Could Europe at last be close to getting its long-promised new rules on airport slot allocation? While few in the industry are exactly holding their breath, some are starting to hope that the newly appointed European Commission (EC) could finally succeed in freeing the logjam which has seen the issue bogged down for the best part of five years by in-fighting within Brussels.
There has never been much argument that there is a need to rewrite the tangle of rules and processes which govern the allocation of take-off and landing slots at Europe's congested hubs. What has so far eluded industry players and politicians is consensus over what shape such rules should take.
The slot allocation process was never going to be an easy area in which to legislate, with much vested interest tied up in a system which has evolved over decades of custom and practice. It started life more than 50 years ago, when a young International Air Transport Association (IATA) brought airlines together to co-ordinate timetables in the first scheduling conferences. Slot co-ordination developed as a natural extension at congested airports. The IATA conferences developed a set of guidelines to be administered by slot co-ordination committees set up at constrained hubs by the main airline users. And at the heart of this system lies the unshakeable principle of grandfather rights - in short, that a carrier can hang onto the slots that it held in a previous season.
EC regulation
But by the 1980s the EC began to take an interest. With Europe in the early stages of creating a liberalised air market, its chief concern was that the slot system appeared to be too heavily loaded in favour of dominant incumbent carriers.
Flag-carriers held most grandfather rights and effectively administered the co-ordination committees, albeit pledging impartiality. New entrants attempting to break into fortress hubs complained bitterly of bias and the lack of an effective way to challenge decisions.
In fact, the IATA guidelines had already been adjusted to cure the most obvious complaints. Each season, up to half the pool of unassigned slots are earmarked for new entrants, while carriers that make less than 80% use of a slot are obliged to hand it back under a "use-it-or-lose-it" rule. Nevertheless, almost by definition, the pool of prime slots remains tiny at a heavily congested hub.
A more radical lobby argued for a broader overhaul of the system, including the call for cash-trading of slots. That, reasoned supporters, would do little more than regulate officially what was already happening informally. Although Europe's slots are not technically owned by carriers and cash sales are outlawed, there has long been a grey market in trading. They also argued that the opportunity for an airline to buy into a rival's hub might do more to encourage robust competition than drip feeding small "new entrants" with a handful of slots from the pool.
In the event, EC Regulation 95/93, which emerged in 1993, settled for enshrining the otherwise voluntary IATA guidelines into law together with measures to make the often murky slot allocation process more transparent and obviously independent. Conditions were laid out under which an airport could be co-ordinated within the European Union (EU), requiring member states to undertake a thorough capacity analysis and consultation process.
In reality, the 1993 regulation was never more than a stopgap, with further legislation to follow. The transport directorate, headed by commissioner Neil Kinnock, set about drafting new rules as long ago as 1995. Consultation took place, the draft was prepared but nothing has since emerged.
While Kinnock had been leaning towards an element of slot trading in the regulation, his then counterpart at competition, Karel Van Miert, was publicly opposed. He was convinced that the incumbent flag-carriers, by dint of their financial muscle, would use slot trading to reinforce dominant hub positions.
The issue meanwhile became inextricably intertwined with Van Miert's battle to regulate airline alliances. The relinquishment of slots was wielded as a central condition for EC approval. Kinnock was unable to press for EU ministerial approval of the new rules and a stalemate resulted. That could now change.
New drafts
The wholesale reshuffle that was forced on the Commission earlier this year has brought in new faces: Loyola Palacio at transport and Mario Monti at competition. Kinnock and Van Miert have moved on and up. Draft regulations are already being reworked within the transport directorate and officials expect to hold the first detailed discussions with Palacio by the start of December.
Slot trading is understood still to be on the agenda but talks will take place with the competition directorate to ensure that the deadlock is not repeated. Brussels insiders acknowledge that the issue was a personal one for Van Miert - himself a former competition commissioner. The hope now is that Monti might not dig in his heels so hard.
For certain, any slot trading proposals will come with many safeguards. Only a specified proportion of all slots at an airport would be available for trading and no single airline would be able to buy more than 0.5% of those slots in any one season. Another proposal, already aired as a compromise by Kinnock, is to impose a time limit on trades. So an airline would keep the slots for around 10 years and then be obliged to hand them back to the pool.
Further proposed safeguards include an obligation to inform the airport slot co-ordinator of any deal, guaranteeing transparency. Sales would also have to be open to all-comers to avoid a dominant carrier refusing to sell to new entrant rivals. An auction would have to be held at the request of any interested airline.
Officials in Brussels are adamant, however, that slot trading is not the main issue at stake and that it is by no means certain whether such proposals will even make their way into the final regulation. "It would be a trial, as no-one knows how such trading would work out in practice. All the studies say different things," says one senior official.
While acknowledging that trading has been a thorny "political issue", the emphasis is being placed on the more pressing need to correct the deficiencies of the existing regulations.
The definition of "new entrant" will be tightened to exclude airlines, such as franchise partners, operating on behalf of incumbent carriers. It is also proposed to give new entrants first rights to dip into the pool, before allowing established carriers to re-schedule their slots as part of the co-ordination process.
The use-it-or-lose-it rule is due to be tightened to close the loopholes and exceptions that have robbed it of much of its impact. The EC also notes that some airlines deliberately, and with impunity, fail to respect their slot timings - on occasion publishing times they do not have. That undermines the efficiency of airport operations argues the EC and future offenders would have to hand slots back to the pool.
Perhaps most important, the EC aims to shore up the machinery of slot allocation through an expanded role for the co-ordinators. The proposal is to lay out further measures to ensure their independence from major carriers or governments, but give them greater power to enforce decisions. They may also be asked to cover new airports where aircraft movements are restricted by environmental limits rather than congestion.
Here the EC may already have a blueprint in the form of a new breed of slot co-ordination companies. Even before the 1993 regulation, some were already heeding the calls for greater independence. British Airways handed over its responsibilities to Airport Co-ordination Ltd, the world's first independent slot company, set up1991. It is now owned by 12 airlines and serves a dozen airports across the UK. Similar models are being followed elsewhere in Europe.
When the new regulation will be ready for approval by the full Commission remains uncertain. It seems highly unlikely that the new rules - whether with or without slot trading - will be agreed before the summer. But it may just be enough that the debate is finally moving again.
Source: Airline Business
