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Chapter 6

Airline Slots and Scheduling

Dr. Rohafiz binti Sabar


Transport and Logistics Department
College of Business
Room 257 , Main Building of COB
D/l: 04-9283664
email: rohafiz@uum.edu.my
1 Transport and Logistics Department July 2009
Definition of a slot
 The approval to conduct an aircraft landing or a take-off
at an airport at a specific time on a specific day
 EU definition encompasses – right to use all
infrastructure
 Slot availability linked to terminal capacity
 Airport slots have two dimensions:
 they are allocated to airlines in advance so that they
can establish timetables and promote services; and
 they are allocated by ATC to airlines on the day of
operation
 Slots are not guaranteed because of delays and other
operational disruption.
Slots and airline scheduling
 Airlines need the correct number and timing of slots :
 to offer departure & arrival times that are convenient
to passengers;
 to coordinate with departure & arrival times of
partner carriers;
 to compete with other carriers;
 to optimise aircraft utilisation - e.g. one arrival
followed by a departure 1 hour later.
 If airport is not congested then the airline will approach
airport ATC to be granted an approval to take-off and
land.
 If airport is congested then special arrangements exist.
System-wide demand and supply of
slots
 Increased demand for airport slots
 Air traffic growth (4% to 6% annual)
 Hubbing
 Increased competition
 Focused in major regions (Europe, N. America, Asia)
 Levels of airport charges are low at busy airports and do
not reflect scarcity
 Inadequate supply of slots
 Failure to invest in new runways / expand capacity &
expand capacity in 1970s
 Environmental constraints and questions over
sustainability of growth rates
 Long planning & construction time horizons
System-wide demand and supply of
slots
Excess demand and capacity at London Heathrow all arrivals
Summer 2005

Source: UK CAA / ACL Ltd


IATA slot allocation process
 Developed by IATA in response to growing
congestion at airports.
 Established to resolve conflicts between airlines over
access to the runway.
 System administered by IATA involves:
 Airlines
 Slot coordinators designated at congested airports
 IATA method legally adopted within the EU
(Council Regulation 95/93) with some differences.
IATA slot allocation process
 Each airport has a slot allocation status :
 Non-coordinated (level 1)
 Schedules facilitated (level 2)
 Fully coordinated (level 3)
 IATA slot allocation method comes into effect at
level 3.
 Airports reach level 3 if
 Voluntary re-scheduling has failed; or
 demand for slots exceeds capacity; and
 All efforts to expand capacity have been exhausted.
IATA slot allocation process
 National civil aviation regulator determines the levels
 At Level 2 – an independent slot coordinator is
appointed and an airport scheduling committee is formed
 Airlines, GA users, airport, ATC, handling, coordinator
 At level 2 the coordinator is requesting airline
cooperation in re-scheduling
 At Level 3 - Full coordination gives coordinator greater
control over management of capacity and demand at the
airport
 Airlines have more flexibility under level 2
 Support of major airlines usually needed to change from
level 2 to level 3
IATA slot allocation
process

 Process at each airport administered by a schedules


coordinator appointed by government
 In EU must be independent of the airlines (e.g. CAA)
 In some other countries usually largest airline
 Airlines, airports & ATC involved in the process
 Process involves local and international phases
 Slots allocated to airlines at international
conferences held twice a year attended by airlines
and airport coordinators. Summer and winter
scheduling seasons.
IATA slot allocation
process

 Slots can only be allocated to aircraft operators


 Priority to regular scheduled & charter flights
 Airlines can retain slots granted to them in previous
season “grandfather right” (Historic slots)
 Slots can be exchanged between airlines – 1 for 1
 Slots cannot be bought or sold
 Slots cannot be transferred from new entrants to
established airlines within a 2-year period.
 Slots must be used for at least 80% of its time
IATA slot allocation
process

 Local rules can be applied


 New entrant airlines have first choice on 50% of the
slot pool (unwanted slots, returned slots, newly
created slots)
 Airlines can apply for slots their grandfather historic
slots to be re-timed
 In EU,
 Slots can be reserved for domestic / PSO services
 Slots cannot be bought or sold
IATA slot allocation process
Strengths

 Airlines do not have to pay separately for slots –


(they will pay charges that go along with using slots
e.g. airport charges)
 Maintains stability in airline scheduling
 Rewards airlines that have made past investments in
routes at the airport and makes long-term planning
more predictable
 Flexibility enables airlines (large slot holdings) to
react quickly to new commercial opportunities
IATA slot allocation process
Weaknesses

 IATA system incompatible with maintaining


competitive airline markets
 New entrant airlines unable to secure access to
required slots at slot-constrained airports
 Slot pool consists of mainly unattractive slots
 Airlines with historic rights maintain dominant
market shares
 Inefficiencies in usage of slots
 Not possible to achieve allocative efficiency (slots
are used for air services to destinations that are
most highly valued by society)
 Not possible to achieve productive efficiency (slot is
used to move the maximum number of passengers
IATA slot allocation process
recent developments

 Slot trading has taken place unofficially at some


airports (Heathrow) in recent years.
 What is allowed is 1 for 1 exchanges with
accompanying monetary compensation.
 Example:
 regional airline has slots at primary congested airport
and long-haul airline has slots at secondary airport
 Long-haul airline wants slots at primary airport
Reforming slot allocation
 Introduction of price-mechanism in slot allocation
 Ensure that slots are allocated to those airlines who value
the slot the highest
 Present existing airline with grandfather slots with the
opportunity cost of holding slots
 To what extent will the price mechanism:
 Maximise passenger throughput at an airport
 Facilitate airline competition / remove market entry
barriers
 Avoid adverse implications of sudden / radical change
 protecting socially valuable air services & the environment
 Implications for worldwide slot scheduling coordination
 Slot ownership
Reforming slot allocation

 There are two basic types of price-based slot


allocation mechanisms
 Auctions
 Trading (buying & selling between airlines)
 There are two dimensions to consider:
 Should airlines keep existing slots and then be allowed to
trade ?
 Should slots be taken from airlines and then auctioned to
the highest bidder.
Reforming slot allocation
Secondary Trading

 Allow existing holders of “grandfather” slots to sell their slots


to other airlines – without need for exchange.
 Any eligible airline would be entitled to make a cash offer for
slots held by an incumbent airline
 All transactions needs to be approved / cleared by slot
coordinator to ensure compatibility with airport operations /
capacity
 Larger airlines at an advantage over smaller airlines ( like
under auctions) – could increase slot holdings at the airport.
 Positive effects on competition – only with regard to lucrative
long-haul routes
 Possible loss of less profitable regional connections
Reforming slot allocation
how much are slots worth?

 Depends on demand and supply conditions at the


airport
 Time of day / quality of the slot
 ATC constraints – night curfew will reduce supply of
slots
 Availability of substitute airports
 Airport runway expansion plans will increase
capacity thereby reducing slot values
 Lifting of bilateral agreements / deregulation will lead
to increased demand
 Slot values (exchanges) at Heathrow have been
between £4 million £6 million per slot.
Policy issues

 Is reforming the slot allocation system in order to


increase competition really needed?
 How do you define a market.
 Is it the choice of flights from one airport?
 Is it the choice of flights available from 2 or 3 airports in
same metropolitan area?
 A route at an airport will have competitive pressures
from:
 Services offered at other local competing airports to the
same destination in
 Connecting services from the airport to the destination
 In some cases high speed rail to the destination
Policy issues
 Monetary trading will probably lead to increased hub
dominance by established carriers.
 Radical solutions (auctions) could cause increased
uncertainty in the airline industry.
 Compatibility with IATA system (e.g. simultaneous
auctions).
 Loss of regional services – should regional services be
protected?
Recommended
reading
 Amsterdam slot trading report (available on Blackboard
under Air Transport Fundamentals – External Resources)
 IATA world scheduling guide (available on Blackboard
under Air Transport Fundamentals – External Resources)
 Also academic papers available on library electronic
journals (ingenta, Science Direct)