The Slot Auction

The problem

Three American airports are so crowded that the government limits how many planes may take off and land each hour: Kennedy and LaGuardia in New York and Reagan National in Washington. The limits are called slots, and a slot is worth a great deal, because it is the only way to fly to the most valuable markets in the country at the hours people want to fly. The slots were allocated decades ago to the airlines that were already operating, under a rule that says a slot is kept as long as it is used. Nobody has paid for one since. Airlines trade them among themselves, for money, in private, and the FAA records the transfer.

The value surfaced in June 2026, when Spirit Airlines, in bankruptcy, put its LaGuardia slots up for auction and the estimates ran to $80 million for a single carrier's holdings at one airport. Multiply across three airports and a dozen carriers and the estate is worth many billions. It was created by the government, it exists only because the government limits the airport, and the government's share of it is zero.

This has been tried before, and the story of how it failed is the reason the proposal is written the way it is. In 2008 the FAA issued rules for Kennedy, LaGuardia and Newark that would have grandfathered most slots to their holders and auctioned a limited number each year for five years, to create a market and let new airlines in. The airlines sued. The Government Accountability Office issued an opinion on September 30, 2008 that the FAA had no statutory authority to auction slots or keep the proceeds. The D.C. Circuit stayed the rule. In October 2009 a new administration rescinded it, citing congressional and airline opposition. The slots have been inherited, free, ever since.

№ 015 made the argument for the airwaves: a public resource handed out by queue is a resource lost. The runway at 8 a.m. is the same resource, and it has never even been auctioned once.

The proposal

The Slot Auction: Congress grants the FAA the authority GAO said it lacked. Each year, one-tenth of the slots at every slot-controlled airport are auctioned as ten-year leases, so that the whole estate turns over once a decade and no slot is ever again held in perpetuity. A share of each auction is reserved for new entrants and for service to small communities. The proceeds are deposited in the American Permanent Fund.

How it would work

1. The authority. A statute stating that slots at capacity-constrained airports are licences to use public airspace, allocated by the Secretary of Transportation by competitive auction, with proceeds deposited as this proposal directs. This is the sentence the 2008 rule did not have and the reason it died.

1. A tenth a year, for ten years. Each year, ten percent of the slots at each controlled airport, chosen across the day so that peak and off-peak are both represented, are auctioned as ten-year leases. The incumbent holding a slot that comes up may bid for it like anyone else. After ten years every slot has been auctioned once and every slot is on a lease with an end date. No airline loses more than a tenth of its holdings in any year, and every airline knows the schedule a decade in advance.

1. The reserve and the floor. Slots are auctioned in a uniform-price format with a modest reserve; a slot that does not clear the reserve returns to the pool. A set-aside of one in five auctioned slots is reserved for carriers with fewer than a set share of the airport's slots, so that an auction does not become a way for the largest airlines to buy the airport, and one in ten is reserved for routes to small communities that would otherwise lose service, as European slot rules provide.

1. Newark and the rest. Any airport the FAA designates as slot-controlled in future comes under the same rule from the day of designation, so that the estate is never again given away at the moment it becomes valuable.

1. Trading, in the open. Airlines may still trade leased slots between themselves for the remainder of the lease, but every trade, and its price, is published. The secondary market that exists today in private becomes the public's guide to what the next auction should expect.

1. The proceeds. Deposited as principal under № 065 to № 067, and reported under № 050. The airspace is the public's; so is the rent.

The numbers

The estate. Roughly a few thousand daily slots across the three airports. If a peak slot pair is worth several million dollars, as the private trades and the Spirit sale suggest, the estate is on the order of $10 to $20 billion. Nobody knows, because it has never been priced in the open, which is the first thing the auction fixes.

The annual take. Auctioning a tenth of the estate each year as ten-year leases raises, in steady state, on the order of $1 to $2 billion a year, depending on demand and the reserve. It is real money, and it is money that currently changes hands between airlines with no public receipt.

What the airlines have already paid. Incumbents have bought slots from each other for decades; the value they have paid for is real and the ten-year rolling schedule is the transition. Any airline that bought a slot in the private market gets, on average, five more years of free use before its slot comes up.

The passenger. Economists who have studied slot auctions generally find that the price of a slot is a transfer of scarcity rent from the airline to the public, not a cost added to the fare: the fare at 8 a.m. at LaGuardia is already set by scarcity, and whoever holds the slot charges it. What changes is who keeps the difference.

The honest objections

"Airlines will pass the cost to passengers." The strongest objection and the one the evidence answers least conveniently for the airlines: a slot at a full airport is already priced into the fare, because the airline holding it charges what the market bears whether it paid for the slot or inherited it. An auction changes who collects the rent, not the fare. Where an airline could raise fares further, it already would have. The honest caveat is that this is theory confirmed in a handful of studies, and the published trade prices in item 5 will let anyone check it.

"Small cities lose their flights to New York." The reason for the small-community set-aside in item 3, borrowed from the European rules that have run slot markets for thirty years. A route to Burlington that cannot outbid a route to Los Angeles keeps its slot under the set-aside, and the public pays for that service by forgoing the higher bid, which is the honest way to subsidise it.

"Incumbents invested in these airports relying on grandfathered slots." They did, and they have also sold those slots to each other for cash while relying on them, which is the clearest possible evidence that the slots were always understood as assets rather than as licences. The ten-year rolling auction gives every holder a decade of notice and an average of five years' further free use.

"The FAA lacks the authority, and the courts said so." GAO said so, and the court stayed the rule while the question was argued. That is precisely why item 1 is a statute. Congress can grant the authority in a sentence, and the only question is whether it wants the airlines or the public to keep the rent.

"The money is small next to what the FAA needs for air traffic control." № 124, The Tower Trust, is where that problem is addressed. The slot rent is a return on an asset, not an appropriation, and the rule of this catalog is that returns on public assets go to principal. If Congress wants to fund the towers from the runways it may say so in public; what it may not do is keep giving the runways away.

Sources

• Federal Aviation Administration, Congestion Management Rule for John F. Kennedy International Airport and Newark Liberty International Airport and the LaGuardia rule, Federal Register, October 2008; rescission, October 2009
• U.S. Government Accountability Office, Federal Aviation Administration: Authority to Auction Airport Arrival and Departure Slots and to Retain and Use Auction Proceeds (B-316796), September 30, 2008; Slot-Controlled Airports: FAA's Rules Could Be Improved to Enhance Competition and Use of Available Capacity (GAO-12-902)
• Marketplace, "Spirit to auction $80 million in takeoff and landing slots at LGA," June 2026
• Federal Aviation Administration, Slot Administration data, faa.gov
• European Commission, Regulation (EEC) 95/93 on slot allocation, and the new-entrant and public-service provisions
• Proposals № 015 (The Spectrum Dividend); № 039 (The Orbital Commons); № 050 (The Shareholder's Report); № 124 (The Tower Trust, forthcoming)