Case Study

MEMORANDUM TO: Secretary Elizabeth Dole, Department of Transportation FROM: DATE: December 4, 2000 SUBJECT: Recommendation that the Department of Transportation should implement a competitive market system of slot allocation as a means of achieving efficiency. In this scheme, supply and demand determines the market price for slots, resulting in an optimal price and output of landing slots for all airlines. SUMMARY This policy memo recommends shifting to a market system of slot allocation. Airport deregulation and various …

…New Entrants Will be allowed to participate in auction but must begin bidding at the set price floor and are not eligible for discounts on final bid. This memo recommends that the federal government use profits earned from the sale of these slots to make improvements at airports and increase safety. After the auctioning of all slots has taken place, the FAA and DOT will relinquish authority over slot allocation and implement a market system.