US GAO says auction of airline slots illegal

WASHINGTON, Sept 30 (Reuters) - The Bush administration has no legal authority to auction coveted takeoff and landing rights at crowded New York-area airports to ease congestion and boost competition, congressional investigators said on Tuesday.

The Government Accountability Office (GAO) decision sent to members of Congress influential on aviation matters was enthusiastically backed by major U.S. carriers, which have sued to block the market-based attempt to make them operate more efficiently.

International airlines also oppose the plan.

The decision left unclear whether the Transportation Department would back down since it has received a more favorable opinion of its plan from an independent review board within the Federal Aviation Administration (FAA).

The Transportation Department proposed earlier this year to sell access at busy airports, beginning with two vacant slots -- one round trip -- at New Jersey's Newark international airport in early September.

The matter was put on hold, pending the outcome of regulatory and legal reviews.

The agency wants to gauge the value of slots. If successful at Newark and broadened, the initiative could force carriers to return dozens of unused slots to be sold by the government.

Continental Airlines (CAL.N) has a hub at Newark and other big carriers, including Delta Air Lines (DAL.N), American Airlines, a unit of AMR Corp (AMR.N), US Airways Group (LCC.N), and Northwest Airlines Inc NWA.N operate in the New York area.

Proponents believe forcing airlines to pay a premium for coveted rights to operate at peak periods of the day at popular airports would result in more streamlined operations, including the use of larger planes to reduce congestion.

Regulators have also capped flights at New York-area airports at peak times.

Addressing chronic delays around New York has been a vexing problem for years. More than a third of flights in the United States fly to or over New York airspace, the FAA says.

Gary Kepplinger, GAO general counsel, wrote to lawmakers that "FAA lacks a legal basis to go forward" with the auction plan. He disagreed with regulators that they have titles and can sell them, saying a decades old policy governing property sales does not apply.

Carriers in the past have been accused of overscheduling flights at crowded airports to capture as many passengers as possible during the busiest periods, often using smaller jets.

Brian Turmail, a Transportation Department spokesman, said the GAO had little time to conduct its analysis and is relatively unfamiliar with aviation law.

"Should Congress give the agency an opportunity to conduct a more thorough review, we are confident that GAO will better understand both the validity and the effectiveness of our approach," Turmail said.

The Port Authority of New York and New Jersey, which operates the three big airports, supported the GAO finding. (Reporting by John Crawley; Additional reporting by Joan Gralla; Editing by Bernard Orr)