D.C Circuit Holds that Congestion Pricing at Airports Ought to be Welcomed

On July 13, 2010, the U.S. Court of Appeals for the District of Columbia Circuit denied the Air Transport Association of America’s Petition for Review of the Department of Transportation’s 2008 Policy Regarding Airport Rates and Charges.  73 Fed. Reg. 40,430 (July 14, 2008).  In Air Transport Association v. U.S. Department of Transportation, Case No. 08-1293 (D.C. Cir. 2010), Judge Douglas Ginsburg, writing for the unanimous Court, commented that the DOT’s “effort to relieve congestion pricing [through the new pricing policy] . . . should be welcome on its merits, not spurned for its novelty.” Id. at 27.

The Court addressed each of Air Transport Association’s four principal arguments.  First, the ATA argued that the Congestion Pricing Policy authorizes airports to charge unreasonable and unjustly discriminatory landing fees, in violation of the Airports and Airways Improvement Act of 1982, 49 U.S.C. § 47107(a)(1), and the Anti-Head Tax Act, 49 U.S.C. § 40116(e)(2).  Second, the ATA believed that the landing fees are state or local governmental regulations preempted by the Airline Deregulation Act of 1978, 49 U.S.C. § 41713(b)(1).  Next, ATA alleged that the DOT failed to meet its obligation under § 113 of the Aviation Administration Authorization Act of 1994, 49 U.S.C. § 47129, to provide guidance to airports.  And finally, ATA argued that the Congestion Pricing Policy is arbitrary and capricious because it is an unexplained departure from prior policies. The D.C. Circuit found each of these arguments unpersuasive.

In essence, this case was fairly easy for the D.C. Circuit to decide.  The first two arguments fall under the “facial challenge” rules, which means that in order for the ATA to prevail, it would have to show that the Congestion Pricing Policy would violate the law in every circumstance.  That is, that there is no reasonable set of circumstances under which the Policy would be valid.  That is an extremely high bar – and the ATA failed to make it over.  Is there a possibility of an airport applying the Policy in a discriminatory fashion? Yes, the court acknowledged, but that is an issue left for another day. With respect to the other two arguments, the Court found that the Department of Transportation met its obligations to provide guidance to airports and that it had adequately explained its departure from prior policies.

There has been a little pushback from some commentators about the offhand way Judge Ginsburg dismissed the idea of slot auctions.  See, “D.C. Circuit Upholds Congestion Pricing,” Aviation Law Prof Blog.  As pointed out in that blog post, on pages 5-6 of the opinion, Judge Ginsburg writes:

There are two ways in which an airport might increase its landing fee to the market-clearing level — that is, to the price just high enough to eliminate the excess demand and hence the queue at peak times. The first is to sell at auction the right to land an aircraft at a particular airport at a particular time; that right is called a “landing slot.” In an auction an airport would first determine the number of landings it can accommodate during a given period of time, such as an hour, and then allow airlines to bid for each slot in an auction; the winning bid would determine the price of the landing slot. The alternative is “congestion pricing,” which entails the airport itself increasing the price (landing fee) until it elicits demand for only as many landings as it can accommodate, thereby eliminating queuing and delay. Both a slot auction and congestion pricing will converge upon the same price and the same quantity.

He then goes on to state that while neither system “is preferable to the other,” commentators “have advocated slot auctions rather than congestion pricing because an airport operator knows how many landings the airport can safely accommodate per hour but can only learn by trial and error what fee will yield that many landings.”  Opinon, at 5 (citation omitted).  This, for all practical purposes, was the end of D.C. Circuit’s discussion of the relative merits and disadvantages of slot auctions versus congestion pricing.  The Aviation Law Prof Blog article, laments the lack of discussion of “the reality that congestion pricing is a suboptimal mechanism for reducing airport congestion while taking account of the latitude for abuse (i.e., rent extraction) the pricing option offers.”

However, that issue was not before the Court.  Indeed, the Aviation Law Prof Blog correctly notes that “even if the D.C. Circuit’s opinion contained a more thorough and accurate discussion of slots, it would not have changed the holding.”  In this matter, the issue before the Court was whether congestion pricing was within the legal authority of the Department of Transportation, not whether there was another method of resolving the congestion problem that is better than congestion pricing.  The Court does take into account the possibility that congestion pricing can be abused:

We cannot, of course, rule out the possibility that an airport will implement a system of fees that complies with the Amendments but is nonetheless unreasonable or unjustly discriminatory. Because an airport can also implement the Amendments in a way that is reasonable and not unjustly discriminatory, however, the ATA’s facial challenge must fail.

Opinion, p. 18.  It is not the place of the Court to prefer one option over another, only to adjudge whether the regulations or policy before it is legal or not.

73
Fed. Reg. 40,430 (July 14, 2008)
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