Airport subsidies and congestion in North America: the need for accounts and a regulator within virtual World Trade Organization rules

We examine the potential role of airport slot trading as a congestion inter nalization mechanism in North America. We argue that the air transportation system is massively subsidized both in Canada and in the United States and that the imposition of prices that recover full direct costs, including en vironmental costs, as one would expect if air transport were brought within World Trade Organization rules, would severely reduce the potential need f or any slot-trading scheme. We also argue that in many airports a severe pr oblem of monopoly regulation would arise if current pricing control institu tions were modified, as Canada has started to do. Slot values are a buffer that would also residually reflect true demand-driven scarcity not captured by carrier hub dominance, landing fees and airport passenger charges. (C) 2001 Elsevier Science Ltd. All rights reserved.