Slot Allocation Grandfather Rights

Posted on 4/10/2022 by admin

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Our role is to promote the importance of competitive markets for consumers and wider society. One way we do this is by advising government on how its policies and laws might affect markets. We encourage government to promote competition, engaging with it to remove, limit or prevent public restrictions and distortions of competition, highlighting the many ways in which government shapes and influences markets. We call this engagement, advocacy.

Slot Allocation Grandfather Rights Legislation
Slot Allocation Grandfather Rights Activist
Slot Allocation Grandfather Rights Amendment
Slot Allocation Grandfather Rights Definition
Airport Slot Allocation Grandfather Rights

The current EU slot allocation system gives airlines 'grandfather rights' to the take-off and landing slots they currently use. This allows airlines to hold on to valuable slots, provided they are used at least 80 percent of the time. The application of market mechanisms would make airlines face a cost that accurately reflected the scarcity of slots. Fundamental principle of the slot allocation process of IATA is the grandfather right, i.e., the right of an airline to keep a slot of the pr eceding equivalent season. This right is granted if and only if such a slot was used at least 80% of the time (use-it-or-lose-it rule). However, this procedure is far from being efficient. Slots, granting the right to take-off or land at so-called ‘Level 3’ (or slot-coordinated) airports at a specific time period, are allocated by independent coordinators on the basis of historic rights (or ‘grandfather rights’) at the given airport. The general principle regarding slot allocation is that an air carrier having operated its particular slots for at least 80% during the summer/winter scheduling period is entitled to the same slots in the equivalent scheduling period of the following year (so called grandfather rights). Consequently, slots which are not sufficiently used.

Once the grandfather rights are confirmed, the remaining slots are allocated to a ‘slot pool’ which also contains any newly created slots through increases in hourly schedule limits, slots returned voluntarily and slots otherwise unclaimed by anyone. Slots in the slot pool are allocated free of charge by the slot coordination body in the.

One current example of our advocacy is from December 2018, when we advised the Department for Transport (DfT) on the impact on competition of how airport take-off and landing slots are allocated. Our advice recommends a move away from the current administrative system, towards a market-based approach to allocating new and existing slots.

What is an airport slot?

An airport slot is the right for an airline to take-off or land at a particular airport, at a particular time.

The current ‘grandfathering’ rule under the administrative system gives airlines an indefinite right to a slot, as long as they use it at least 80% of the time – the ‘use-it-or-lose-it’ rule.

Even when new slots become available, which is very rare at the busiest airports, only half of these are reserved for ‘new entrants’. Very few airlines meet the strict definition of a new entrant, needing to hold fewer than 5 slots at the airport on the day a new slot is allocated.

Current rules could produce worse outcomes for passengers

Airlines may hold onto slots they do not necessarily need or are not able to use efficiently, simply to prevent other airlines from using them.

Although the use-it-or-lose-it rule is in place, it does not require an airline to use a slot in the most efficient way. For example, the airline with the slot may use a smaller aircraft whereas a new entrant might have an incentive to maximise the capacity the slot offers. The current rules also restrict the ability of new and/or smaller airlines to enter and expand their offerings.

These factors potentially limit choice of airlines, routes and flight times for passengers, and could lead to worse outcomes in terms of the routes and frequency of services, and higher air fares.

Why altering the current system will not be enough

Possible changes to the current administrative system, with a view to enhancing competition and connectivity, are set out in DfT's consultation. These include changes to the existing ‘new entrant’ rule or allocating slots without ‘grandfathering’ rights. In our view, more could be done to address concerns that slots are not used efficiently. The DfT plans to set out its preferred policy on slot allocation within the Aviation 2050 White Paper later this year.

The DfT also suggests reforms to secondary trading, which allows airlines to sell slots to other airlines. Secondary trading has been possible for some time but in its current form has not functioned effectively, with limited slots being traded.

Airlines are reluctant to trade as they don’t want to sell to competitors and because if they do sell, they may not be able to buy (back) slots in the future. The effectiveness of any reforms depends on addressing the incentives of airlines to trade. One option proposed by the DfT is to increase transparency but we do not think this goes far enough in addressing these issues.

Changes to secondary trading are also unlikely to resolve the issue that incumbent airlines already hold slots, whereas new entrants would have to pay to acquire them.

Why a market-based approach is better

A well-designed auction process would address the shortcomings of the current system. Rather than relying on administrators to decide who would be the most efficient user, an auction would mean the airline that values the slot the most wins the right to use it. This is because airlines hold information that isn’t available to an administrator and so would bid according to the value they see in any given slot.

Slot allocation grandfather rights amendment

Designing auction processes is not straightforward and comes with some risks. For example, large airlines may bid more aggressively to secure slots and entrench their existing position. This needs to be taken into account in designing the auction, but in our view, is not a reason not to pursue an auction route. For example, it could be managed by rules to limit the ability of large incumbents to keep or increase their existing allocation.

If risks are addressed appropriately in the auction design, our advice is that the benefits of a market-based approach will outweigh the risks. Ofcom’s move from an administrative to a market-based allocation of spectrum is a good example of where well thought-through auction design has ensured that potential risks have not materialised.

Why now?

The issue of how best to allocate airport slots is not new. In 2011 the European Commission recommended that new capacity should be auctioned off, though this ultimately wasn’t adopted.

Auctioning slots would help ensure that increasingly scarce capacity is used as efficiently as possible, delivering benefits to passengers and the aviation sector more generally. New capacity at Heathrow and potentially at Gatwick presents a good first opportunity to adopt a market-based approach.

Change and the process of competition can be unsettling. But in our view, it is important to remember that defenders of the status quo are often more organised and speak louder than the advocates for change.

For more information you can read our full report on the competition impacts of airport slot allocation.

Slot Allocation is the scheduled time of arrival and departure available for allocation by, or as by allocated a coordinator for an aircraft movement on a specific date at a coordinated airport.
Why Slot Allocation comes into existence?

Lack of Airport Capacity
Traffic Congestion
To enhance Operational Model

Capacity of a system is a variable measure of throughput or system capability related to the level of service being provided. It is broadly classified into three –

Landside Capacity- consists of parking area for vehicles etc

Terminal Capacity- Terminal building

Airside Capacity- consists of parking bays, RAMP area, Taxiway, Runway etc

With the increase of air traffic, there is a continuously growing demand for capacity at congested airports. Slots, that is to say the permission to land and take-off at a specific date and time at congested airports, are essential for airlines' operations. Slots will be distributed in an equitable, non-discriminatory and transparent way by an independent coordinator. The aim of the EU framework is to ensure the fullest and most efficient use of existing capacity at congested EU airports while maximizing consumers' benefits and promoting the competition.
ACT
Council Regulation (EEC) No 95/93 of 18 January 1993 on common rules for the allocation of slots at Community airports.
SUMMARY
The aim of this regulation is to ensure that where airport capacity is scarce, the available landing and take-off slots * are used efficiently and distributed in an equitable, non-discriminatory and transparent way.
The regulation lays down the objective criteria on the basis of which an airport can be designated 'coordinated' or 'schedules facilitated' on the grounds that its capacity is insufficient.
European Union (EU) countries can designate any airport a 'coordinated airport' * provided that a capacity analysis is carried out and there is a serious shortfall of capacity which cannot be resolved in the short term.
Coordinator / Schedules facilitator
The EU country responsible for a coordinated or schedules facilitated airport * ensures the appointment as airport coordinator or schedules facilitator of a qualified natural or legal person with extensive experience of the coordination involved in planning the movements of air carrier aircraft. The coordinator / schedules facilitator acts in a neutral, non-discriminatory and transparent manner and should be functionally separated from any single interested party. Moreover, the system of financing the coordinator’s activities will be such as to guarantee the coordinator’s independent status. The same coordinator may be appointed for more than one airport.
Airport capacity
Airport slot capacity available for allocation is determined twice yearly by the competent authorities, according to the two programming 'seasons' (winter and summer) in place in international aviation. Calculation of an airport’s capacity is based on an objective analysis of the possibilities of accommodating the air traffic.
Air carriers must provide the coordinator with any relevant information requested by him.

Coordination committee
The EU country responsible shall ensure that a coordination committee is set up at a coordinated airport. The coordination committee makes proposals and advises the coordinator on all questions relating to the capacity of the airport, and in particular opportunities to increase capacity, coordination parameters, methods of monitoring, and local guidelines. Membership of this committee is open to:
air carriers using the airport;
the managing body of the airport;
air traffic control authorities;
general aviation representatives.
Procedure for allocation of time slots
The general principle regarding slot allocation is that an air carrier having operated its particular slots for at least 80 % during the summer/winter scheduling period is entitled to the same slots in the equivalent scheduling period of the following year (so called grandfather rights). Consequently, slots which are not sufficiently used by air carriers are reallocated (the so called 'use it or lose it' rule).
The Regulation provides for the setting up of 'pools' containing newly-created time slots, unused slots and slots which have been given up by a carrier or have otherwise become available.
The coordinator also takes into account additional rules and guidelines established by the air transport industry and local guidelines proposed by the coordination committee and approved by the EU country or any other competent body responsible for the airport.
If a requested slot cannot be accommodated, the coordinator informs the requesting air carrier of the reasons therefore and indicates the nearest alternative slot.
Slots may be exchanged or transferred between airlines in certain specified circumstances (for instance, partial or total takeover, or transfer to a different route or traffic mode). In such cases, explicit confirmation from the coordinator is always required.
An EU country may reserve certain slots for regional services.
Enforcement
An air carrier's flight plan may be rejected by the competent Air Traffic Management authorities if the air carrier intends to land or take off at a coordinated airport without having a slot allocated by the coordinator. If an air carrier repeatedly and intentionally operates air services at a significantly different time from the allocated slots or in a significantly different way, the coordinator may decide to withdraw from that air carrier the series of slots in question. Consequently, that air carrier may lose its grandfather rights. EU countries shall ensure that effective, proportionate and dissuasive sanctions are available to deal with this type of situations.
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