UPDATE 2-US airlines threaten to sue over slot auctions

Tue Aug 5, 2008 7:09pm EDT

(Recasts with airlines threatening to file suit)

By John Crawley

WASHINGTON Aug 5 (Reuters) - U.S. airlines threatened on Tuesday to sue the Bush administration over its plan to cut delays at one of the nation's most congested airports even as new data shows over a quarter of all flights are late.

The Air Transport Association, the lead trade group for major carriers, said in a statement that the U.S. Transportation Department proposal to auction landing slots at New Jersey's Newark airport is unlawful and widely opposed.

"DOT has left us no options - we will sue to prevent this illegal action," James May, the trade association's chief executive said.

Relations between airlines and transportation planners have deteriorated sharply over the past several months as government efforts to reduce delays have clashed with carriers losing altitude financially due to record high fuel prices.

"The timing is incredible -- in the middle of an enormous financial crisis that is reshaping the industry," said Giovanni Bisignani, director general of the trade group representing overseas carriers, the International Air Transport Association.

The Transportation Department proposed on Tuesday auctioning unused rights for one round-trip flight at Newark to gauge interest and determine their value.

The auction decision came hours after the agency released its latest industry on-time figures showing delays remained stubbornly high in the first half of 2008 even though operations and travel demand were both down.

The on-time rating of 73.3 percent was just slightly better than the record low 72.6 percent in the first half of last year, even though operations contracted due to record fuel prices and bankruptcies. Several small airlines ceased operations this year.

Airlines flew 3.6 million flights carrying 303 million passengers in the January-June period, compared with 3.7 million flights and 309 million passengers a year earlier.

New York's LaGuardia Airport had the worst on-time arrival performance of the 32 busiest airports, while Chicago's O'Hare was last for timely departures. Both airports are notoriously congested and often rank at or near the bottom in performance categories.

Newark ranked next to last in on-time arrival performance, only ahead of LaGuardia.

MARKET MECHANISMS

Transportation Secretary Mary Peters has long championed "market-based" mechanisms for reducing congestion. She believes forcing airlines to bid for slots for the busiest times of day would prompt airlines to rethink their operations, perhaps using bigger planes.

"Such measures have been very successful at managing congestion in other transportation modes and can provide strong incentives for more efficient use of a strained resource, like New York-area airports," Peters said. The auction is planned for Sept. 3.

On Monday, the Port Authority of New York & New Jersey, which operates JFK, Newark and LaGuardia airports, said it would not recognize slot auctions on grounds they would hurt business and reduce service to small communities.

Transportation officials believe they have the legal authority to move forward unless Congress steps in and acts on pending legislation to block the move when lawmakers return in September.

Democrat Patty Murray and Republican Christopher Bond, the chairman and ranking member respectively of the Senate Appropriations subcommittee on transportation, told Peters in a letter on Tuesday to wait for "clear authority" from Congress.

"There is no question that your insistence on moving forward (with) these controversial efforts will subject the department and the FAA (Federal Aviation Administration) to extensive and costly litigation that will benefit nether the taxpayer nor the traveler," they wrote.

Murray and Bond also are unhappy that Peters has diverted "millions in FAA operating funds" to administer the auction.

Airline shares shrugged off yet more bad news about delays, rising sharply Tuesday on lower oil prices. The Amex Airline Index .XAL rose 9.6 percent. (Reporting by John Crawley; editing by Tim Dobbyn)