Article from BTNews 17 FEBRUARY 2020
COMMENT: Who owns the Heathrow slots?
The ownership of the Heathrow (LHR) slots has been brought into sharp focus by Flybe dropping both Newquay and Guernsey to Heathrow for the summer season, as reported by BTN last week.
The better news for Cornwall and West Devon in this week’s issue is that British Airways is resurrecting its Newquay services, albeit in a limited way.
A great deal has been written about the Heathrow runway slots, some of it correct, some completely wrong, and when it comes to monetary value, only conjecture. Unless an airline chooses to make a statement on how much it has paid for a slot, or is paying, there is no statutory reason to publish a figure.
As reported elsewhere in this issue Flybe’s curious shenanigans do not appear to have been well received – by Heathrow chief executive John Holland-Kaye who highlighted the two routes in a press release showing the growth of regional traffic, something the airport is keen to develop; by Newquay Airport, with a new airport director about to be announced, putting out a statement that Heathrow was responsible for 30% of the airport’s traffic with a load factor of 84% and local Cornwall media quoting holiday and business trade people on their disappointment with the news.
The question is why has the struggling regional carrier dumped one of the finest connecting airports in the world for a one runway operation where its part-owner Virgin Atlantic has much less of a presence than Heathrow?
Is Flybe about to announce two new Heathrow routes with greater revenue potential and less cost than Newquay/Guernsey?
To try and put the record straight BTN has attempted to unravel the myths that have risen concerning airport slots and Heathrow in particular.
ACL (Airport Co-ordination Ltd) was set up in 1992 as a membership company, with UK airlines as its members, and now has four independent directors on its Board as well as directors nominated by its six members British Airways, easyJet, Flybe, Jet2.com, Tui Airways and Virgin Atlantic Airways. It now acts for 40 airports around the world and employs 35 people at its offices in Staines, Manchester Dubai and Auckland and provides data services and consultancy as an adjunct to its core task of slot coordination.
Amongst its many successful contracts was handling the London 2012 Olympic Games requirements and more recently the 2019 runway closure at Dubai Airport.
ACL is designated by the Secretary of State for Transport as the independent coordinator for a number of UK airports, including Heathrow.
It has the authority to sanction the misuse of operations without a slot, early or late operation and the use of a slot in a significantly different way to that allocated.
ACL acts under the EU Slot Regulation, which requires coordinators to be independent and to act in a neutral, transparent and non-discriminatory way. It is assumed that UK legislation will continue the application of the EU Slot Regulation.
Slots are the right to use airport infrastructure. There is a continuing debate about who “owns” airport slots, but technically they are a usage right rather than an asset.
The coordinator allocates slots in accordance with the EU Slot Regulation and the Worldwide Slots Guidelines in order to maximize efficient use of airport infrastructure.
Slots are allocated for free.
Slots are subject to so-called “grandfather rights” under which the coordinator will re-allocate a series of slots to an airline provided that it uses at least 80% of the series of slots in a given season. If the airline fails to use the slots sufficiently, they are returned to the pool for the coordinator to re-allocate.
Once a series of slots has been grandfathered, the slots can be exchanged between airlines. At highly constrained airports, this has given rise to slot trading between airlines which may involve one airline paying another for slots. In some cases, an airline may exchange slots to another airline for a set period, with the provision that the other airline will exchange them back at the end of the period. A parallel can be made with a footballer who is loaned from one club to another.
Most of the slots which Flybe currently uses at Heathrow were exchanged to it from British Airways under IAG’s commitments to the European Commission in order to remedy competition concerns about merging bmi into BA. Virgin Atlantic’s Little Red operation used BA slots under the same ‘remedy’ provisions; these slots were returned to BA when Little Red ceased operating.
It appears that only Flybe can use these slots (they can’t be exchanged to another carrier such as Virgin) and should it cease to use them they would be exchanged back to BA; or in the unlikely event that BA didn’t want them would be returned to the coordinator to reallocate. The remedy slots cannot be used for routes other than European short-haul routes.
The Slot Regulation specifies that 50% of available slots must be allocated to new entrants if there is new entrant demand for them. Very few slots become available for allocation at LHR each season. Norwegian applied for 14 weekly slots at LHR for summer 2020 and was allocated six (enough for three weekly rotations). Norwegian’s plans changed and it returned the slots to the pool.
Another problem for Heathrow is that the bigger the aircraft, the greater the wake vortex which means the gap after an arriving Airbus A380 has to be longer than after a much smaller Boeing 737. This has to be taken into account by the airport when declaring its slot capacity. On Heathrow’s runways aircraft movements average every 90sec on each strip. Heathrow also accommodates the Bombardier Q400 turboprop which can only carry 68 passengers for the same slot as the A380. Another consideration in a complicated mix.
Taking London City Airport as an example the small aircraft (eg Embraer) require much less runway time, and with the new, about to be commissioned parallel taxiway, twice as many aircraft can in theory be accommodated. London City’s problem is aircraft stands with two out of commission due to the terminal rebuild.
BTN quotes some values suggested for slot swapping, but they cannot be verified.
The highest price paid for a pair of take-off and landing slots at Heathrow Airport is thought to be $75m, by Oman Air to Air France–KLM for a prized early morning arrival, reported in February 2016. A year before, American Airlines paid $60m to Scandinavian Airlines for a pair.
As things stand IAG will control 55% of Heathrow slots summer 2020. These are very much in line with major continental gateways where the ‘home’ airline also has the majority. The Delta/Flybe/Virgin Atlantic group has around 7%.
Flybe remains an enigma. Chief executive Mark Anderson has been announced as the key speaker at the British – Irish Airport Expo, Olympia London, 9–10 June. Will the airline be Virgin Connect by that time? The issue of slots is bound to arise.
OUR READERS' FINEST WORDS (All times and dates are GMT)
All comments are filtered to exclude any excesses but the Editor does not have to agree with what is being said. 100 words maximum
Tom Buncle, Edinburgh
Thank you for a very clearly articulated and enlightening insight into the arcane world of airport slot allocation.
John Smith,
The best article on airlines that i have read in a long time Thank you
Geoff Moore,
Thanks guys for helping me to understand the the wonderful world of airport slots! It has been a mystery but you have cleared up most aspects.