FAA Airline Slots Marketing the Essay

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2)

The market would not favor only those carriers with deep pockets with largess that was paid for by the taxpayer. The FAA came to the conclusion that it would not be profitable for a large airline to operate a low-valued flight just because it had the cash to do this (ibid, p. 5).

3)

An airplane carrier that expects to offer high-valued flights but is also short of cash ought to be able to borrow to finance needed slots. The ability of an airline to finance equipment and slot purchases depends upon the expected profits from the use to which the equipment or slots will be put.

The claim in counter-argument two and three above does not seem to be born out in the information from Exhibit 2 in the case study. Here, the smaller airlines and regional charters lost 91 slots at the pacer airports (ibid, p. 13). Also, the fact that it might not be profitable to operate a low-valued flight did not keep the larger carriers from using their muscle to force the smaller airlines out of the slots they previously had.

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Secondly, it would seem that the smaller airlines and regional charters were not able to borrow. Rather, the larger airlines had the cash already or were able to borrow the cash that they needed to purchase the slots that the smaller regional airlines and charters had. A third issue is the extent to which a market approach will create greater incentives to create more capacity at these slot-constrained airports. Unfortunately, the slot committee obviously did not have or exercise incentives to allow the market to create more capacity at crowded airports. It seems that forces of monopoly/oligopoly were extant.

Appendix

Key Data

Major Losses and Gains at Pacer Airports

Major Airlines

+91

Small Regional/Charter

-91

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