Landing slots row exposes air policy rifts

Date: 21/01/1999

By Chris Johnstone

TWO issues in aviation policy are guaranteed to produce discord where once there was harmony - whether airport take-off and landing slots can be bought and sold to boost competition and how to regulate the spread of global alliances.

The slots debate has driven a rift between Competition Commissioner Karel Van Miert and Transport Commissioner Neil Kinnock, the two men tasked with masterminding EU policy in this contentious area.

The former maintains that slots - basically, the opportunity to touchdown or take-off at a particular time - are not a proprietary commodity to be bought and sold. But Kinnock argues that there is already a grey, illegal market in slots and some rules to govern this shady practice would be better than none.

The treatment of airline alliances has in turn underlined divisions between Van Miert and his regulatory counterparts in the US.

The European Commission's 'anti-market' demand that limits on flights should be used to encourage newcomer airlines to take on alliance partners on problem routes has raised eyebrows in Washington. There is, however, a broad transatlantic consensus that the industry's claims that their link-ups bring nothing but benefits is flawed.

The conditions set by Van Miert for clearing the British Airways/American Airlines alliance, and to a lesser extent the three-way deal between Scandinavian Airline System, Lufthansa and United Airlines, have prompted accusations that he is trying to put the brakes on an historical trend which will inevitably lead to the creation of around five global giants.

Van Miert's demands last year for BA and AA to shed more than 260 slots at London airports were attacked as a potential deal-breaker. In truth, however, enthusiasm for the alliance was waning before the Commission announced its decision, as an increasing number of rival airlines began shifting capacity to transatlantic flights to offset the downturn in demand in crisis-hit Asia.

Only time will tell if the BA/AA deal is dead or only sleeping. However, other looser alliances - such as those between Sabena, Swissair, Delta Airlines and Air France and Continental - look almost certain to stay the course.

The Commission policy's on alliances is relatively clear. But there is no clarity on the broader question of whether airlines should be allowed to sell scarce slots at overcrowded airports to boost competition.

The argument centres on who owns slots - airlines, airports, or governments. Ownership combined with the right to sell them would amount to a significant windfall for any of the parties involved.

Airlines are currently in the ambivalent position of inheriting the right to use slots and exchange them, but not to sell them. Rivals have to wait for incumbents to give them up, which does not happen very often at sought-after airports, swap them or strike illegal cash deals.

Everyone agrees this is not a recipe for greater competition, but no one agrees on the solution. Selling slots would not really tackle the problem because most are currently in the hands of existing dominant airlines and newcomers would have to, literally, buy their way into the market.

The Commission has also identified high airport charges in the EU as part of the problem but, here too, a solution is proving difficult to deliver.

The institution's attempts to force charges down have run into indifference and opposition from national governments, but the issue has moved back up the aviation agenda following threats by some airports to increase charges to compensate for the abolition of duty-free sales.

This has, predictably, sparked a fresh outcry from airlines. “A modern consumer-orientated business, if for whatever reason loses part of its market, cannot simply charge more to its remaining customers,” said Karl-Heinz Neumeister, secretary-general of the Association of European Airlines.

The Commission's efforts to combat over-charging began with a bid to breakdown monopolies for airport services, such as handling baggage and getting passengers on and off planes, followed by a proposal to make airport landing and take-off charges reflect the costs of the services provided.

While the first initiative was eventually endorsed by EU governments, the second has been held up by fears that it could seriously disrupt the way airports are financed.

Sweden, in particular, is concerned that its high-earning airports might be prevented from cross-subsidising loss-making airports in the icy, Arctic north, undermining its regional development policy. Spain shares some of these doubts.

Transport Commissioner Neil Kinnock has suggested a compromise where cross-subsidies between airports would be allowed as long as funding did not come from core landing and take-off charges, but rather from other earners, such as shop rentals and, ironically, duty-free sales.