Domestic Aviation: Barriers Continue to Limit Competition

Published by the Government Accountability Office on 1997-10-28.

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

                   United States General Accounting Office

GAO                Testimony
                   Before the Committee on Commerce, Science and
                   Transportation, U.S. Senate

For Release
on Delivery
Expected at
                   DOMESTIC AVIATION
2:30 p.m. EST
October 28, 1997
                   Barriers Continue to Limit
                   Statement by Gerald L. Dillingham
                   Associate Director, Transportation Issues,
                   Resources, Community, and Economic
                   Development Division

    Mr. Chairman and Members of the Committee:

    We appreciate the opportunity to testify on the air service problems that
    some communities have experienced since the deregulation of the airline
    industry in 1978. Airline deregulation has led to lower airfares and better
    service for most air travelers, largely because of increased competition
    spurred by the entry of new airlines into the industry and established
    airlines into new markets. As we reported in April 1996, however, some
    airports—particularly those serving small and medium-sized communities
    in the East and upper Midwest—have not experienced such entry and thus
    have experienced higher fares and less convenient service since
    deregulation.1 In an October 1996 report and testimonies earlier this year,
    we reported that certain industry practices, such as restrictive gate-leasing
    arrangements at a number of key hub airports in these regions, have
    contributed to these problems.2 We concluded that the full benefits of
    deregulation have yet to be realized because of problems with access to
    certain airports and the cumulative effect of certain marketing strategies
    employed by established airlines. Our testimony today summarizes
    findings from our prior work on operating barriers and recent actions
    taken by the Department of Transportation (DOT) in connection with those
    findings. We will also discuss how the draft Aviation Competition
    Enhancement Act of 1997 and other initiatives seek to address those

    In summary:

•   A combination of factors continues to limit entry at airports serving small
    and medium-sized communities in the East and upper Midwest. These
    factors include the dominance of routes to and from those airports by one
    or two traditional hub-and-spoke airlines3 and operating barriers, such as

    Airline Deregulation: Changes in Airfares, Service, and Safety at Small, Medium-Sized, and Large
    Communities (GAO/RCED-96-79, Apr. 19, 1996).
     Airline Deregulation: Barriers to Entry Continue to Limit Competition in Several Key Domestic
    Markets (GAO/RCED-97-4, Oct. 18, 1996); Airline Deregulation: Addressing the Air Service Problems of
    Some Communities (GAO/T-RCED-97-187, June 25, 1997); and Domestic Aviation: Barriers to Entry
    Continue to Limit Benefits of Airline Deregulation (GAO/T-RCED-97-120, May 13, 1997). Related GAO
    products are listed at the end of this statement.
     These airlines include the nation’s seven largest: American Airlines, Continental Airlines, Delta Air
    Lines, Northwest Airlines, TWA, United Airlines, and US Airways.

    Page 1                                                                             GAO/T-RCED-98-32
    slot controls4 and long-term exclusive-use gate leases at hub airports. In
    contrast, the more wide-spread entry of new airlines at airports in the
    West and Southwest since deregulation—and the resulting geographic
    differences in fare and service trends—has stemmed largely from the
    greater economic growth in those regions as well as from the absence of
    dominant market positions of incumbent airlines and barriers to entry.
•   We have found that little progress has been achieved in lowering the
    barriers to entry since we first reported on them in 1990.5 Slot controls
    continue to block entry at key airports in the East and upper Midwest. We
    recommended that DOT take actions to promote competition in regions
    that have not experienced lower fares as a result of airline deregulation by
    creating a pool of available slots by periodically withdrawing some
    grandfathered slots from the major incumbents and redistributing them in
    a fashion that increases competition. Moreover, we suggested that, absent
    action by DOT, the Congress may wish to consider revising the legislative
    criteria that govern DOT’s granting slots to new entrants. We also suggested
    that the Congress consider granting DOT the authority to allow exemptions
    on a case-by-case basis to the perimeter rule6 at National Airport when the
    proposed service will substantially increase competition.
•   In response to our recommendations, DOT indicated that it would revise its
    restrictive interpretation of the legislative criteria governing the granting
    of new slots. On October 24, 1997, DOT announced its decision on some of
    the pending requests for slot exemptions and set forth its new policy on
    slot exemptions. DOT also is evaluating how effectively slots are being used
    and it is formalizing a policy that will identify anticompetitive behavior as
    a precursor for formal enforcement action.
•   The proposed Aviation Competition Enhancement Act of 1997 addresses
    three barriers to competition: slot controls, the perimeter rule, and
    predatory behavior by air carriers.
•   Increasing competition and improving air service at airports serving small
    and medium-sized communities that have not benefited from fare
    reductions and/or improved service since deregulation will likely entail a
    range of federal, regional, local, and private-sector initiatives. Recent
    national and regional conferences are examples of efforts to pool available

     To minimize congestion and reduce flight delays, the Federal Aviation Administration has since 1969
    set limits on the number of operations (takeoffs or landings) that can occur during certain periods of
    the day at four congested airports—Chicago O’Hare, Washington National, and New York Kennedy and
    LaGuardia. The authority to conduct a single operation during those periods is commonly referred to
    as a “slot.”
    Airline Deregulation: Barriers to Entry Continue to Limit Competition in Several Key Domestic
    Markets (GAO/RCED-97-4, Oct. 18, 1996).
     Rules governing operations at New York’s LaGuardia and Washington’s National airports prohibit
    flights to and from those airports that exceed a certain distance.

    Page 2                                                                          GAO/T-RCED-98-32
                       resources to focus on improving the airfares and quality of air service to
                       such communities. Other steps—such as improving access to gates—may
                       also be needed to further ameliorate current competitive problems.

                       Our April 1996 report found that since deregulation, fares have fallen and
Airline Barriers to    service has improved for most large-community airports. Our report also
Entry Persist and      found that substantial regional differences exist in fare and service trends,
Predominantly Affect   particularly among small- and medium-sized community airports. A
                       primary reason for these differences has been the greater degree of
Competition in the     economic growth that has occurred over the past two decades in larger
East and Upper         communities and in the West and Southwest. In particular, we noted that
                       most low-fare airlines that began interstate air service after deregulation,
Midwest                such as Southwest Airlines7 and America West, had decided to enter
                       airports serving communities of all sizes in the West and Southwest
                       because of those communities’ robust economic growth. By contrast,
                       low-fare carriers had generally avoided serving small- and
                       medium-sized-community airports in the East and upper Midwest, in part
                       because of the slower growth, harsher weather, and greater airport
                       congestion in those regions.

                       Our review of the trends in fares between 1979 and 1994 for a sample of
                       112 small-, medium-sized, and large-community airports8 identified 15
                       airports at which fares, adjusted for inflation, had declined by over
                       20 percent and 8 airports at which fares had increased by over 20 percent.
                       Each of the 15 airports where fares declined was located in the West or
                       Southwest, and low-fare airlines accounted for at least 10 percent of the
                       passenger boardings at all but one of those airports in 1994.9 On the other
                       hand, each of the eight airports where fares had increased by over
                       20 percent since deregulation was located in the Southeast and

                       Our April 1996 report also revealed similar findings concerning the trends
                       in service quantity and quality at the 112 airports. Large communities in

                        Before deregulation, Southwest provided intrastate air service within Texas.
                        Our sample of 112 airports included 49 airports serving small communities, 38 serving medium-sized
                       communities, and 25 serving large communities. In 1994, these airports accounted for about two-thirds
                       of all domestic airline departures and passenger enplanements in the United States. We defined small
                       communities as those with a metropolitan statistical area population of 300,000 or less, medium-sized
                       communities as those with a metropolitan statistical area population of 300,001 to 600,000, and large
                       communities as those with a metropolitan statistical area population of 1.5 million or more.
                        Of the 15 airports, 5 serve small communities, 5 serve medium-sized communities, and 5 serve large

                       Page 3                                                                          GAO/T-RCED-98-32
        general, and communities of all sizes in the West and Southwest, had
        experienced a substantial increase in the number of departures and
        available seats as well as improvements in such service quality indicators
        as the number of available nonstop destinations and the amount of jet
        service. However, without the cross-subsidy present under regulation,
        fares were expected to increase somewhat at airports serving small and
        medium-sized communities, and carriers were expected to substitute
        turboprop service for jet. Over time, smaller and medium-sized
        communities in the East and upper Midwest had generally experienced a
        decline in the quantity and quality of air service. In particular, these
        communities had experienced a sharp decrease in the number of available
        nonstop destinations and in the amount of jet service relative to turboprop
        service. This decrease occurred largely because established airlines had
        reduced jet service from these airports since deregulation and deployed
        turboprops to link the communities to those airlines’ major hubs.

        We subsequently reported in October 1996 that operating barriers at key
        hub airports in the East and upper Midwest, combined with certain
        marketing strategies of the established carriers, fortified established
        carriers’ dominance of those hub airports and routes linking those hubs
        with nearby small- and medium-sized-community airports. In the upper
        Midwest, there is limited competition in part because two airlines control
        nearly 90 percent of the takeoff and landing slots at O’Hare, and one
        airline controls the vast majority of gates at the airports in Minneapolis
        and Detroit under long-term, exclusive-use leases. Similarly, in the
        Southeast and Appalachia, one airline controls the vast majority of gates
        under exclusive-use leases at Cincinnati, Charlotte, and Pittsburgh.
        Finally, in the Northeast, a few established airlines control most of the
        slots at National, LaGuardia, and Kennedy. As a result, the ability of
        nonincumbents to enter these key airports and serve nearby small and
        medium-sized communities is very limited.

        Particularly for several key markets in the upper Midwest and East, the
        relative significance of those operating barriers in limiting competition and
        contributing to higher airfares has grown over time. As a result, our
        October 1996 report, which specifically addressed the effects of slot and
        perimeter rules, recommended that DOT take action to lower those
        barriers, and highlighted areas for potential congressional action.

Slots   To reduce congestion, FAA has since 1969 limited the number of takeoffs
        and landings that can occur at O’Hare, National, LaGuardia, and Kennedy.

        Page 4                                                      GAO/T-RCED-98-32
By allowing new airlines to form and established airlines to enter new
markets, deregulation increased the demand for access to these airports.
Such increased demand complicated FAA’s efforts to allocate takeoff and
landing slots equitably among the airlines. To minimize the government’s
role in the allocation of slots, DOT in 1985 began to allow airlines to buy
and sell them to one another. Under this “Buy/Sell Rule,” DOT
“grandfathered” slots to the holders of record as of December 16, 1985.
Emphasizing that it still owned the slots, however, DOT randomly assigned
each slot a priority number and reserved the right to withdraw slots from
the incumbents at any time. In addition, to mitigate the anticompetitive
effects of grandfathering, DOT retained about 5 percent of the slots at
O’Hare, National, and LaGuardia and in early 1986 distributed them in a
random lottery to airlines having few or no slots at those airports.

In August 1990, we reported that a few established carriers had built upon
the favorable positions they inherited as a result of grandfathering to such
an extent that they could limit access to routes beginning or ending at any
of the slot-controlled airports.10 We also reported that while the lottery
was successful in placing slots in the hands of some entrants and smaller
incumbents, the effect on entry over the long term was disappointing, in
part because many of the lottery winners subsequently went out of
business or merged with an established carrier.

Recognizing the need for new entry at the slot-controlled airports, the
Congress in 1994 created an exemption provision to allow additional slots
for entry at O’Hare, LaGuardia, and Kennedy when DOT “finds it to be in the
public interest and the circumstances to be exceptional.”11 In
October 1996, we reported that the level of control over slots by a few
established airlines had increased even further (see app. I). We found that
the exemption authority, which in effect allows DOT to issue new slots,
resulted in little new entry because DOT had interpreted the “exceptional
circumstances” criterion very narrowly. DOT had approved applications
only to provide service in markets not receiving nonstop service. We found
no congressional guidance, however, to support this interpretation. As a
result, little new entry occurred at these airports, which is crucial to
establishing new service in the heavily traveled eastern and midwestern

 Airline Competition: Industry Operating and Marketing Practices Limit Market Entry
(GAO/RCED-90-147, Aug. 29, 1990).
  FAA Authorization Act of 1994, P.L. 103-305, section 206. The number of flights at National Airport is
further limited by federal law to address local concerns about noise. As a result of these additional
limits, the Congress chose not to extend DOT’s exemption authority to include National.

Page 5                                                                             GAO/T-RCED-98-32
                  In our 1990 report, we outlined the pros and cons of various policy options
                  to promote airline competition. These options included keeping the
                  Buy/Sell Rule but periodically withdrawing a portion of slots that were
                  grandfathered to the major incumbents and reallocating them by lottery.
                  Because the situation had continued to worsen, we recommended in our
                  October 1996 report that DOT redistribute some of the grandfathered slots
                  to increase competition, taking into account the investments made by
                  those airlines at each of the slot-controlled airports. We also said that if
                  DOT did not choose to do so, the Congress may wish to consider revising
                  the legislative criteria that govern DOT’s exceptional circumstances
                  provision so that DOT could consider competitive benefits as a key
                  criterion in deciding whether or not to grant slots to new entrants.

Perimeter Rules   At LaGuardia and National airports, perimeter rules prohibit incoming and
                  outgoing flights that exceed 1,500 and 1,250 miles, respectively. The
                  perimeter rules were designed to promote Kennedy and Dulles airports as
                  the long-haul airports for the New York and Washington metropolitan
                  areas. However, the rules limit the ability of airlines based in the West to
                  compete because those airlines are not allowed to serve LaGuardia and
                  National airports from markets where they are strongest. By contrast,
                  because of their proximity to LaGuardia and National, each of the seven
                  largest established carriers is able to serve those airports from its principal

                  While the limit at LaGuardia was established by the Port Authority of New
                  York & New Jersey, National’s perimeter rule is federal law.12 Thus, in our
                  October 1996 report, we suggested that the Congress consider granting
                  DOT the authority to allow exemptions to the perimeter rule at National
                  when proposed service will substantially increase competition. We did not
                  recommend that the rule be abolished because removing it could have
                  unintended negative consequences, such as reducing the amount of
                  service to smaller communities in the Northeast and Southeast. This could
                  happen if major slot holders at National were to shift their service from
                  smaller communities to take advantage of more profitable, longer-haul
                  routes. As a result, we concluded that a more prudent course to increasing
                  competition at National would be to examine proposed new services on a
                  case-by-case basis.

                    The Metropolitan Washington Airports Act of 1986 (P.L. 99-591, sec. 6012).

                  Page 6                                                                         GAO/T-RCED-98-32
Long-Term, Exclusive-Use   Our reports have also identified restrictive gate leases as another barrier
Gate Leases                to establishing new or expanded service at some airports. These leases
                           permit an airline to hold exclusive rights to use most of an airport’s gates
                           over a long period of time, commonly 20 years. Such long-term,
                           exclusive-use gate leases prevent nonincumbents from securing necessary
                           airport facilities on equal terms with incumbent airlines. To gain access to
                           an airport in which most gates are exclusively leased, a nonincumbent
                           must sublet gates from the incumbent airlines—often at nonpreferred
                           times and at a higher cost than the incumbent pays. Since our 1990 report,
                           some airports, such as Los Angeles International, have attempted to regain
                           more control of their facilities by signing less restrictive, shorter-term
                           leases once the exclusive-use leases expired. Nevertheless, our
                           October 1996 report identified several airports in which entry was limited
                           because most of the gates were under long-term, exclusive-use leases with
                           one airline.

                           Although the development, maintenance, and expansion of airport
                           facilities is essentially a local responsibility, most airports are operated
                           under federal restrictions that are tied to the receipt of federal grant
                           money from FAA. In our 1990 report, we suggested that one way to alleviate
                           the barrier created by exclusive-use gate leases would be for FAA to add a
                           grant restriction that ensures that some gates at an airport would be
                           available to nonincumbents. Because many airports have taken steps since
                           then to sign less restrictive gate leases, we concluded in our 1996 report
                           that such a broad grant restriction was not necessary. However, to address
                           the remaining problem areas, we recommended that when disbursing
                           airport improvement grant moneys, FAA give priority to those airports that
                           do not lease the vast majority of their gates to one airline under long-term,
                           exclusive-use terms.

                           In response to our October 1996 report, DOT stated in January of this year
DOT’s Recent               that it shared our concerns that barriers to entry limit competition in the
Announcements              airline industry. The agency indicated that it would include competitive
Indicate Willingness       benefits as a factor when determining whether to grant slots to new
                           entrants under the exceptional circumstances criterion. DOT also
to Increase                committed to giving careful consideration to our recommendation that it
Competition                create a pool of available slots and periodically reallocate them, but that it
                           might choose to pursue alternative means to enhancing competition. On
                           October 3, 1997, DOT announced that it would soon publicly issue a number
                           of initiatives aimed at enhancing competition. Two of those initiatives
                           related to identified problems: providing access to high-density airports

                           Page 7                                                       GAO/T-RCED-98-32
                       through slot exemptions and investigating allegations of anticompetitive

                       As of mid-October, DOT had 174 requests for slot exemptions, most of
                       which were for slots at O’Hare and LaGuardia airports. On Friday,
                       October 24, 1997, DOT issued its decision on some of the requests for slot
                       exemptions and set forth its new policy on slot exemptions, which has
                       been expanded to take into account the need for increased competition at
                       the slot controlled airports. Because some in government and academia
                       believe that slots at some airports may be underutilized, DOT is also
                       evaluating how effectively slots are being used at these airports.

                       Finally, DOT has expressed concern about potentially over-aggressive
                       attempts by some established carriers to thwart new entry. According to
                       DOT, over the past 16 months, there has been an increasing number of
                       allegations of anticompetitive practices, such as predatory conduct, aimed
                       at new competition, particularly at major network hubs. DOT is formulating
                       a policy that will more clearly delineate what is acceptable and
                       unacceptable behavior in the area of competition between major carriers
                       at their hubs and smaller, low-cost competitors. This policy is to indicate
                       those factors DOT will consider in pursuing remedies through formal
                       enforcement actions.

                       The proposed Aviation Competition Enhancement Act of 1997 has been
Aviation Competition   drafted to promote domestic competition. The legislation targets three of
Enhancement Act of     the barriers to competition: slot controls, the perimeter rule, and
1997 Would Address     predatory behavior by air carriers.

Identified Issues      The bill would create a mechanism by which DOT would increase access to
                       the slot-controlled airports. Under the draft legislation, where slots are not
                       available from DOT, the Department would be required to periodically
                       withdraw a small portion of the slots that were grandfathered to
                       incumbent airlines and reallocate them among new entrant and limited
                       incumbent air carriers.13 Slots would not be withdrawn if they were
                       already being used to serve certain small or medium-sized airports. This
                       provision of the proposed bill is consistent with the spirit of our
                       recommendation on slots and provides a good starting point for the debate
                       about how such a process should be used and its potential impact. Our
                       recommendation recognized the sensitivities with withdrawing and

                         The proposed bill specifies that generally not more than 10 percent of incumbents’ grandfathered
                       slots could be withdrawn initially and not more than 5 percent every 2 years thereafter. It generally
                       defines a limited incumbent carrier as one holding no more than 12 slots at an airport.

                       Page 8                                                                             GAO/T-RCED-98-32
                         reallocating slots from one airline to another by stating that such a process
                         should take into account the investments made by the established airlines.
                         The proposed bill does not specify details about how DOT should
                         implement this process. Because of the sensitivities in making any
                         reallocations, DOT would need to carefully consider balancing the goals of
                         increasing competition with fair treatment of affected parties.

                         The bill also addresses the perimeter rule by requiring the Secretary of
                         Transportation to grant exemptions to the existing 1,250 mile limit at
                         Washington National Airport under certain circumstances. There are
                         legitimate concerns about whether or not exemptions to the rule would
                         negatively affect the noise, congestion, and safety at Washington National,
                         as well as air service to and from different communities within the
                         perimeter. The bill addresses these concerns by specifying that only stage
                         3 aircraft (aircraft that meet FAA’s most stringent noise standards) can be
                         used and that exemptions would not be allowed to affect the number of
                         hourly commercial operations at National Airport. The bill further
                         specifies that the Secretary certify that whenever exemptions to the rule
                         are granted, noise, congestion, and safety will not deteriorate relative to
                         their 1997 levels. The Secretary must similarly certify that air service to
                         communities within the existing perimeter will not worsen.

                         Finally, the bill also contains a provision intended to limit the time that DOT
                         has to respond to complaints of predatory behavior. As we noted
                         previously, because of its concerns in this area, DOT plans to announce a
                         policy that will more clearly delineate the factors it will consider in
                         pursuing remedies through formal enforcement actions.

                         Because a variety of factors has contributed to higher fares and poorer
Range of Initiatives     service that some small and medium-sized communities in the East and
Will Likely Be Needed    upper Midwest have experienced since deregulation, a coordinated effort
to Address Air Service   involving federal, regional, local, and private-sector initiatives may be
                         needed. In addition to DOT’s planned actions and the proposed legislation,
Problems                 several public and private initiatives that are currently under way, as well
                         as other potential options, are discussed below. If successful, these
                         initiatives would complement, and potentially encourage, the increasing
                         use of small jets by the commuter affiliates of established airlines—a trend
                         that has the potential for increasing competition and improving the quality
                         of service for some communities.

                         Page 9                                                        GAO/T-RCED-98-32
Regional, State, and Local   Recognizing that federal actions alone would not remedy their regions’ air
Initiatives                  service problems, several airport directors and community chamber of
                             commerce officials in the Southeast and Appalachian regions recently
                             initiated a coordinated effort to improve air service in their regions. As a
                             result of this effort, several members of Congress from the Southeast and
                             Appalachian regions in turn organized a bipartisan caucus named “Special
                             Places of Kindred Economic Situation” (SPOKES). Among other things,
                             SPOKES is designed to ensure sustained consumer education and coordinate
                             federal, state, local, and private efforts to address the air service problems
                             of communities adversely affected since deregulation. Two SPOKES-led
                             initiatives under way include establishing and developing a Website on the
                             Internet and convening periodic “national air service roundtables” to bring
                             together federal, state, and local officials and airline, airport, and business
                             representatives to explore potential solutions to air service problems. On
                             February 7, 1997, the first roundtable was held in Chattanooga.

                             A key conclusion of the February 1997 roundtable was that greater
                             regional, state, and local efforts were needed to promote economic growth
                             and attract established and new airlines alike to serve small and
                             medium-sized markets in the East and upper Midwest. Suggested
                             initiatives included (1) creating regional trade associations composed of
                             state and local officials, airport directors, and business executives;
                             (2) offering local financial incentives to nonincumbents, such as
                             guaranteeing a specified amount of revenue or providing promotional
                             support; and (3) communities’ aggressive marketing efforts to airlines to
                             spur economic growth.

Private-Sector Initiatives   To grow and prosper, businesses need convenient, affordable air service.
                             As a result, businesses located in the affected communities have
                             increasingly attempted to address their communities’ air service problems.
                             Perhaps the most visible of these efforts has been the formation of the
                             Business Travel Contractors Corporation (BTCC) by 45 corporations,
                             including Chrysler Motors, Procter & Gamble, and Black & Decker. These
                             corporations formed BTCC because they were concerned about the high
                             fares they were paying in markets dominated by one established airline.
                             BTCC held national conferences in Washington, D.C., in April and
                             October 1997 to examine this problem and explore potential market-based
                             initiatives. At BTCC’s October conference, attendees endorsed the concepts
                             of (1) holding periodic slot lotteries to provide new entrant carriers with
                             access to slot controlled airports, (2) allowing new entrants and other
                             small carriers to serve points beyond Washington National’s perimeter

                             Page 10                                                       GAO/T-RCED-98-32
                rule, and (3) requiring DOT to issue a policy addressing anticompetitive
                practices, and specifying the time frames within which all complaints will
                be acted upon.

Regional Jets   In addition to public and private-sector initiatives, the increasing use of 50-
                to 70-seat regional jets is improving the quality of air service for a growing
                number of communities. Responding to consumers’ preference to fly jets
                rather than turboprops for greater comfort, convenience, and a perceived
                higher level of safety, commuter affiliates of established airlines are
                increasingly using regional jets to (1) replace turboprops on routes
                between established airlines’ hubs and small and medium-sized
                communities and (2) initiate nonstop service on routes that are either
                uneconomical or too great a distance for commuter carriers to serve with
                slower, higher-cost, and shorter-range turboprops.

                Because regional jets can generally fly several hundred miles farther than
                turboprops, commuter carriers will be able to link more cities to
                established airlines’ hubs. To the extent that this occurs, it could increase
                competition in many small and medium-sized communities by providing
                consumers with more service options.

                Mr. Chairman, this concludes our prepared statement. We would be glad
                to respond to any questions that you or any member of the Subcommittee
                may have.

                Page 11                                                       GAO/T-RCED-98-32
Appendix I

Percentage of Domestic Air Carrier Slots
Held by Selected Groups

Airport      Holding entity                                                              1986            1991             1996
O’Hare       American and United                                                            66              83                87
             Other established airlines                                                     28              13                 9
             Financial institutions                                                          0                3                2
             Post-deregulation airlines                                                      6                1                1

Kennedy      Shawmut Bank, American, and Delta                                              43              60                75
             Other established airlines                                                     49              18                13
             Other financial institutions                                                    0              19                 6
             Post-deregulation airlines                                                      9                3                7

LaGuardia    American, Delta, and US Airways                                                27              43                64
             Other established airlines                                                     58              39                14
             Financial institutions                                                          0                7               20
             Post-deregulation airlines                                                     15              12                 2

National     American, Delta, and US Airways                                                25              43                59
             Other established airlines                                                     58              42                20
             Financial institutions                                                          0                7               19
             Post-deregulation airlines                                                     17                8                3
                              Notes: Numbers may not add to 100 percent due to rounding. Some airlines that held slots have
                              gone bankrupt, and as a result, financial institutions have acquired slots.

                              Source: GAO’s analysis of data from FAA.

                              Page 12                                                                      GAO/T-RCED-98-32
Appendix I
Percentage of Domestic Air Carrier Slots
Held by Selected Groups

Page 13                                    GAO/T-RCED-98-32
Appendix I
Percentage of Domestic Air Carrier Slots
Held by Selected Groups

Page 14                                    GAO/T-RCED-98-32
Related GAO Products

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

              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).

              Airline Competition: Essential Air Service Slots at O’Hare International
              Airport (GAO/RCED-94-118FS, Mar. 4, 1994).

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

              Airline Competition: Options for Addressing Financial and Competition
              Problems, Testimony Before the National Commission to Ensure a Strong
              Competitive Airline Industry (GAO/T-RCED-93-52, June 1, 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 Competition: Weak Financial Structure Threatens Competition
              (GAO/RCED-91-110, Apr. 15, 1991).

              Airline Competition: Fares and Concentration at Small-City Airports
              (GAO/RCED-91-51, Jan. 18, 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).

              Page 15                                                     GAO/T-RCED-98-32
           Related GAO Products

           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: DOT’s Implementation of Airline Regulatory Authority
           (GAO/RCED-89-93, June 28, 1989).

           Airline Service: Changes at Major Montana Airports Since Deregulation
           (GAO/RCED-89-141FS, May 24, 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).

(348057)   Page 16                                                     GAO/T-RCED-98-32
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