Auction Charges for Airport Landing Slots

For presentation to the International Union for

Land Value TaxationLondon Conference, July,

2013

By H. William Batt, Ph.D.

Albany, New York

Total Rank %Passengers Change Change

1 Hartsfield–Jackson Atlanta International Airport Atlanta, Georgia, United States 95,462,867 3.30%2 Beijing Capital International Airport Chaoyang, Beijing, China 81,929,689 4.50%3 London Heathrow Airport Hillingdon, London, United Kingdom 70,038,857 0.90%4 Tokyo International Airport Ōta, Tokyo, Japan 67,788,722 1 8.30%5 O'Hare International Airport Chicago, Illinois, United States 67,091,391 1 0.40%6 Los Angeles International Airport Los Angeles, California, United States 63,687,544 3.00%7 Paris Charles de Gaulle Airport Roissy, Tremblay, Mitry-Mory, Île-de-France,France 61,611,934 1.10%8 Dallas-Fort Worth International Airport Dallas-Fort Worth, Texas, United States 58,591,842 1.40%9 Soekarno-Hatta International Airport Cengkareng, Tangerang, Banten, Indonesia 57,730,732 3 14.40%

10 Dubai International Airport Garhoud, Dubai, United Arab Emirates 57,684,550 3 13.20%11 Frankfurt Airport Frankfurt, Hesse, Germany 57,520,001 2 1.90%12 Hong Kong International Airport Chek Lap Kok, Hong Kong, China 56,064,248 2 5.20%13 Denver International Airport Denver, Colorado, United States 53,156,278 2 0.60%14 Suvarnabhumi Airport Bang Phli, Samut Prakan, Thailand 53,002,328 2 10.60%15 Singapore Changi Airport Changi, East Region, Singapore 51,181,804 3 10.00%16 Amsterdam Schiphol Airport Haarlemmermeer, North Holland, Netherlands 51,035,590 2 2.60%17 John F. Kennedy International Airport Queens, New York City, New York, United States 49,293,587 3.10%18 Guangzhou Baiyun International Airport Huadu, Guangzhou, Guangdong, China 48,548,430 1 7.80%19 Madrid Barajas Airport Madrid, Spain 45,175,501 4 9.00%20 Atatürk International Airport Istanbul, Turkey 44,992,420 10 20.10%21 Shanghai Pudong International Airport Pudong, Shanghai, China 44,880,164 8.30%22 San Francisco International Airport San Mateo County, California, United States 44,431,894 8.60%23 McCarran International Airport Las Vegas, Nevada, United States 41,666,527 4 0.50%24 Charlotte Douglas International Airport Charlotte, North Carolina, United States 41,226,035 2 5.60%25 Phoenix Sky Harbor International Airport Phoenix, Arizona, United States 40,452,009 2 0.30%

Rank Airport Location

Total Rank %Cargo ChangeChange(Metric Tonnes)

1 Hong Kong International Airport Chek Lap Kok, Hong Kong 4,062,261 2.20%2 Memphis International Airport Memphis, Tennessee, United States 3,916,535 2.50%3 Shanghai Pudong International Airport Pudong, Shanghai, China 2,939,157 5.30%4 Incheon International Airport Seoul National Capital Area, South Korea 2,456,724 1 3.30%5 Stevens Anchorage International Airport Anchorage, Alaska, United States 2,449,551 1 3.70%6 Dubai International Airport Dubai, United Arab Emirates 2,267,365 3.10%7 Louisville International Airport Louisville, Kentucky, United States 2,187,766 1 0.90%8 Paris-Charles de Gaulle Airport Central, France 2,150,950 1 6.50%9 Frankfurt Airport Frankfurt, Hesse, Germany 2,066,432 2 6.70%

10 Narita International Airport Narita, Chiba, Kantō, Honshū, Japan 2,006,173 3.10%11 Miami International Airport Miami, Florida, United States 1,929,889 1 4.90%12 Singapore Changi Airport Changi, East Region, Singapore 1,898,850 1 3.00%13 Beijing Capital International Airport Chaoyang, Beijing, China 1,787,027 1 6.00%14 Los Angeles International Airport Los Angeles, California, United States 1,688,351 1 3.70%15 Taiwan Taoyuan International Airport Dayuan, Taoyuan, Taiwan, Republic of China 1,577,728 3.10%16 London Heathrow Airport Greater London, United Kingdom 1,556,203 0.70%17 O'Hare International Airport Chicago, Illinois, United States 1,512,186 1 3.00%18 Amsterdam Airport Schiphol Haarlemmermeer, North Holland, Netherlands 1,511,824 1 2.40%19 Suvarnabhumi Airport Greater Bangkok,Thailand 1,345,487 1 1.80%20 John F. Kennedy International Airport New York City, New York, United States 1,283,663 1 5.50%21 Guangzhou Baiyun International Airport Baiyun, Guangzhou, Guangdong, China 1,246,467 5.60%22 Indianapolis International Airport Indianapolis, Indiana, United States 932,105 2.70%23 Tokyo International Airport Ōta, Tokyo, Kantō, Honshū, Japan 909,684 3.60%24 Shenzhen Bao'an International Airport Bao'an District, Shenzhen, Guangdong, China 854,901 3.50%25 Leipzig/Halle Airport Leipzig, Germany 846,092 2 13.70%26 Doha International Airport Doha, Qatar 844,532 1 4.50%27 Newark Liberty International Airport Newark, New Jersey, United States 743,762 1 7.50%28 Cologne Bonn Airport Cologne, Germany 730,054 1 0.50%29 Kansai International Airport Izumisano/Sennan/Tajiri, Osaka, Japan 723,148 1 2.70%30 Kuala Lumpur International Airport Sepang, Selangor, Malaysia 702,227 0.10%

Rank Airport Location

WORLD'S BUSIEST AIRPORTS BY CARGO TRAFFIC

Total RankMovements Change

1 Hartsfield–Jackson Atlanta International Airport ATLANTA GA, US 923 996 2.7%2 O'Hare International Airport CHICAGO IL, US 878 798 0.4%3 Los Angeles International Airport LOS ANGELES CA, US 702 895 5.4%4 Dallas/Fort Worth International Airport DALLAS/FORT WORTH TX, US 646 803 0.8%5 Denver International Airport DENVER CO, US 628 796 0.2%6 Charlotte/Douglas International Airport CHARLOTTE NC, US 539 842 1 2.0%7 Beijing Capital International Airport BEIJING, CN 533 257 1 3.0%8 McCarran International Airport LAS VEGAS NV, US 531 538 1 5.1%9 George Bush Intercontinental Airport HOUSTON TX, US 517 262 3 2.7%

10 Paris-Charles de Gaulle Airport PARIS, FR 514 059 2.8%11 Frankfurt Airport FRANKFURT, DE 487 162 4.9%12 London Heathrow Airport LONDON, GB 480 931 1 5.7%13 Phoenix Sky Harbor International Airport PHOENIX AZ, US 461 989 2 2.8%14 Philadelphia International Airport PHILADELPHIA PA, US 448 129 2 2.7%15 Detroit Metropolitan Wayne County Airport DETROIT MI, US 443 028 1 2.1%16 Amsterdam Airport Schiphol AMSTERDAM, NL 437 083 4 8.6%17 Minneapolis–Saint Paul International Airport MINNEAPOLIS MN, US 436 506 1 0%18 Barajas Airport MADRID, ES 429 390 1 1.0%19 Toronto Pearson International Airport TORONTO ON, CA 428 764 1 2.5%20 Newark Liberty International Airport NEWARK NJ, US 410 024 1 2.9%21 Munich Airport MUNICH, DE 409 956 1 5.1%22 John F. Kennedy International Airport NEW YORK NY, US 408 730 1 2.5%23 San Francisco International Airport SAN FRANCISCO CA, US 403 564 4.2%24 Miami International Airport MIAMI FL, US 394 572 4.9%25 Tokyo International Airport| TOKYO, JP 379 670 4 10.8%26 Logan International Airport BOSTON MA, US 368 987 2 4.6%27 LaGuardia Airport NEW YORK NY, US 366 597 1.2%28 Salt Lake City International Airport SALT LAKE CITY UT, US 358 002 2 1.3%29 Mexico City International Airport MEXICO CITY, MX 350 032 1 3.0%30 Guangzhou Baiyun International Airport GUANGZHOU, CN 349 259 - 6.1%

Rank Airport Location Change

WORLD'S BUSIEST AIRPORTS BY AIRCRAFT MOVEMENTS

Delta to Beijing Peak Movements

Delta to Shanghai Peak Movements

Background: Airport Landing Slots

• Four High-Density Rule airports in the US use slot allocation as a way of rationing time– Kennedy, Laguardia, O’Hare, Ronald Reagan

– All other airports have unallocated slots

– e.g. Laguardia has one arrival runway with 32 arrivals per hour

– Airlines control their own gates and schedules but the FAA controls landing slots

– No man but he can have a right to what that is once joined to, at least where there is enough, and as good, left in common for others. – John Locke, 1690.

Business trips by air by Brits by catchment, 2011 (million)

Luton Airport Expansion Proposal

Luton Airport Expansion Proposal

Distribution of aircraft movements, summer,

2007, Sydney AU Airport

• Morning Peak Hours Time Slots

• Hourly 6:00 to 9:45

• Evening Peak Hour Time Slots

• Hourly 17:00 to 19:45

2011 2012

Why schedule landing slots?

• Unregulated, airlines may schedule operations that exceed the safe arrival/departure rate of an airport.

• Airlines want as many flights as possible at popular airports.

• Airlines worry that they need to have a stronghold at an airport in case slots become regulated.

IATA Allocation Current System

• Airlines own their time slots as property.• Airline annual reports list them as an asset.• Current holders of slots can sell or lease them,

but must return them if they are used less than 80% of the time.

• Airlines can exchange time slots• Slots are limited for takeoffs and landings per

hour or half hour.

UK airlines to value landing slots as assets on balance sheets

• Deloitte put the capital value of a pair landing slots in 2012 at up to Heathrow at £25 to £30 million, followed by deGaulle, Gatwick and Frankfurt depending on time of day.

• At Heathrow there were a total of 9,562 landing slots last summer, 99% held by legacy flag carriers, i.e., established airlines.

• British Airways held 41%, BMI held 11%, and Virgin Atlantic 3%.

Auctioning Airport Slots - 1

• Slots are scarce at Heathrow and Gatwick• Lack of runway capacity means carriers don’t

schedule movements at the best times.– Only carriers that afford to should use peak times.

• Auctions allow mid-size carriers growth.• Auctions time slots should pair takeoff &

landing. • Peak slots go to airlines willing to pay, leading

to more efficient allocation.

Auctioning Airport Slots – 2• Auctions could be by the week or by season.

– Divide the week into 15 or 30 minute windows.

• Bundle rights to use runway with stands (gates) and terminal capacity.– Bid must state aircraft size, destination, terminal

choice and passenger loads.

• Create simultaneous multiple round auctions.• Allow a secondary market for trading slots.• Higher prices would favor large air carriers.

What money is involved?

• Auction advocates mostly stress efficiency and productivity.

• FAA estimated in a 1989 paper that the additional time costs to passengers and additional operating costs to carriers was over $5 Billion dollars in the US alone.

• The cost is likely to be at least double today.

Current Airport Charge System

• Slots are sold when congestion is sufficient that auction sales are necessary – on a first-come, first-served basis.

• Charges are also priced on the basis of the aircraft weight on the the runway. Light-weight planes can tie up traffic forcing large planes to wait.

• Runway wear is a function of the square of the weight on the tarmac of each wheel.

Charging Auction Rent for Time Slots

• Comports with all the principles of charges for public goods. Prices should really be user fees.

• Airport time slot auctions would be efficient, non-distortionary, administratively simpler, easily understandable, and even progressive.

• Time slot auctions would give a moral ground to the pricing system that now is lacking.

• Time slot auctions are ecologically sound.

Projection of CO2 Emissions from UK

Aviation

• (Sustainable Aviation CO2 Road Map 20112)