An eleventh-hour plan the Bush administration had crafted to auction flight slots at New York City-area airports to the highest bidder has been halted, the U.S. Department of Transportation announced yesterday.

Citing a changed economic landscape and the controversial nature of the proposal, Transportation Secretary Ray LaHood proposed rescinding the plan to sell flight slots at airports owned by the Port Authority of New York and New Jersey, following a 30-day public comment period.

"We're still serious about tackling aviation congestion in the New York region," LaHood said in a press release. "I'll be talking with airline, airport, and consumer stakeholders, as well as elected officials, over the summer about the best ways to move forward."

The Port Authority vigorously opposed the auctioning of flight slots at Newark Liberty International Airport, John F. Kennedy International Airport, and LaGuardia Airport since it was proposed last year, and in December the authority obtained a stay in the U.S. Court of Appeals that blocked a scheduled auction.

The Port Authority argued that Federal Aviation Administration had no legal right to auction the slots and said that the auctions would drive costs up while doing nothing to reduce congestion. Transportation officials in the Bush administration said competition would lower costs to passengers.

The authority applauded the decision in a statement. "The secretary is taking a common-sense approach to dealing with the metropolitan area's flight delays," the agency said.

The FAA has imposed caps on the number of hourly arrivals and departures at the three airports to curb congestion while the Port Authority has pushed replacing the existing ground-based air-traffic control system with a global positioning system-based technology called NextGen, which it says will route planes more efficiently.

The announcement came the day after theauthority released new traffic statistics showing declines in the use of all its assets in the first quarter of 2009 compared to the first quarter of 2008.

Tons of cargo at the Port of New York and New Jersey fell by 17.4% while air cargo fell by 29.8%. The number of passengers using the five airports owned by the authority dropped by 11.6%.

Traffic on the authority's bridges and tunnels fell by 5.4%, led by an 11.6% decline of truck traffic. The Port Authority Trans-Hudson, or PATH, commuter trains saw a 2.3% decline in ridership, the first quarterly decline since 2003.

The authority was not able to provide revenue figures corresponding to the drop in traffic.

Fitch Ratings put the airport sector on negative outlook in August as the recession stymied air travel.

"The authority hasn't escaped what's going on nationally," said Fitch analyst Michael McDermott. "To the extent that there's a drop in throughput, there will be some impact on the airports."

The drop in passengers hits the Port Authority's concession revenue and parking garage revenue directly, he said.

Although the airport revenue is but one stream for the authority, it's an important one. "The bulk of actual net revenue is being generated by the bridges and tunnels and the airports, so PATH and seaports are basically break-even operations," McDermott said.

Last month Standard & Poor's put bonds issued by the New York City Industrial Development Agency on behalf of Aero JFK LLC for a cargo facility at JFK airport on negative watch when one of the tenants stopped paying rent.

In difficult economic times, the authority benefits from its conservative debt policies, said Fitch analyst Vanessa Roy.

"They have hefty reserves," she said. "The Port Authority has a very solid balance sheet. They keep two years of bonded debt service available and they have a policy to keep 20% of their total outstanding debt in reserves."

Fitch and Standard & Poor's rate the authority AA-minus with stable outlooks. Moody's Investors Service rates it Aa3 with a stable outlook.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.