Image: Virgin America plane arrives at San Francisco International Airport from JFK
John Decker  /  AP
U.S. Transportation Secretary Mary Peters is scheduled to deliver a report to the president in mid-December on the problem of airport delays. If she goes ahead with a plan to ease delays by capping the number of flights at Kennedy, it could make it harder for new carriers like Virgin America to expand in New York.
updated 12/13/2007 9:27:42 AM ET 2007-12-13T14:27:42

British billionaire Richard Branson wants Virgin America to be the next JetBlue, an upstart that challenges the big boys with low prices and dazzles passengers with stylish mood-lighting, black leather seats and an in-flight entertainment system.

But any hope the new airline has of becoming a major player in one of its premier markets —New York — could be dashed if federal regulators go ahead with a plan to cap the number of flights at the city's major airports.

The company is one of several whose future business plans may be at stake as the government shapes a plan to battle chronic flight delays by forcing airlines to trim their schedules in New York, where runway bottlenecks now cause problems nationwide.

U.S. Transportation Secretary Mary Peters is scheduled to deliver a report to the president on the problem next week, and officials have told the airlines she is all but certain to recommend reinstating hourly flight limits at John F. Kennedy International.

Industry experts said that, depending on the program's final shape, flight caps could make it harder for new carriers to expand in New York and force established airlines to be more selective about where they fly.

The end result, Bear, Stearns & Co. analyst Frank Boroch said, could be a cooling-off of the fare wars that have made air travel to the city relatively cheap.

"While airlines may be unhappy with the restraints on some of their opportunities, if they are actually able to deliver their product on time to customers, and reduce costs (related to delays), the industry could benefit," he said.

Passengers may see prices go up slightly, but Boroch suggested the sacrifice might be worth it if their planes, now routinely hours late, arrive on time.

That opinion is not shared by officials at airlines hoping to grow in New York. Caps, they say, will almost certainly mean limited availability of slots to newcomers.

"What this basically means is that if you have a small airline and you want to serve New York, you can forget it," said Edward Faberman, a spokesman for the Air Carrier Association of America, whose members include AirTran, Frontier and Spirit.

U.S. transportation officials have been saying for weeks that Kennedy, LaGuardia and Newark Liberty have been pushed past their breaking points by the fast expansion of carriers like JetBlue. Fare wars have lured so many fliers that runways at all three airports are now essentially overbooked for several hours each day.

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Prior to Jan. 1, the airlines were not allowed to schedule more than 86 operations per hour during peak travel times. Transportation officials have suggested Kennedy can actually handle no more than 81 flights per hour, far fewer than the 100 or more that are now scheduled during the busiest times of day.

Hourly flight limits already exist at LaGuardia, and officials said similar caps are also likely to be added to Newark.

The caps could, in theory, reduce delays by keeping the airlines from over-scheduling, but the restrictions would raise the question of how the government would go about distributing the available slots.

Department of Transportation spokesman Brian Turmail declined to comment on the agency's plans, saying they were still being developed. But DOT officials have told airline executives that one option could be auctioning slots to the highest bidder.

It is not yet clear who could legally collect the money from such a scheme, or what it would mean for airlines with questionable ability to pay prices likely to exceed $1 million per slot.

Any auction plan would likely face a legal challenge from major carriers, who have spent billions of dollars developing terminals and establishing routes. The Air Transport Association said that if the slots for those routes were then auctioned off, it would make those investments worthless.

Flight caps and slot auctions are also opposed by politicians representing small cities that could see less service if the airlines are forced to pay top dollar for each takeoff or landing.

"I think flight caps should be the very last resort," said Sen. Charles Schumer, who recalled the days when flights out of cities like Buffalo and Rochester cost as much as a ticket to Europe because of a lack of competition.

A number of airlines have asked federal authorities to instead try boosting the capacity of New York's airports — steps that the Federal Aviation Administration already hopes to take by redesigning airspace and upgrading navigational technology.

Even with those changes, however, the DOT's Turmail said some type of flight cap may be unavoidable. Airlines have informed the DOT that they intended to boost their schedules at JFK by as much as 22 percent next summer — an increase Turmail said the airport cannot possibly handle.

If rationing has to happen, larger air carriers and the Port Authority of New York and New Jersey, which operates the airports, favor the adoption of a scheduling system similar to one used abroad.

Under that plan, carriers already established at an airport are basically guaranteed the same number of spots they had the previous year. Unused slots, or new ones created by capacity improvements, could be distributed to newcomers by lottery, auction or some other means.

That type of rationing, however, creates problems for newcomers like Virgin America, which began its first flights between the west coast and New York in August. It now has eight flights per day that touch down in New York.

"Certainly it is a key market for us," said Virgin America spokeswoman Abby Lunardini. "We hope to have a presence there going forward. Our main concern is not being effectively locked out."

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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