generally represent separate passenger
markets. Leisure travelers tend to be more sensitive to price changes than
are business travelers. Moreover, airlines pay special attention to business
travelers because these travelers are responsible for generating a
disproportionate amount of airline revenue. We examined changes in the
overall distribution of passenger traffic by analyzing for each airline
pre-entry and post-entry changes in the number of passengers paying fares
in different fare categories, defined in $50 increments. Because airline
ticket data do not indicate the purpose for which individuals traveled, we
assumed that passengers paying higher fares were generally those
traveling for business and those paying lower fares were generally
traveling for leisure.

We conducted our work from March 1999 through August 1999 in
accordance with generally accepted government auditing standards.




32
 See, for example, Airline Deregulation: Changes in Airfares, Service, and Safety at Small,
Medium-Sized, and Large Communities (GAO/RCED-96-79, Apr. 19, 1996).



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Appendix IV

Additional Information on Substitutability of
Airports

                       Since 1993, several new airlines have begun service to the Washington,
                       D.C., area. This appendix describes the impact of four of those new
                       airlines on competition among the area’s airports. Specifically, it describes
                       the effect that (1) ValuJet’s new service between Washington Dulles and
                       Atlanta’s Hartsfield International Airport (Atlanta) had on the number of
                       passengers and the fares they paid for travel between Atlanta and Reagan
                       National and BWI; (2) Southwest Airlines’ (Southwest) new service
                       between BWI and St. Louis Lambert Field (St. Louis) had on the number of
                       passengers and the fares they paid for travel between St. Louis and Dulles
                       and Reagan National; (3) Western Pacific’s new service between Dulles
                       and Denver International Airport (Denver) had on the number of
                       passengers and the fares they paid for travel between Denver and BWI and
                       Reagan National; and (4) Midway’s new service between Reagan National
                       and Raleigh-Durham International Airport (Raleigh-Durham) had on the
                       number of passengers and the fares they paid for travel between
                       Raleigh-Durham and Dulles and BWI. As discussed in the report and
                       appendix III, we assessed the substitutability of Washington’s three
                       airports by determining the extent to which passengers switched from one
                       Washington area airport to another when new service became available.
                       The more the airports are substitutable, the more likely passengers are to
                       switch airports in response to new service options.


                       ValuJet’s entry at Dulles significantly increased the number of passengers
Valujet’s Entry at     who flew on low-fare tickets for travel between Dulles and Atlanta. The
Dulles During 1994     number of passengers paying between $50 and $99 for one-way tickets
Suggests That Reagan   between Atlanta and Dulles increased almost fivefold, from about 1,000 to
                       almost 5,000 passengers between the end of 1993 and the end of 1994.
National and Dulles    Similarly, but to a lesser extent, ValuJet had the same effect on low fares
May Be Substitutes     and passenger traffic at Reagan National. Over the same period, the
                       number of low-fare passengers served by Delta Air Lines (Delta) increased
for Leisure            modestly, from 7,640 to 9,850, suggesting that Delta viewed the two
Passengers but That    airports as substitutes. However, the number of low-fare passengers on
Business Passengers    this route decreased overall because Trans World Airlines (TWA) stopped
                       serving this route after ValuJet’s entry at Dulles. In contrast, ValuJet’s
Regard Each Airport    entry at Dulles did not exert a downward pressure on the higher fares paid
as Separate            by business passengers at any of the three area airports, and the number of
                       passengers paying these fares remained about the same. Since the airlines
                       did not need to reduce fares charged to business passengers to keep them
                       from switching, we conclude that business travelers did not perceive the
                       three airports to be substitutes. On the other hand, because some leisure




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Additional Information on Substitutability of
Airports




passengers may have switched from BWI to Dulles to obtain lower fares, we
conclude that they regard the airports as moderate substitutes.

When ValuJet began service at Dulles in 1994, Delta was the principal
carrier of passengers between Dulles and Atlanta, an airport that also
serves as Delta’s operations hub. Delta, and to a much lesser extent, TWA
and US Airways, provided nonstop service to each of the three
Washington, D.C., area airports at a wide variety of fares. When ValuJet
began offering low-fare service between Dulles and its base of operations,
Atlanta, during the second quarter of 1994, most of ValuJet’s passengers
flew on tickets that cost between $50 and $99 each way, usually for a
round-trip ticket.33 In comparison, fares charged by the other air carriers
for travel between Washington’s three airports and Atlanta ranged
between $50 and $549.

At Dulles, ValuJet’s entry into the market for travel between Dulles and
Atlanta had a significant impact on the fares charged by Delta, which
appeared to have lowered the fares it charged between those airports. As
shown in figure IV.1, the distribution of fares on Delta for travel between
Dulles and Atlanta shifted substantially in favor of lower fares after
ValuJet began its operations.34 Because Delta offered more seats at prices
matching some of ValuJet’s lower fares, the fares generally charged to
leisure passengers, Delta’s passenger levels at lower fare levels
dramatically increased from approximately 11,700 to 29,000 passengers
per quarter (or about 130 to 320 per day) for fares between $50 and $199.
In contrast, the impact of ValuJet’s entry on the number of passengers
traveling at the more expensive fares, those between $300 and $399 each
way, did not change substantially. These lower fares also resulted in a
greater number of passengers traveling between Dulles and Atlanta, an
increase from 54,220 (about 593 passengers per day) to 94,950 passengers
(about 1,038 per day).




33
  These fares are based on round-trip and one-way itineraries and are expressed on a one-way basis.
34
  We examined changes in airfares for the period covering 2 quarters before the new carrier’s entry
through 2 quarters after. In this case, we examined changes in Delta’s fares in the fourth quarters of
1993 and 1994. Looking at changes across the same seasonal quarter also helps minimize any changes
in airfares associated with seasonality (i.e., comparing traffic and fares during peak summer travel
with those during the winter off-season).



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                                          Additional Information on Substitutability of
                                          Airports




Figure IV.1: Change in the Distribution
of Fares and the Number of
Passengers Flying on Delta Between
Dulles and Atlanta, Before and After,
ValuJet’s Entry Into the Dulles-Atlanta
Market




                                          Note: To ease comparisons on the total number of passengers among the three airports, we used
                                          the same scale showing the number of passengers for each airport.

                                          Source: GAO’s analysis of DOT’s data.




                                          ValuJet’s offering low fares in the market between Dulles and Atlanta had
                                          a similar, but more modest effect on fares and passenger traffic between
                                          Reagan National and Atlanta. The distribution of fares that Delta charged
                                          for travel between Reagan National and Atlanta changed only slightly in
                                          response to ValuJet’s entry at Dulles. As figure IV.2 shows, the only
                                          substantial change was an increase in the number of passengers, from
                                          6,600 passengers per quarter to nearly 22,500 per quarter, paying between
                                          $150 and $199 to travel between Dulles and Atlanta. This increase took
                                          place in a fare category whose prices exceeded the $50 to $99 charged by
                                          ValuJet for the same route. For the $50 to $99 fare category at Reagan
                                          National, the increase in the number of passengers was quite
                                          moderate—an increase of 7,600 to 9,900 passengers. In contrast, over the
                                          same time period, the number of the more expensive business tickets sold




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                                          Additional Information on Substitutability of
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                                          changed only slightly. Part of Delta’s increased passenger loads may be
                                          attributable to TWA’s dropping service between Reagan National and
                                          Atlanta during 1994.


Figure IV.2: Change in the Distribution
of Fares and Number of Passengers
Flying on Delta Between Reagan
National and Atlanta, Before and After
ValuJet’s Entry Into the Dulles-Atlanta
Market




                                          Source: GAO’s analysis of DOT’s data.




                                          After ValuJet’s entry at Dulles, the number of BWI passengers traveling in
                                          the lower fare category—$50 to $99—fell significantly, even though Delta
                                          did not reduce its total capacity in the market. As seen in figure IV.3, the
                                          number of low-fare passengers in this category decreased from about
                                          43,000 to about 26,000. Thus, it appears that passengers who had been
                                          traveling on low fares between BWI and Atlanta switched to Dulles.
                                          However, the distribution of fares generally paid by business passengers
                                          remained largely unchanged by ValuJet’s entry at Dulles. US Airways (then
                                          USAir) also served the route between BWI and Atlanta. After ValuJet began




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                                          Additional Information on Substitutability of
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                                          service at Dulles, the distribution of fares paid by passengers on US
                                          Airways remained largely unchanged.


Figure IV.3: Change in the Distribution
of Fares and Number of Passengers
Flying on Delta Between BWI and
Atlanta, Before and After ValuJet’s
Entry Into the Dulles-Atlanta Market




                                          Source: GAO’s analysis of DOT’s data.



                                          Southwest’s entry into the market between BWI and St. Louis demonstrated
Southwest’s Service                       that many leisure passengers apparently were willing to go to BWI to obtain
Between BWI and St.                       the low fares available there rather than continuing to use Reagan
Louis Suggests That                       National. Southwest began service between BWI and St. Louis during the
                                          second quarter of 1994. Before Southwest began service between BWI and
Reagan National,                          St. Louis, TWA and US Airways served that route. Between the fourth
Dulles, and BWI Are                       quarter of 1993 and the fourth quarter of 1994, the total number of
                                          passengers flying between Baltimore and St. Louis grew from under 30,000
Substitutes for                           to over 80,000 (an increase of over 174 percent).35 By the fourth quarter of
Leisure Passengers                        1994, Southwest carried nearly 31,000 passengers between BWI and St.
but Not for Business                      Louis (almost 340 per day, each way), each of whom paid between $50 and
                                          $99 each way.
Passengers
                                          35
                                           A year before Southwest’s entry on this route, the BWI-St. Louis market ranked as the 624th largest
                                          U.S. domestic city pair, with approximately 25,000 passengers per quarter (nearly 280 passengers per
                                          day). One year after Southwest entered the market, it was the 147th largest market, with about 106,000
                                          passengers flying that quarter (nearly 1,200 per day).



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As shown in figure IV.4, the new service by Southwest changed both the
competition in the BWI—St. Louis market and the distribution of fares. US
Airways, which carried about 4,900 passengers (or about 54 per day) on
that route in the third quarter of 1993, dropped its service. TWA, which
carried more than three times as many passengers than US Airways during
the same quarter, matched some of Southwest’s fares and the number of
passengers traveling at low fares increased dramatically. Prior to
Southwest’s entry, TWA carried about 6,500 passengers per quarter
(slightly more than 70 per day) at fares of less than $100 each way during
the fourth quarter of 1993. One year later, during the fourth quarter of
1994, the number of passengers traveling on TWA at fares of less than $100
increased to over 33,000 per quarter (about 365 per day). Some of that
increase is likely attributable to TWA’s increasing its capacity (measured
by the amount of available seats, reflecting either an increase in flight
frequency or the use of larger aircraft) between BWI and St. Louis by
almost 50 percent over the period. On the other hand, the number of
passengers paying high fares declined. The number of passengers paying
between $200 and $299 declined from more than 3,100 per quarter (about
34 per day) to about 500 per quarter (about 6 per day).




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                                          Additional Information on Substitutability of
                                          Airports




Figure IV.4: Change in the Distribution
of Fares and Number of Passengers
Flying on TWA Between BWI and St.
Louis, Before and After Southwest’s
Entry Into the BWI-St. Louis Market




                                          Source: GAO’s analysis of DOT’s data.




                                          Southwest’s service between BWI and St. Louis affected the distribution of
                                          fares paid for nonstop service offered by TWA between Reagan National
                                          and St. Louis, especially for lower fares typically paid by leisure travelers.
                                          As shown in figure IV.5, the number of passengers paying between $50 and
                                          $149 at Reagan National declined from about 19,000 per quarter (about 211
                                          per day) to about 6,000 per quarter (about 66 per day), despite TWA’s
                                          adding more than 20 percent in capacity in the market. These passengers
                                          likely switched to the low-fare service being offered between BWI and St.
                                          Louis—as described earlier, the number of passengers flying at fares less
                                          than $100 each way increased dramatically after Southwest began its
                                          service. Thus, many of the passengers who paid low fares—generally
                                          leisure passengers—were willing to go to BWI for the lower available fares
                                          rather than continuing with TWA’s somewhat higher fares at Reagan
                                          National. In contrast, the number of higher-fare passengers traveling




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                                          Additional Information on Substitutability of
                                          Airports




                                          between Reagan National and St. Louis (those traveling for fares between
                                          $200 and $299 each way) declined only marginally during the period. As a
                                          result, we conclude that these passengers—who are likely to be business
                                          passengers—were not willing to substitute BWI for Reagan National.


Figure IV.5: Change in the Distribution
of Fares and Number of Passengers
Flying on TWA Between Reagan
National and St. Louis, Before and
After Southwest’s Entry Into the
BWI-St. Louis Market




                                          Source: GAO’s analysis of DOT’s data.




                                          The change in the distribution of passengers and fares paid for service
                                          between Dulles and St. Louis is similar to the change observed on service
                                          between Reagan National and St. Louis, although the number of
                                          passengers traveling between Dulles and St. Louis is much smaller. As
                                          shown in figure IV.6, the number of passengers paying low fares declined
                                          modestly. The number of passengers paying between $50 and $149 each
                                          way declined from roughly 4,100 during the fourth quarter of 1993 (under
                                          50 per day) to about 2,200 during the same quarter of 1994 (less than 25




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                                          Airports




                                          per day). Over the same period, TWA also increased its capacity between
                                          these two airports by roughly 16 percent. This shows some willingness on
                                          the part of low-fare passengers to switch from Dulles to BWI. In contrast,
                                          there is little evidence that high-fare passengers are willing to switch. In
                                          fact, the number of passengers paying more than $150 each way increased.


Figure IV.6: Change in the Distribution
of Fares and Number of Passengers
Flying on TWA Between Dulles and St.
Louis, Before and After Southwest’s
Entry Into the BWI-St. Louis Market




                                          Source: GAO’s analysis of DOT’s data.




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                        Additional Information on Substitutability of
                        Airports




                        An academic study of Southwest’s service from BWI to Cleveland and
                        Chicago Midway airports is consistent with our analysis.36 That analysis of
                        the effect that Southwest’s entry into those markets had on passenger
                        traffic and fares from Reagan National and Dulles showed that
                        Southwest’s entry stimulated significant new passenger traffic and
                        lowered fares at BWI and had smaller, less uniform effects at Reagan
                        National and Dulles.


                        Western Pacific Airlines was a small, low-cost carrier offering service
Western Pacific’s       between Dulles and Colorado Springs, which was initially its main base of
Service Between         operations. In 1997, Western Pacific moved its base of operations to
Dulles and Denver       Denver, which is also a hub for United Airlines (United). Because Western
                        Pacific moved its operations to Denver, its nonstop service between Dulles
Suggests That New       and Denver competed directly with United Airlines’ nonstop service
Long-Haul Service at    between those two airports and potentially competed with nonstop service
                        between BWI and Denver. There is no nonstop service between Reagan
Dulles Had Little       National and Denver because Denver is outside Reagan National’s
Effect on Passengers’   perimeter. Western Pacific has since ceased its operations.
Preferences for
                        The new service offered by Western Pacific between Dulles and Denver
Reagan National or      changed the fares charged by United. United carried substantially more
BWI                     passengers at low fares after Western Pacific moved its operations to
                        Denver than it had carried before. As shown in figure IV.7, during the
                        fourth quarter of 1996, United carried approximately 41,000 passengers
                        (about 450 per day) at fares between $100 and $249 each way. After
                        Western Pacific’s move, United carried about 73,000 passengers (about 800
                        per day) in the same price range. United made this change in fares with
                        only a minor (about 2 percent) increase in its total capacity on this route.
                        The presence of Western Pacific also substantially reduced the number of
                        passengers paying high fares of between $500 and $699 each way. Prior to
                        Western Pacific’s service to Denver, United carried about 13,000
                        passengers per quarter (about 140 per day) at those higher fares, but that
                        figure dropped to about 2,400 (less than 30 per day) after Western Pacific’s
                        move.

                        36
                          Dresner, Martin, Jiun-Sheng Chris Lin, and Robert Windle, “The Impact of Low-Cost Carriers on
                        Airport and Route Competition,” Journal of Transport Economics and Policy, Sept. 1996, pp. 309-328.
                        The study concluded that Southwest’s entry into the Cleveland market had no apparent effect on
                        passenger traffic between Reagan National or Dulles and Ohio, but that its entry into Chicago’s
                        Midway Airport may have had some effect on prices between Reagan National and Illinois. While the
                        methodology of this study was somewhat different than our methodology, the basic conclusion is the
                        same–the introduction of new service did not substantially change the traffic at other area airports.
                        The authors noted that the decline in fares between Reagan National and Illinois followed the decline
                        at BWI by 9 months, and may have been triggered by an unusually steep decline in passenger traffic at
                        the airport during the end of 1993 and beginning of 1994.



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                                          Additional Information on Substitutability of
                                          Airports




Figure IV.7: Change in the Distribution
of Fares and Number of Passengers
Flying on United Between Dulles and
Denver, Before and After Western
Pacific’s Entry Into the Dulles-Denver
Market




                                          Source: GAO’s analysis of DOT’s data.




                                          Western Pacific’s service between Dulles and Denver had an effect on
                                          some leisure and business fares for travel between BWI and Denver. In
                                          addition, the total number of passengers traveling between Dulles and
                                          Denver increased substantially. As shown in figure IV.8, after Western
                                          Pacific began its service, United carried more passengers between BWI and
                                          Denver. The number of passengers paying fares between $100 and $249
                                          each way increased from about 7,200 (about 80 per day) to about 13,500
                                          (nearly 150 per day) from the fourth quarter of 1996 to the same period in
                                          1997. This may be because United increased the number of available
                                          low-fare seats between BWI and Denver to be more comparable with the
                                          number available between Dulles and Denver. As at Dulles, United added
                                          very little capacity to the route, increasing its number of available seats by
                                          less than 3 percent. As such, it is evident that BWI and Dulles are partial
                                          substitutes for leisure traffic. Because of the lower fares between BWI and
                                          Denver, there was a decrease in the number of passengers paying
                                          relatively high fares. The number of travelers paying fares between $600
                                          and $749 declined from about 2,700 (about 30 per day) to about 1,610 (less




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                                          than 18 per day) per quarter. However, because the number of passengers
                                          paying high fares for flights between Dulles and Denver also fell during
                                          this period, we conclude that the decline in the number of high-fare
                                          passengers occurred because those passengers were able to take
                                          advantage of the additional competition to pay lower fares at their
                                          preferred airport rather than switching from one airport to another.


Figure IV.8: Change in the Distribution
of Fares and Number of Passengers
Flying on United Between BWI and
Denver, Before and After Western
Pacific’s Entry Into the Dulles-Denver
Market




                                          Source: GAO’s analysis of DOT’s data.




                                          In addition to assessing the impact of Western Pacific’s new nonstop
                                          service at Dulles on other nonstop service from the Washington, D.C.,
                                          area, we assessed the effect that this new service had on the number of
                                          passengers and fares that used connecting service. We did so because the
                                          perimeter rule precludes any nonstop service between Reagan National
                                          and Denver. We found that, prior to Western Pacific’s entry, relatively few




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                        passengers took connecting flights from the Washington, D.C., area to
                        Denver. Approximately 25 percent of all Washington-Denver traffic took
                        connecting flights, while the vast majority flew nonstop between Dulles or
                        BWI and Denver. Most of those who took connecting flights did so from
                        Reagan National, and most of them flew at relatively low fares. After
                        Western Pacific began its service, the number of passengers on connecting
                        flights at relatively low fares for travel between Reagan National and
                        Denver increased by about one-third, while the number of passengers on
                        connecting flights at relatively low fares for travel between BWI or Dulles
                        and Denver decreased by similar percentages. We did not find that
                        Western Pacific’s low-fare service caused any shift in the airports used by
                        travelers making connections.


                        Our analysis of the effect that Midway had on fares for travel between the
Midway’s Service        three Washington, D.C., area airports and Raleigh-Durham, North Carolina,
Between Reagan          did not suggest that passengers are willing to change airports to obtain
National and            different service or fares. Midway began operations in November 1993 at
                        Midway Airport in Chicago. In March 1995, it moved its hub to
Raleigh-Durham          Raleigh-Durham. It began serving several routes, mainly in the eastern
Suggests That           United States, that were being dropped by American Airlines (American).
                        One of these routes was between Reagan National and Raleigh-Durham.
Passengers Do Not       (American dropped its service between Raleigh-Durham and BWI at the end
Treat Reagan            of 1994 and its service between Raleigh-Durham and Reagan National in
National, Dulles, and   the second quarter of 1995.) Although Midway is not considered to be a
                        low-fare airline like the other new entrant airlines whose experience we
BWI as Substitutes      examined, we included it in our analysis because its initiating service at
                        Reagan National was the only such event during the 1990s.

                        Unlike the other entry events that we examined, Midway did not enter the
                        market with substantially lower fares than American had been charging.
                        Midway carried about the same number of passengers at each fare level as
                        American had carried before eliminating its service between Reagan
                        National and Raleigh-Durham, although Midway carried a somewhat
                        higher number of passengers at lower fares. For example, in the first
                        quarter of 1995, American carried 43 percent of its Reagan
                        National-Raleigh-Durham passengers at fares of between $100 and $149
                        each way. In the first quarter of 1996, Midway carried 47 percent of its
                        passengers for the same amount. As shown in figure IV.9, US Airways
                        carried more passengers between Reagan National and Raleigh-Durham at
                        fares of between $50 and $149 than it had before the service provided by
                        Midway replaced the service provided by American. US Airways had not



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                                          Airports




                                          significantly increased its capacity on that route between the first quarters
                                          of 1995 and 1996. It appears instead that US Airways made more seats
                                          available at those fares. We do not believe that the increase US Airways
                                          experienced is related to Midway’s replacing American on that route.
                                          Rather, we believe that Midway generally gained its passenger traffic from
                                          former American passengers.37


Figure IV.9: Change in the Distribution
of Fares and Number of Passengers
Flying on US Airways Between Reagan
National and Raleigh-Durham, Before
and After Midway’s Entry Into the
Reagan National-Raleigh-Durham
Market




                                          Source: GAO’s analysis of DOT’s data.




                                          The service offered by Midway between Reagan National and
                                          Raleigh-Durham had little impact on the number of passengers or the fares
                                          that they paid for travel between BWI and Raleigh-Durham, suggesting that
                                          travelers did not treat Reagan National and BWI as substitutes. Figure IV.10
                                          shows the number of passengers and the fares that they paid for travel
                                          between BWI and Raleigh-Durham before and after Midway began its
                                          service at Reagan National. The greatest difference is the large increase in
                                          the number of passengers paying between $250 and $299 each way, which

                                          37
                                            Midway also has a frequent flyer program relationship with American.



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                                       Airports




                                       was most likely caused by the exit of American Airlines. This increase is
                                       largely offset by a decrease in the number of passengers paying lower
                                       fares. However, the modest decrease in passengers paying low fares does
                                       not indicate that Midway’s new service caused any shift of traffic from BWI
                                       to Reagan National. Although this change in passenger traffic suggests that
                                       passengers did not treat these airports as substitutes, the change in the
                                       number of passengers and the fares they paid could also be explained by
                                       the fact that Midway’s entry did not substantially lower the fares that other
                                       airlines charged for service between Reagan National and
                                       Raleigh-Durham.


Figure IV.10: Change in the
Distribution of Fares and Number of
Passengers Flying on US Airways
Between BWI and Raleigh-Durham,
Before and After Midway’s Entry Into
the Reagan National-Raleigh-Durham
Market




                                       Source: GAO’s analysis of DOT’s data.




                                       Because there was no nonstop service from Dulles to Raleigh-Durham, we
                                       could not measure whether passengers would view those airports as
                                       substitutes.




                                       Page 50                                         GAO/RCED-99-234 Reagan National Airport
Appendix V

Comments From the Metropolitan
Washington Airports Authority and Our
Evaluation
Note: GAO comments
supplementing those in the
report text appear at the
end of this appendix.




See comment 1.




See comment 2.




                             Page 51   GAO/RCED-99-234 Reagan National Airport
                 Appendix V
                 Comments From the Metropolitan
                 Washington Airports Authority and Our
                 Evaluation




See comment 3.




See comment 4.




See comment 5.




                 Page 52                                 GAO/RCED-99-234 Reagan National Airport
                  Appendix V
                  Comments From the Metropolitan
                  Washington Airports Authority and Our
                  Evaluation




See comment 6.


Now footnote 4.




See comment 7.




See comment 8.




See comment 9.




                  Page 53                                 GAO/RCED-99-234 Reagan National Airport
Appendix V
Comments From the Metropolitan
Washington Airports Authority and Our
Evaluation




Page 54                                 GAO/RCED-99-234 Reagan National Airport
Appendix V
Comments From the Metropolitan
Washington Airports Authority and Our
Evaluation




The following are GAO’s responses to the Metropolitan Washington
Airports Authority’s (MWAA) August 16, 1999, letter.

1. As we have reported in the past, operational barriers such as slot and
perimeter rules impede airline competition–the goal of the industry’s 1978
deregulation. In this report, we clearly state that the report was done to
examine the impact of various legislative proposals on the operations of
the Washington, D.C., area airports and not to assess any underlying
policies. We agree that the draft report could have more clearly stated that
it is not intended to analyze the potential effect of changes in operations at
Reagan National on noise, congestion, and other environmental concerns,
and we made appropriate changes.

2. We believe, as does DOT, that “balanced capacity” is a more appropriate
method for determining an airport’s capacity than the method suggested
by MWAA. While MWAA contends that Instrument Flight Rules (IFR) should be
used to measure capacity, DOT’s Technical Supplement No. 3 to its 1995
report38 points out that IFR airfield capacity is indicative of the lowest level
of available capacity, and thus virtually ensures constant availability of an
airfield.39 In practice, this approach would leave large amounts of airfield
capacity unused because a significantly higher capacity could be achieved
during the better weather conditions under which Visual Flight Rules
apply.40 According to data from FAA, less than 0.5 percent of all air traffic
operations at Reagan National in 1998 were delayed because of weather
conditions. Because setting the number of slots on the basis of balanced
capacity reflects both bad and good weather conditions, we did not revise
our report.

3. By limiting its comments to how delays would change in IFR conditions,
MWAA suggests that the prevailing weather conditions at Reagan National
require IFR operations every day. However, as noted earlier, FAA data show
that less than 0.5 percent of all air traffic operations at Reagan National in
1998 were delayed because of weather conditions. We do not agree that
we understated the potential delay caused by weather, having noted in the
report that delays of 15 minutes or more could increase. Furthermore, we


38
  U.S. DOT, Report to the Congress: A Study of the High Density Rule, May 1995.
39
 Instrument Flight Rules govern procedures for conducting aircraft operations during weather
conditions when the cloud ceiling is less than 1,000 feet and/or visibility is less than 3 miles, requiring
certain aircraft separations and other operating standards.
40
 Visual Flight Rules govern procedures for conducting aircraft operations when the cloud ceiling is
more than 1,000 feet and visibility is 3 miles or more. Airport capacity under these conditions is
generally significantly higher than under conditions under Instrument Flight Rules.



Page 55                                                   GAO/RCED-99-234 Reagan National Airport
Appendix V
Comments From the Metropolitan
Washington Airports Authority and Our
Evaluation




clearly indicate how delays would increase if the slot rule were eliminated.
Thus, we did not revise our report.

4. MWAA correctly notes that the DOT study estimated that adding seven
additional slots per hour would result in an overall net loss and an
increase in delays. The DOT study points out, however, that consumers
would benefit from additional flight services and that the airport would
benefit from an increase in landing fees, even as the airlines would
experience a net loss because of delays. MWAA also correctly notes airlines’
increasing use of regional jets. However, FAA and DOT do not believe that
this change alters their calculations of Reagan National’s balanced
capacity. Thus, we did not revise the report.

5. We do not believe our report implies that MWAA supports an increase in
operations. Rather, the report acknowledges MWAA’s recognition that the
airport could accommodate additional flights.

6. MWAA correctly notes that federal law permits airlines to operate small
jet aircraft (that is, “regional jets”) in commuter slots. However, we do
not believe that clarification is necessary in response to this comment. A
footnote in our report explains that we considered both regional jets and
turboprop aircraft seating fewer than 56 passengers to be commuter
aircraft, and that we considered aircraft seating 56 passengers or more
(that is, “large aircraft”), most of which are not turboprops, to be jets.
Large aircraft are not permitted to use commuter slots.

7. MWAA correctly notes that the transfer of Reagan National and Dulles
airports from federal to local authority did not take place immediately
upon the passage of the Metropolitan Washington Airports Act of 1986.
Rather, that act led to the transfer of authority in June 1987. We modified
our report in response to this comment.

8. We used actual and projected data that were the most currently
available from FAA at the time of our work. In addition, data submitted by
the airlines to DOT indicate that, in 1998, BWI handled more passengers than
Dulles, and nearly as many as Reagan National. Thus, we continue to
believe that these data are valid and made no change to the report.

9. MWAA notes that preferential gate use at Reagan National is not a
“use-or-lose” concept. In response, we clarified the narrative. Also in
response to MWAA, we revised the report to clarify that a tenant airline may
not prevent a new entrant from gaining access to a gate when the gate is



Page 56                                 GAO/RCED-99-234 Reagan National Airport
Appendix V
Comments From the Metropolitan
Washington Airports Authority and Our
Evaluation




not being used and that MWAA could reallocate gates at any time, not just
during the formal reassessment periods that take place every 3 years.




Page 57                                 GAO/RCED-99-234 Reagan National Airport
Appendix VI

GAO Contacts and Staff Acknowledgments


                  John H. Anderson, Jr. (202) 512-2834
GAO Contacts
                  Steven C. Martin (202) 512-2834


                  In addition to those named above, Sonja Bensen, Stephen Brown, Aaron
Acknowledgments   Casey, David Hooper, Joseph Kile, and Lewison Lem made key
                  contributions to this report.




                  Page 58                                GAO/RCED-99-234 Reagan National Airport
Related GAO Products


              Airline Deregulation: Changes in Airfares, Service Quality, and Barriers to
              Entry (GAO/RCED-99-92, Mar. 4, 1999).

              Aviation Competition: Effects on Consumers From Domestic Airline
              Alliances Vary (GAO/RCED-99-37, Jan. 15, 1999).

              Aviation Competition: Proposed Domestic Airline Alliances Raise Serious
              Issues (GAO/T-RCED-98-215, June 4, 1998).

              Domestic Aviation: Service Problems and Limited Competition Continue in
              Some Markets (GAO/T-RCED-98-176, Apr. 23, 1998).

              Aviation Competition: International Aviation Alliances and the Influence of
              Airline Marketing Practices (GAO/T-RCED-98-131, Mar. 19. 1998).

              Airline Competition: Barriers to Entry Continue in Some Domestic
              Markets (GAO/T-RCED-98-112, Mar. 5, 1998).

              Domestic Aviation: Barriers Continue to Limit Competition
              (GAO/T-RCED-98-32, Oct. 28, 1997).

              Airline Deregulation: Addressing the Air Service Problems of Some
              Communities (GAO/T-RCED-97-187, June 25, 1997).

              International Aviation: Competition Issues in the U.S.-U.K. Market
              (GAO/T-RCED-97-103, June 4, 1997).

              Domestic Aviation: Barriers to Entry Continue to Limit Benefits of Airline
              Deregulation (GAO/T-RCED-97-120, May 13, 1997).

              Airline Deregulation: Barriers to Entry Continue to Limit Competition in
              Several Key Domestic Markets (GAO/RCED-97-4, Oct. 18, 1996).

              Domestic Aviation: Changes in Airfares, Service, and Safety Since Airline
              Deregulation (GAO/T-RCED-96-126, Apr. 25, 1996).

              Airline Deregulation: Changes in Airfares, Service, and Safety at Small,
              Medium-Sized, and Large Communities (GAO/RCED-96-79, Apr. 19, 1996).

              International Aviation: Airline Alliances Produce Benefits, but Effect on
              Competition Is Uncertain (GAO/RCED-95-99, Apr. 6, 1995).




              Page 59                                 GAO/RCED-99-234 Reagan National Airport
           Related GAO Products




           Airline Competition: Higher Fares and Less Competition Continue at
           Concentrated Airports (GAO/RCED-93-171, July 15, 1993).

           Computer Reservation Systems: Action Needed to Better Monitor the CRS
           Industry and Eliminate CRS Biases (GAO/RCED-92-130, Mar. 20, 1992).

           Airline Competition: Effects of Airline Market Concentration and Barriers
           to Entry on Airfares (GAO/RCED-91-101, Apr. 26, 1991).

           Airline Deregulation: Trends in Airfares at Airports in Small and
           Medium-Sized Communities (GAO/RCED-91-13, Nov. 8, 1990).

           Airline Competition: Industry Operating and Marketing Practices Limit
           Market Entry (GAO/RCED-90-147, Aug. 29, 1990).

           Airline Competition: Higher Fares and Reduced Competition at
           Concentrated Airports (GAO/RCED-90-102, July 11, 1990).

           Airline Deregulation: Barriers to Competition in the Airline Industry
           (GAO/T-RCED-89-65, Sept. 20, 1989).

           Airline Competition: Fare and Service Changes at St. Louis Since the
           TWA-Ozark Merger (GAO/RCED-88-217BR, Sept. 21, 1988).

           Competition in the Airline Computerized Reservation Systems
           (GAO/T-RCED-88-62, Sept. 14, 1988).

           Airline Competition: Impact of Computerized Reservation Systems
           (GAO/RCED-86-74, May 9, 1986).

           Airline Takeoff and Landing Slots: Department of Transportation’s Slot
           Allocation Rule (GAO/RCED-86-92, Jan. 31, 1986).

           Deregulation: Increased Competition Is Making Airlines More Efficient and
           Responsive to Consumers (GAO/RCED-86-26, Nov. 6, 1985).




(348164)   Page 60                                 GAO/RCED-99-234 Reagan National Airport
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