Aerospace News: New Slot Proposals From The EU

From the Winter 2004 Issue of BLG Aeropsace News

The EU’s prime objective in further developing slot allocation rules is to improve slot mobility between airlines in order to assist efficient use of airport capacity and to improve access to slots. To achieve that aim, the Commission in its consultation paper published on 17 September 2004 floated a number of potential methods of commercial slot allocation. This initial consultation closed on 1 December 2004. Implementation of any of the ideas put forward by the Commission could see significant changes to the way slots are allocated and exchanged at present, including the possible erosion of grandfather rights and the introduction of a free market for the trading of slots which is currently prohibited under EU law.

Amongst the proposals being looked at by the Commission in order to promote the mobility of slots are the following:

• The legalising of slot trading, i.e. the transfer of slots in exchange for money; the Commission suggests that intended transfers would be supervised by the slot co-ordinator and sanctioned only if no other carrier was prepared to pay a higher price, with the slot ultimately going to the highest bidder.
• The compulsory withdrawal of a certain percentage of grandfathered slots that would be returned to the pool for reallocation – this would, the Commission suggests, cater for the fact that carriers will not always be prepared to sell, and that secondary trading of slots will therefore not always provide a full solution to its desire to ensure greater movement of slots. The Commission suggests that, rather than face compulsory redistribution of slots, carriers might then be inclined to sell and the higher the percentage of slots to be withdrawn and redistributed, the greater the incentive on carriers to engage in trading.
• Each slot to have a posted price charged to carriers as part of the airport charge; the Commission’s thinking is that this additional charge would be likely to reduce demand for excess slots. The charge might apply on a season by season basis and the carrier would have no automatic rights to the same slots the following season, so that grandfather rights would apply only if the carrier was prepared to pay the requisite airport charge the following year.
• New slots and those in the pool at the end of the season to be auctioned to the highest bidder.
• 10% of all slots (including those currently subject to grandfather rights) to be surrendered and auctioned every year.

The Commission’s thinking is in its early stages at present. It recognises that there will be issues to be addressed in relation to some of the options it is considering. For example, safeguards would be required to ensure that slots are not in practice available only to those airlines with the deepest pockets and that existing dominant positions enjoyed by some carriers at certain airports are not simply entrenched to the detriment of competition and new entrants. Further, the idea of compulsory withdrawal and reallocation or auctioning of grandfathered slots or season by season allocation would need to be examined carefully to consider whether it might cause impossible disruption to carriers’ schedules and whether some compensation to the carriers who have been required to surrender slots might be appropriate. Once the Commission has industry views on the various possible mechanisms for commercial slot allocation, it recognises the need to go on to consider these further issues.

A new slots regulation is probably therefore some way off and some of the ideas so far put forward by the Commission are likely to be controversial.