Inside Airport Slots – How They Work And Why They’re So Expensive

Airport slots regularly appear in aviation news, especially with reference to busy airports. The recent collapse of Thomas Cook in the UK, for example, has potentially opened up a number of hard to get slots at UK airports.

But what are airport slots, how do they work, and why are they so important – and often expensive! This article takes a look at slots and answers these questions and more.

Take off queue Heathrow
Slots are used to manage arrivals and departures at busy airports. Photo: Phillip Capper via Wikimedia

What is an airport slot?

A ‘slot’ is simply the permission of the airport operator for an airline to land a plane (and then take off – each slot is effectively a landing/take off pair). This gives not just the right to land the aircraft, but also to use all necessary airport services and infrastructure.

Each slot is fixed for a particular time of day, and this is crucial for airlines in managing their schedules. There is, of course, some flexibility for delays (as anyone who has ‘missed their slot’ on a delayed departure will know!). Slots should help ensure the efficient and safe running of the airport, not force airline punctuality.

Boeing 777 at Istanbul
A ‘slot’ is simply the right to land, and depart, an aircraft during a specified time period. Photo: Kivanç Uçan via Wikimedia

Not all airports use slots. There is simply no need when the airport is well below capacity. All airports are categorized by the International Air Transport Association (IATA) as Level 1 (non-coordinated airport), Level 2 (slot facilitated airport) or Level 3 (coordinated airport).

At level 1 and 2 airports, formal ‘slots’ are not required and arrivals and departures are managed by the airport and through cooperation between airlines. At a level 3 airport, the number of flights and available airport infrastructure mean closer management is needed – and slots are used.

According to IATA, as of May 2018 there are 177 Category 3 airports globally. In the UK this includes all London airports, Manchester, Bristol, and Birmingham. In the United States, New York JFK, LaGuardia and Washington National airports are slot controlled.

London Heathrow airport
London Heathrow airport – one of the IATA Level 3 airports. Photo: Mike McBey via Flickr

Slot allocation – easy until they run out!

The IATA ‘Worldwide Airport Slots Group’ allocates and manages slots globally (and has done since slot usage started in the 1970s). An airline already holding a slot keeps it as long as it has sufficiently used it. Any available slots are allocated by this group – to both legacy and new carriers.

IATA rules are that available slots are distributed according to the existing splits between airlines. A further ruling in the EU pushes more slots to new entrants. The problem is that, at busy airports, few slots become available. Slots can also be exchanged between airlines. An IATA conference is held twice a year at which airlines can meet and exchange or re-schedule their slots.

British Airways at LHR
Legacy carriers such as British Airways keep hold of their slots – BA has around 55% of slots at Heathrow. Photo: Simple Flying

Virgin Atlantic has recently expressed the desire to see the allocation rules changed, to allow them more slots to compete against IAG’s dominance at Heathrow. This is an important issue, with up to 350 new slots up for grabs when the Heathrow expansion goes ahead.

Virgin Atlantic at LHR
Virgin Atlantic wants to see more slots as part of the Heathrow expansion. Photo: Simple Flying

And it’s not just in London where slot scarcity is a challenge. Qantas and Virgin Australia are currently locked in a battle over two available daytime slot pairs at Tokyo’s Haneda airport. Fair play suggests one each – but Qantas is making a strong case for both.

The market for slots

This scarcity of slots means that at many airports the only real option to acquire slots is to buy them from another airline. The rules for this vary between countries; many do not allow trading, while some allow leasing but not a sale.

The best (or worst, depending on your viewpoint) example of this is London Heathrow airport. With slot demand here vastly exceeding supply, the market for slots has become furious. One of the most expensive deals to make media attention was the purchase in 2016 of a pair of slots by Oman Air from Air France-KLM for US$75 million. Similarly, top prices were paid in 2015 by American Airlines – $60 million for a pair of slots from SAS.

Oman Airlines 787
Oman airlines recently paid a record price for slots at Heathrow. Photo: tjdarmstadt via Wikimedia

With such high sale prices, slots often become a major part of an airline’s balance sheet. When UK airline Monarch collapsed in 2017, their slots were one of their most valuable assets (according to Flight Global). After a legal battle to obtain the rights to sell, their Gatwick slots were sold to British Airways’ owner IAG.

Monarch Airways
Administrator KPMG got the rights to sell Monarch Airway’s slots. Photo: Aero Icarus via Wikimedia

Operating flights to nowhere

One of the crucial parts of the IATA slot rules is the ‘use it or lose it’ system. If a slot is not at least 80 percent utilized by an airline, it must be given up for re-allocation.

With the high value of slots, airlines would not want to lose their slots unnecessarily. This often leads to inefficient scheduling to ensure they are used. They may use smaller aircraft more often, for example, in order to keep more slots.

The most extreme examples are when an airline operates empty flights just to keep the slots for future use. These so-called ‘ghost flights’ are sometimes seen at busy airports.

One such case that raised media attention (for example with the BBC), was British Mediterranean Airways operating empty flights from Heathrow to Cardiff. This came about after they terminated their service to Tashkent. The airline flew empty six days a week for almost six months until they started another route using the slot.

British Mediterranean
British Mediterranean Airways (forerunner of BMI) – one of the most well known ‘ghost flight’ cases at Heathrow. Photo: Aero Icarus via Wikimedia

Is there a better way than using slots?

The current system is not without its faults and criticisms. It can create situations where airlines are forced to operate ‘ghost flights,’ and can severely restrict flexibility and schedule changes by airlines. Many also feel the system is highly biased to existing and legacy carriers.

At congested airports, new airlines will have massive difficulty obtaining slots. The EU Commission, for example, reported in 2012 that despite the rules for new entrants, less than one percent of slots at major airports Heathrow, Paris Charles de Gaulle and Paris Orly were being distributed each year.

Ryanair and Easyjet
A change in slot allocation rules might see airlines such as Ryanair and Easyjet take space at airports such as Heathrow. Photo: Simple Flying

What could be done better? In an article in 2017, the Economist suggested some alternative solutions. One possibility is to use an auction-based system. Airlines could bid for slots every few years, rather than continue to hold the rights to them. Another option is to use congestion based pricing, where airlines would pay more to operate flights at peak hours.

These options have their problems too though. Not least, possibly higher rates or upfront payments causing more financial problems for airlines. For the near future at least, the current system seems set to stay.

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CHUCK BUCHLER

Now I understand the anxiety of JetBlue obtaining slots for London or Paris. Should they wait for an airline to go bust and jump on the slots or go thru normal negotiations. Hope JetBlue has a war chest of cash and moves quickly to scoop up slots.