Congestion spurs ‘slot’ reform

Date: 21/12/1995

By Tim Jones

A LOOMING capacity crisis at Europe's major airports will prompt a proposal to reform the EU's system for allocating airlines' treasured take-off and landing 'slots' by March next year.

With 80&percent; of Europe's major international routes seriously congested already and 15 airports expected to be full by the end of the decade, the European Commission feels it must act to prevent air transport from grinding to a halt.

The Commission will take the opportunity, during the review of the 1993 slots regulation, to tighten up existing rules and think the previously unthinkable, even though radical solutions are unlikely to find enough support among EU transport ministers.

“The environment is not right to consider a fundamental change, but it will not be enough to do a simple update,” said a Commission official. But he added: “Airlines and member states, will be content with small adjustments. Only DGIV (the Directorate-General for competition) will be unhappy.”

The Commission has already held one round of talks with industry representatives and member states, and another will be held on 10 January.

Theoretically, the system of allocating slots is meant to ensure coordinated scheduling of flights, provide the certainty needed for airlines to invest in new routes and expand services at Europe's most congested airports.

Under the 1993 regulation, major airports are meant to have an independent coordinator to allocate, monitor and withdraw slots, create a 'pool' of available slots and confirm their exchange.

Moreover, half the slot pool must be allocated to 'new entrants' rather than the national flag carriers who tend to dominate take-offs and landings at the key airports. In effect, however, airports like Heathrow, Düsseldorf and Frankfurt are already so heavily congested that hardly any slots go into the pool to be offered to anyone, whether new entrant or incumbent.

The Commission asked consulting firm Coopers & Lybrand to assess the current legislation and look at these problems.

While steering clear of recommendations of thorough-going reform, Coopers found the rights and duties associated with holding a slot to be unclear, arbitrary distinctions between incumbents and new entrants, and inefficient use of the existing allocation system.

Small airlines constantly complain about having their entrance into major airports blocked by the flag carriers.

They have called on the Commission to ensure that the existing rules are properly implemented, particularly regarding the separation of the slot coordinator and the national flag carrier. Nevertheless, DGIV is surprised it has received relatively few formal complaints from small airlines over the slots issue.

“There is a bias towards conservatism within the system. As soon as you get into it, you take the ladder with you,” said one official. “Where airlines are strong, they like it and elsewhere they want to be treated as a new entrant.”

The obvious exception to this is Virgin, which has complained long and hard about being shut out of lucrative routes from Heathrow.

In July, its bids for slots to fly to Washington, Chicago and Bombay were blocked and it lodged a formal complaint against 'grandfathering'. This is the practice of allowing slots granted for one year to be held in perpetuity.

Instead, Virgin wants them granted for a limited period of maybe seven years, then allocated to the airlines flying the largest number of passengers.

DGIV suspects airlines are not complaining to them as much as they might otherwise because they are getting around slot restrictions by signing 'code-sharing' agreements with other major carriers.

These accords allow airlines to share booking systems, and passengers with one airline can be automatically booked on to the other on certain routes.

However, the Directorate-General responsible for competition does not regard this as a solution since it believes these code-sharing deals can, in themselves, restrict competition even further.

DGIV has attempted to use its leverage in merger clearance, most recently in the planned link-up of German airline Lufthansa and Scandinavian Airlines System (SAS), either to make slots available for new entrants or untangle code-sharing agreements.

The Commission has also begun a study into the effects of code-sharing on competition, particularly for small airlines.

These agreements, when combined with 'frequent flyer' programmes, can be highly attractive to business customers because points raised on one airline can be used on another.

“Regulatory barriers have finally disappeared, but market-created barriers still exist and may become more widespread,” said Frederik Sørensen, responsible for air transport policy in DGVII, the Directorate-General for transport.

In its recommendations, the Commission may consider the creation of a new class of 'heavily congested' airport where rules would be applied differently from elsewhere in the Union, said an official.

This kind of approach would address the complaints of some in the industry that the existing slots regulation is not being enforced. “Some people say we should apply the rules before we overhaul them,” said an official.