Perimeter Rules-LGA and DCA

In addition to the anticompetitive constraints of slot and gate access, at LaGuardia and at Ronald Reagan National, there is the additional con­straint of perimeter rules. These restrictions pro­hibit nonstop flights of more than 1,500 miles into and out of LaGuardia11 and nonstop flights of more than 1,250 miles into and out of Reagan National. The purpose of these rules was to pro­mote the use of the new JFK and Dulles (IAD) airports as the long-haul airports for the area when they were built in the 1950s.

The effect of these rules is to restrict entry, particularly in the case of startup airlines with hubs outside of the established perimeter. Under these rules for instance, America West, the sec­ond-largest airline started after deregulation, was precluded from serving these two airports from its Phoenix, Arizona, base of operations.

At the same time, all seven of the largest, estab­lished airlines in the United States could easily serve these airports from one or more of their hubs.

By virtue of two federal statutes,12 DOT was allowed to award 44 new slots to airlines at DCA, 24 of which could be used for flights to cities more than 1,250 miles away. These slots were awarded to airlines serving six cities (Den­ver, Las Vegas, Los Angeles, Phoenix, Salt Lake City, and Seattle). See Figure 31-1.

LaGuardia has one exemption to its perim­eter rule—to and from Denver International.

The continuation of perimeter rule con­straints, especially for LGA, has been roundly criticized as no longer necessary. Under these arguments, the protected airports (JFK and IAD) no longer need development, and the introduc­tion of Stage 3 and Stage 4 aircraft into the fleet has reduced the airports’ noise footprint for all types of jet aircraft such that the restriction on long-range jet aircraft is no longer necessary.

Щ Marketing Strategies-Frequent Flyer Programs

Frequent flyer programs began in the early 1980s as a device to encourage customer loyalty and to entice frequent travelers to use a chosen airline to the exclusion of all other competing airlines. The customers who normally fly the most, and usually at the highest fares, are business travelers whose costs of travel are usually paid by their employ­ers, or accounted for as a business expense. Fre­quent flyer awards are based on miles flown with the airline that go directly to the passenger, not the employer. So far these awards have not been considered taxable. Thus, the frequent flyer has a potential personal and financial incentive to continue to fly with the sponsoring airline, often paying its highest fares. A new entry into one of these markets, whether by a startup or by an established airline, is very difficult.

FIGURE 31-1 Summary of slot exemptions granted by DOT under AIR-21 and Vision 100 as of September 2006.