Air New Zealand has sold its London Heathrow slot for a whopping NZ$42 million ($27 million). The flag carrier of New Zealand is letting go of its slot pair as it is ending its flights to the major European hub in October.
Prized possession
Forbes reports that this sale is above the £10-20 million ($13-26 million) range that was initially expected. Usually, sellers of these slots aren't long-haul airlines. However, with the firm vacating the United Kingdom's busiest airport, another operator will be looking to take advantage of the footfall.
Over 80 million passengers pass through the hub each year. Therefore, whichever firm takes on the slots will likely see a lucrative return on its investment. Even though the sale is for more than expected, it doesn't come close to the record at the airport. In 2016, Oman Air purchased a Heathrow slot from Air France/KLM for $75 million.
One of the key reasons why this year's deal isn't as extraordinary as Oman Air's is the time of the slot. The national carrier of Oman's purchase was for a prime time morning slot. However, Air New Zealand's slot is for an 11:00 arrival and a 15:00 departure, which isn't as attractive.
Additionally, this sale was finalized at the end of January, which is before a court blocked the opening of a third runway at Heathrow. With airlines expecting there to be more offerings of slot with the extra runway, the demand wasn't as strong. Had negotiations continued into February, Air New Zealand could have been more firm on its pricing.
Who is the buyer?
The new holder of the slot has not been revealed. However, there are plenty of airlines that fit the bill of a company that could be keen on a new slot at the airport.
One Mile At A Time highlights that Vistara's new Boeing 787 Dreamliner will be used for long-distance operations. Moreover, London is expected to be the first long-haul destination for the Indian carrier. This slot could work perfectly for the ever-growing, full-service Indian operator.
United States-based operators such as United Airlines, Delta Air Lines, and American Airlines are also always looking at options to expand into the UK. United has especially shown its intent to grow within new intentional business segments. With a strong presence at Heathrow already, it could be interested in offering greater connections to one of the several US cities that it serves.
JetBlue is also set to fly to London next year so it could be a contender. Having said that, the low-cost carrier may be more suited to London Gatwick with its pricing structure and fleet type.
Furthermore, Middle Eastern outfits such as Emirates and Qatar Airways are always looking to affirm their presence in Europe. It wouldn't be a surprise to learn that one of these airlines snapped up the slot.
A new era
After 38 years, Air New Zealand will be ending its Los Angeles-London service in October. This is to direct capacity to faster-growing markets for the operator. With allocations at Heathrow hard to come by, the firm that has purchased this slot will also be hoping to also see long-term success with its new asset.
Simple Flying reached out to Air New Zealand for comment on the sale of its Heathrow slot but did not hear back before publication. We will update the article with any further announcements.
What are your thoughts on this sale? Who do you think bought the slot? Let us know what you think in the comment section.