Congestion and slot allocation

Co-ordinating and allocating flights may traditionally be a back-room activity, but current capacity constraints mean that it is rapidly coming to the fore. It is a fact that large airports are congested and will probably stay that way. In Europe and elsewhere the development of air traffic demand has outpaced the development of capacities in recent times. Furthermore major airports do not expect any substantial change to this situation in the foreseeable future. This is in spite of some impressive expansion programmes we can presently see at airports such as Madrid Barajas today and probably at Frankfurt in a few years from now. Of course there are other airports that still have available capacity, some of them a significant amount, to the extent that one can even talk about an under-usage of capacities. The reason for this situation is quite simple. Certain airports and at certain times of the day or week, are more attractive to airlines than others.

The hub of the problem

Hubbing, the system by which an air carrier uses a major airport to provide all of the connections an air carrier can offer, has intensified this development. No major carrier would be able to provide connections to every part of its network from all of the other parts, except by providing transfers, which are financially and operationally attractive for the airline and convenient to the travelling public. Convenient to the public is taken to mean: travel at attractive times of the day; short waiting times between connecting flights and high on-time performance rates. It should be considered that the desired short waiting times between connecting flights results in a high number of arrivals within a relatively short time interval, with the same high number of departures after an hour or so. From time to time one might hear voices in the air transport industry mentioning that congestions can be eliminated by changing arrival or departure times, or even by changing the airport in order to avoid congestion. Even though this may be a possible solution to capacity problems in some areas, at least in Europe, with its high population density and numerous capacity shortages, merely trying to avoid congested times or areas offers no solution. Rather, in such a free environment, trying to avoid congested times or even airports gives no guarantee for a smooth operation. Air carriers compete with each other and when the market they operate in is liberalised they have the opportunity to freely change schedules and introduce new ones. For instance, one of the most attractive ways to start a new service is to place it in the middle of a competitor’s arrival or departure peak, in order to obtain all of the connecting flights. Nobody could stop the carrier from doing so. It is evident that sooner rather than later the new times (and airports) would be as congested as the old ones. It is evident that such a situation is totally unsatisfactory for most, if not all carriers maintaining networks. It is also unsatisfactory for other carriers which do not have such networks, because whenever a time might suit a competitor, an alternative flight may be put on it. In other words, in such a scenario no air carrier operating into any major or even midsized airport would be safe from having its operation deteriorated substantially by its competitors.

Guidelines and issues

The airline industry, while gradually taking other parts of the air transport system on board, developed procedures which became known worldwide as the ‘World Scheduling Guidelines’ (WSG). These guidelines are officially recognised just as recommendations. However, they have become extremely important in this field of activity. Likewise, some ten years ago, the EU devised an official regulation on slot allocation at community airports. The Regulation became legally binding to its member states and has also been amended recently, primarily for technical and procedural reasons. The EU adopted most of the procedures from those used within industry already, as well as some ideas of their own. Similarly, the majority of the EU’s ideas were taken up by the worldwide recommendations. Generally speaking, some of the key factors in the field of airport coordination and slot allocation at present are the following:

• Some 220 airports worldwide are coordinated or ‘Schedule facilitated’. For most airports the recommendations of the air traffic industry are used as a blueprint. In other cases the coordination procedures would at least follow the recommendations in the key points.
• About 120, hence more than half of the worldwide number of coordinated airports, are located in the EU and in the neighbouring countries. For them, the EU slot regulation is binding. The EU slot regulation and the ’recommendations’ are often similar and sometimes even identical.
• Key points of slot allocation priorities consider the interests of the traditional major air carriers. However, the interests of the remaining parts of the industry are not omitted. Moreover, such priorities were and still are modified whenever necessary in lieu of the changing environment of the industry. Some of the key points under question include those of historical priorities (grandfather rights) new entrants and year round services.

Enforcement tools

There is a wide agreement throughout the airline industry that the best airport coordination can only be second to having ample capacities available everywhere and at any time. However it is clear that we do not live in an ideal world. Airports and their associations such as ACI Europe have correctly emphasised that in the age of capacity shortages airport slots have become precious and must not be wasted. Airport coordinators have the obligation to exploit the given capacities in the very best way. Contrary to this it should also be considered that air carriers also need a certain amount of flexibility for their schedules to deal with disruptions of any sorts, may those be operational, technical etc. The industry jointly took this on board by introducing the ‘80 per cent rule’. This rule requires air carriers to use the slots, as allocated, for at least 80 per cent during the given season, e.g. for a summer or winter period, in order to profit from the grandfather rights priority during the next equivalent season. In other words, up to 20 per cent of the allocated slots could eventually be wasted by simply not using them. Flights, which are operated at slots different from those given by the coordinator may also fall into the category of ’not used as allocated‘, in particular if the deviations are ’significant‘, ’intentional’ and/or ’regular‘. Moreover, the duties of the airport coordinator, in particular in the EU, do include checking whether flights operated to/from a coordinated airport had received the proper slot from the coordinator. While the airport coordinator has a set of tools to enforce the allocations made, and while at least in the EU the respective member state has the clear obligation to support the airport coordinator in his duty, it is questioned from many sides whether this regulated environment really suits the industry best.

Deregulation

Looking at an environment of deregulation in Europe, it seems to be quite evident that the chance of landing or departing at an attractive airport is a valuable asset. So, slots should be treated as such, as having value. Actually, this has been suggested by many different sources and that slots are a scarce asset and should be available only at a price is a sound argument. It is interesting to note that the EU Commission has initiated a report dealing with alternative methods for slot allocation; nonetheless, the commercialisation of slots is not an easy task. Rather, there are also good arguments against it. For instance it should be remembered that air transport is a worldwide business. For many years, the present slot allocation procedures and priority rules, in particular grandfather rights, have proven successful. Airlines are extremely reluctant to give up those rules and procedures. In particular replacing them with a need to acquire slots on a buy or lease base, may be disastrous for smaller, financially weak airlines. If such an airline is state-owned, as is often the case in areas outside of North-America and Europe, a consequence could be that US/EU carriers would find it extremely difficult to obtain traffic rights into the home airport of that non-European airline. Consequently, a direct flight into such a country for which a market obviously exists, would become impossible. In the US we find the full range of commercialisation, although most slot transfers seem to be done on a lease basis, granting the original owner the chance to use them again after the end of a leasing agreement. So, how are the above mentioned traffic right problems overcome? The portion of international flights at the biggest US airport, Chicago O’Hare, remains at 3-5 per cent. This makes it easy to grant the slots for international flights compared to the EU, even if domestic services have to be changed or cancelled. Other US high-density airports such as Washington-National, or New York La Guardia, have no international flights operating regularly. New York J.F.K., with all of its international flights arriving and departing during peak-times, is coordinated along the lines of the worldwide procedures. In Europe, this solution is not applicable. We have to keep in mind that the proportion of international flights (from/to EU airports) at big hubs such as Heathrow, Frankfurt or Amsterdam reaches 40 per cent or more. Considering the differences between just the EU/US markets, it can be seen that changing the worldwide slot allocation system always bears the danger of triggering unwanted reactions. Conversely, ‘closed shop’ situations at hub airports with some 60 per cent or so of their available slots occupied by the home carrier, may not be wanted either. Some even talk about a fortress scenario. And we have already seen that up to 20 per cent of the planned and allocated slots may be wasted by just not being used through grandfather rights.

Flexible solutions

As mentioned, airlines need flexibility when doing their scheduling. They may keep this flexibility by changing schedules within their own portfolio and by exchanging slots with other carriers. All regulations, recommendations and procedures would not only allow but encourage them to do so. Slot exchanges (swaps) may not only be performed between airlines at one airport but could also involve two or more airports, considering that perhaps a good swap deal at airport A might convince these carriers to do another swap deal at airport B. Such slot bartering – without money flowing – would normally be done after finishing the initial coordination for a new scheduling season. Slot bartering has existed for a long time and is done constantly. It is therefore a short step to slot trading with money involved. The name given to such activities is ‘Secondary Trading’. Secondary trading again though, is not the most ideal way to overcome the existing capacity shortages. We have learned that the root causes of congestion at certain hub airports goes deeper. However, secondary trading does have advantages. The aforementioned short step to involving money in the process is one. The carefully balanced worldwide system of airport coordination and slot allocation would also not be disrupted. In particular, there would be no need to change to the system of priorities, i.e. nothing could force an air carrier to give up slots for which historic rights have been obtained. International repercussions would not be expected – if ever they might appear, they would be kept to a minimum. Finally a clear legal basis for slot trading and secondary trading would be beneficial compared to the current uncertain environment.

Remaining questions

Certain questions then remain to be addressed. For instance:

• How does the seller find a buyer?
• Do we need protection from the carrier already dominating that airport in order to avoid a monopoly (fortress) situation?
• How do you deal with the possibility that an air carrier may be willing to sell slots to a partner airline but never to a competitor, although the latter might be able and willing to pay more?
• Is an open bidding or an auction needed whenever a slot is for sale?
• Should a certain portion of the money be reserved for improving the airport’s infrastructure?
• (Last but not least) What would be the airport coordinator’s role in the process of secondary trading?

This list of questions is far from being complete. It shows, however, that even introducing the easiest change into the slot allocation procedures needs a good deal of careful evaluation. Slot allocation, although one might look at it as a back office activity, has become extremely important for air carriers and airport operation. Regulators as well as various parts of the industry have again started to discuss directions where this integral part of air transport might go. We as airport coordinators are prepared to follow any of these directions provided they would enable us to provide a good service to airlines and other capacity users as well as to the capacity providers. One remains though; at least in Europe there will never be enough or even too much capacity at major airports.

Claus Ulrich

Mr Ulrich has been Chairman of the Worldwide Coordinators Group (WWACG) since 2003. The WWACG represents the interests and collective views of all officially approved airport coordinators and schedule facilitators worldwide, with approximately 220 airports coordinated or schedule facilitated. Before this he was Chairman of the European Union Airport Coordinators Association (EUACA) for six years and Chairman of the European Union Airport Coordinators Group (EUACG) in 1994/1995.