Plan to let airlines buy and sell slots set for take-off

Date: 13/07/2000

By Renée Cordes

THE European Commission is to propose new rules which would allow airlines to buy and sell take-off and landing slots under certain conditions, ending more than three years of fierce internal arguments over whether the practice should be legitimised.

The move is aimed at clamping down on the EU's thriving black market in slots by making the procedures for allocating them more transparent. But Europe's largest airlines are opposed to the initiative, arguing that there is no need to change the existing regime.

Transport Commissioner Loyola de Palacio is still working on the details of her proposals, which were due to be published later this month but could be delayed until September. However, her officials say she will call for a radical overhaul of Union rules dating back to 1993 which allow slots to be exchanged but not sold. She will argue that trading in slots should be permitted in some circumstances, as many airlines already buy and sell them anyway - especially at congested airports - and rules are therefore needed to ensure that this is done in a fair and open manner. Officials also want to make sure that unused or little-used slots are made available to those who need them.

Arguments over how to regulate the sector have been raging since 1997, with former Competition Commissioner Karel van Miert and De Palacio's predecessor Neil Kinnock repeatedly locking horns over the issue. Kinnock argued in favour of legitimising the practice, but Van Miert insisted that slots were a public resource which did not belong to the airlines and could therefore not be sold by them.

The dispute has clouded the Commission's attempts to rule on several proposed aviation alliances because clearance for such deals often depends on airlines agreeing to give away some of their existing slots to ensure fair competition with smaller rivals.

De Palacio's initiative comes amid mounting complaints from start-up carriers that they are at a competitive disadvantage to the Lufthansas and KLMs of this world, as current EU rules give airlines which already possess slots an automatic 'grand-father' right to keep them when they come up for renewal twice a year. It is also part of a broader campaign to ease traffic delays and improve service at airports. "We currently have a situation where companies are giving or selling their slots to other carriers, but not in a transparent way," said a Commission spokesman.

To remedy this, the EU executive is considering several options for allowing airlines to buy and sell slots openly. Scenarios being explored include allowing airlines to buy slots for a restricted period of time, such as ten years, after which they would go back to the common pool and be reallocated under the normal procedures. De Palacio is also considering the possibility of a public auction or sale, but with a ceiling on the percentage of slots any one airline could purchase.

Officials said the Commission was wary of allowing a completely unrestricted trade in slots, amid widespread fears that

this could lead to dominance by the largest carriers with the biggest budgets.

Pressure for clarification of the slot rules has been growing in the wake of a British high court decision last year which provided the only interpretation so far of the Union's seven-year-old legislation. In a case involving an exchange of slots between British Airways and a subsidiary of KLM, the court ruled that the outright sales of slots was illegal since airlines did not own them. But it also decided that it was legal for slots to be exchanged, even in cases where money changed hands. This simply added to confusion over the legal situation.

Despite this, many in the airline industry are urging the Commission not to change the existing rules. Tim Goodyear, a spokesman for the International Air Transport Association, which runs the current twice-yearly slot allocation conferences, argues that allowing airlines to buy slots could result in them being distributed unfairly. "If you have a system of buying and selling, the rich airlines are going to buy up all the slots right away," he said.

The European Commission is to propose new rules which would allow airlines to buy and sell take-off and landing slots under certain conditions, ending more than three years of fierce internal arguments over whether the practice should be legitimised.