Slot Allocation Grandfather Rights
- Airport Slot Allocation Grandfather Rights
- Slot Allocation Grandfather Rights Activist
- Slot Allocation Grandfather Rights Amendment
- Slot Allocation Grandfather Rights Definition
- Slot Allocation Grandfather Rights Legislation
Held and employed slots. These rights are known as ‘grandfather rights’ and they potentially enable incumbent carriers to hold allocated slots in perpetuity. It is also important to note that the use-it-or-lose-it requirement is purely a quantita-tive concept and has no qualitative aspect in terms of evaluating how the allocated slots.
- Obviously, the allocation in this system is dominated by the grandfather rights: if the series of slots (a minimum number of 5) are used in the previous equivalent season for at least 80% of the time the incumbent carrier has the right to use that slot in the next season as well (the ‘use it or lose it’ rule).
- Existing users of these airports enjoy grandfather rights in relation to their current slot holdings. While the regulation provides for 50 per cent of any slots not subject to grandfather rights to be allocated to new entrants, and the remainder allocated according.
- ‘Grandfather rights’ entitle an airline to continue using the same slot in the next scheduling period, provided that it has used that slot for at least 80% of the previous period. (This principle is also called the ‘80/20’ or ‘use it or lose it’ rule). 10 The graphic below shows the annual slot allocation cycle.
Airports are under pressure to free up space for carriers – or face the crippling effects of congestion. Ross Davies talks to Emmanuelle Maire of the European Commission about how altering the current slot allocation system could provide the industry with greater leeway and stave off what is already being described as a ‘capacity crisis’.
On average, 26,000 flights take place every day across Europe's skyways. According to analysis conducted by the European Commission, passenger numbers could almost quadruple by 2030.
Put simply, the majority of Europe's airports are being stretched to their limits, prompting Siim Kallas, the EU's commissioner for transport, to recently label the current situation a 'capacity crisis'. If efficiency isn't improved, there is a serious danger that the continent's airports will become maxed out, leading to interminable delays and congestion.
Supporting traffic growth has long been a quandary that the European Commission has sought to remedy. Following the formation of a single aviation market in the 1990s, the regulation of take-off and landing slots at airports was cited as a key recourse. However, that the process is still ongoing over a decade later is indicative of the regulatory headache that slot allocation poses. The general consensus points to an overall lack of efficiency across the system.
'With the current slot constraints, airports simply cannot accommodate traffic,' says Emmanuelle Maire, head of the European Commission's internal market and airports unit at the Directorate for Mobility and Transport. 'EU regulations as they currently stand are no longer fit for purpose and are unable to accommodate the evolution of the aviation market.'
Healthy competition
Presently, slots at EU airports are allocated to airlines by independent coordinators, which do so under the proviso of fair and non-discriminatory selection. However, once carriers have their slot, they are entitled to keep it on an indefinite basis, providing they continue to use it and adhere to certain regulations.
The concept, known as 'grandfather rights', has come under fire as being inefficient and bottlenecking competition from new entrants.
'There are definitely question marks over competition,' says Maire. 'We need to find the right balance between stability and strengthening this competition. This will require clearer legislation concerning the independence of slot coordinators, for instance, to make sure that allocation is absolutely impartial.'
The Commission's last report, made public in December 2011, mooted the possibility of imposing a sanction by which airlines would need to use at least 85% of their allocated slots in a given year - up from the previous threshold of 80%. If they failed to meet the stipulations, carriers would automatically forfeit their slot to other claimants.
Many airlines and airports have railed against the 'use it or lose it' rule, with some, including airline lobby group the International Air Transport Association (IATA), claiming that in order to adequately follow such measures, airlines would be in danger of being forced to fly empty planes so as to preserve their slots. Maire disagrees with the accusation.
'I thank that's something of an overreaction,' she says. 'From the research we have conducted, setting the bar at 85% would actually mean that there would be no financial damages whatsoever for airlines. Furthermore, there would be more passengers on planes, which is the overall aim for the industry.'
Secondary trading and slot auctions
If that particular proposal has been met by opprobrium, one option that has proven to be a more attractive alternative is the idea of secondary trading, which, in effect, would create an open marketplace for airlines to buy and sell slots among themselves. By conducting this in a transparent, fully regulated way, operators would be incentivised to sell underused slots to other carriers, creating better capacity.
Airport Slot Allocation Grandfather Rights
Of the EU's 27 member states, the UK has been the biggest exponent of secondary trading, with the High Court ruling in its favour in 1999. This was highlighted in a recent study conducted by transportation consultants Steer Davies Gleave. It claimed that at Heathrow - a notable example of an airport operating at near full capacity - airlines pay in the region of £30-40m for a pair of peak-time slots, and that the High Court's decision has induced, on average, an increase in aircraft size of 33%.
'The UK has a very good system, which is very transparent,' states Maire. 'I would like to see the same opportunity afforded to airlines across Europe, in the interest of using their existing capacity budget to procure new slots, but also with guarantees on the independence of coordinators and the transparency of data.'
Despite favourable recommendations for secondary trading from the likes of Steer Davies Gleave, Maire concedes that the Commission has its work cut out in passing legislation. In some EU countries, such trading is prohibited - although slots have tended to change hands privately - while question marks still remain over the willingness of airlines to sell slots to competitors.
'The problem in the past has been that secondary trading has not been clearly authorised across the EU,' says Maire. 'This goes back to administrative models that did not envisage the current market-based mechanisms. What we need to curb this is direct access for interested parties to slot data.'
The Commission has also looked into the viability of holding airport slot auctions, whereby in the case of runway expansion, or confiscation as a result of misuse, the slot would be auctioned off to the highest bidders. According to the aforementioned Steer Davies Gleave report, at current prices, the sale of spaces at Heathrow alone would raise in the region of £5-6bn.
While some governments may see this as a golden opportunity to line the coffers, the airline industry has been steadfast in its opposition to the idea of auctions, claiming that not only is it tantamount to taxation, but also that the process is too complex to undertake - namely, allocation at different airports is interdependent, which would require thousands of auctions to take place simultaneously across the EU.
In light of this opposition, slot auctions - which were also trialled and subsequently dropped at New York's JFK and La Guardia Airports in 2009 - do not feature in the Commission's current set of proposals.
'While there is an economic case for slot auctions in terms of creating competition, it would be very dangerous for overall stability,' says Maire. 'And, in practice, it would be very difficult to implement as you have to effectively connect the departure slot at one airport with an arrival slot at the destination airport. Consequently, it is not something we are proposing at this current time.'
A sizeable challenge
Another factor that needs to be taken into consideration relates to the size of the aircraft. At many of Europe's airports, a considerable number of slots are utilised by smaller aircraft for short-haul flights, limiting potential passenger numbers. In the face of this, the Commission is proposing that 50% of slots be set aside for new, larger entrants to ramp up capacity.
Slot Allocation Grandfather Rights Activist
'We are proposing a revision of the threshold so that new entrants could be a bit bigger,' explains Maire. 'This entails not allocating the 50% of slots to mini or micro entrants, which, in turn, would create more competition at airports where there are slot constraints.'
Maire admits that the subject of slot allocation is still a work in progress. The Commission's latest set of proposals still needs to be approved by European Parliament before any concrete laws can come into play. At the time of writing, this could still be more than a year away.
Slot Allocation Grandfather Rights Amendment
Given the ongoing swell in passenger figures and projected growth, many industry mouthpieces, such as IATA, would argue that time is of the essence and Brussels will have to take action sooner or later. And if ministers are to follow the Commission's recommendations, Maire is hopeful that secondary trading could be implemented in all member states in the near future.
'From our findings, we believe that secondary trading offers, by far, the best benefits to airlines and airports,' she says. 'This has been amply demonstrated by Heathrow and Gatwick; perhaps one day soon, other airports could increase their passenger numbers, too. These changes could be worth €5bn, create up to 62,000 new jobs and would build an infrastructure able to handle 24 million more passengers by 2025.'
Such projections will be contingent on improving and aligning communication between slot coordinators, airports, airlines and air traffic control authorities - 'different actions among stakeholders,' as Maire puts it. If this can be achieved, the 'capacity crunch' referred to by Siim Kallas could yet be averted.