Airport slots are an important part of many airline’s operations. Put simply, they give an airline the right for an aircraft to take off and land at a specific airport at a designated time. At busy airports, these naturally have become very important – and scarce. This article takes a look at how airlines obtain slots, and why, in some cases, they can be so expensive.
Airport slots – how do they work?
Not all airports use slots. Slots are designed to aid the safe and efficient running of the airport, not to force control on airlines, so only busier airports require them. All airports are categorized by the International Air Transport Association (IATA) as Level 1 (non-coordinated airport), Level 2 (slot facilitated airport) or Level 3 (coordinated airport).
- A level 1 airport is deemed to be able to meet all capacity requirements.
- Level 2 airports have the potential of congestion but can be managed by airline collaboration.
- A Level 3 airport has constrained capacity due to available infrastructure. Arrivals and departures need to be controlled with the use of slots.
How do airlines get slots at airports?
There are 177 Level 3 airports globally where slots are used. These include:
- In the UK, all London airports, Manchester, Bristol, and Birmingham.
- New York JFK, LaGuardia and Washington National in the US.
- In Asia Hong Kong, 11 domestic airports in China, Kuala Lumpur, Singapore, Tokyo Narita and Haneda, Fukuoka, Mumbai, Delhi, and Chennai.
- Some airports are only seasonally slot controlled. For example, Innsbruck only in the winter season, and many Italian and Greek airports during the summer peak.
Slots are managed overall by the IATA ‘Worldwide Airport Slots Group.’ Slots are controlled locally by aviation authorities (e.g. the FAA in the US), normally using IATA “Worldwide Slot Guides (WSG).” An airline wishing to operate a new service can apply for a slot. Airports can approve this if slots are still available, but problems arise at airports which are operating at capacity.
Use them or lose them
The main way this is mitigated is with a rule that slots must be used in order to keep them. Airlines cannot keep hold of slots they do not use, and any slot pair that has not been at least 80 percent utilized one year, must be given up by the airline.
Available slots at an airport are divided between airlines according to their existing slot allocation. In the EU there is a further ruling that distributes more slots to new airlines. Slots can also be exchanged between airlines. An IATA conference is held twice a year where airlines can meet and re-schedule slots.
The slot market – getting high prices
If processes exist through IATA for sharing and allocation of slots, why then do we often see them sold for very high prices? At capacity-constrained airports, with scarce slot availability, these naturally become sought after – and something that airlines will pay to get hold of.
The rules for selling slots vary between regions. In the US for example, direct sales are not permitted. But there are cases of airlines exchanging slots as part of operational deals, or leasing slots to each other. The recent scrutiny over Delta and WestJet’s partnership and use of LaGuardia slots is just one example of this.
The fiercest market for slots occurs in the UK. Whilst EU rules don’t allow airlines to include them as assets in their books (one estimate by the Guardian newspaper in 2004 showed British Airway’s Heathrow slots could be worth up to £2.5 billion), there are ways they can sell them.
One of the most expensive deals to date was Oman Air’s purchase in 2016 of a pair of early morning slots from Air France-KLM for US$75 million. American Airlines also paid $60 million for a pair of slots from SAS in 2015.
Such high value and scarcity naturally lead airlines to want to keep hold of their slots. Airlines will often operate lower capacity aircraft more frequently to keep slots utilized. And they can even resort to flying empty, or ‘ghost,’ flights for the same purpose. This happened recently at Heathrow, where Air Serbia was operating ghost flights to babysit Etihad’s slots.
Changing the rules?
Most the of rules governing slot allocation and use have been in place since the 1970s when the IATA Worldwide Airport Slots Group was formed. Whilst IATA maintains that this system works, many others have expressed concern that the system is outdated and needs improvement. The EU Commission, for example, reported in 2012 that despite the rules for new entrants, less than one percent of slots at major airports Heathrow, Paris Charles de Gaulle and Paris Orly were being distributed each year.
At a conference in 2019, several experts expressed their concerns over the IATA WSG standard, and how airlines can manipulate the rules. Andrew Charlton, an aviation consultant and former head of government affairs at IATA, explained,
“They are totally out of date and out of time. They stem from a construct of the 1970s – totally irrelevant to the way aviation is run and managed today.”
Leading UK aviation consultant, John Strickland’s opinion is for a new overhauled system. He said,
“A transparent framework for slot usage is the best means to address this. The principles of fairness and equality must be respected, permitting airlines to plan capacity usage in a way that fosters long-term sustainable business whilst aiding meaningful competition.”
In an article in 2017, the Economist also suggested some alternative solutions. These included using an auction-based system, with airlines re-bidding regularly for their slots, as well as some form of congestion based pricing of slots. Airport and airline management is a complex and highly regulated area however – any changes to the system will likely be some time away.
