Auctioning leases on our common assets: far better than giving away the asset or auctioning it once and for all

The FAA is moving ahead with plans to auction off a 10-year lease on a takeoff and landing slot at Newark Airport.  The Bloomberg article quotes DOT Sec'y Mary Peters' general counsel as saying that the 10-year lease could fetch hundreds of thousands of dollars.  At $100,000, and 3652 days, that means that an airline would be paying ... are you ready for this? ...  $27.38 per day for that pair of arrival and departure.    At a final bid of $500,000, the winning airline would be signalling that it would be worth $137 per day to them, to have a plane arrive and depart from Newark Airport!  

Do you think there are any airlines who would be unprepared to outbid such a bid in order to take part in the NYC market?

Further, the article indicates that the FAA plans to sell as many as 208 New York-area slots before January 20.  Assuming they are all 10-year leases, and the average winning bid is $50,000 ($13.69 per day), we're talking about revenue of $1,040,000 per year ($10.4 million over 10 years).  If the average winning bid is $200,000, that's revenue of $4.16 million per year ($41.6 million over 10 years).

By definition, there is a market-clearing price.  I suspect it is far above $69 per flight ($500,000 for a 10-year slot lease).   And I'm very pleased that our DOT Secretary recognizes that this asset belongs to us, not the airlines, and that its value should be collected.

I hope that only a small fraction of the slots will be auctioned off each year; if the economy is healthy, airlines will be willing to pay more next year than they are this year.

Separately, Sec'y Peters is suggesting a switch, at least in the Washington, D.C., area to "direct pricing" for area highways: tolls on all major roadways -- tolls with 'congestion pricing' to discourage use during peak driving periods.'    Bravo!   Bill Vickrey would be pleased.