Position Paper September 2010 Comments on behalf of the airline members of the International Air Carrier Association (IACA) on the questionnaire put forward by Steer Davies Gleave contracted by the European Commission to undertake an impact assessment on possible revisions to Regulation (EEC) 95/93 on the allocation of slots at Community airports 1. General comments The International Air Carrier Association (IACA) represents 33 airlines serving the leisure industry. IACA members operate over 800 state-of-the-art, environmentally efficient aircraft and directly employ more than 50,000 people. Each year IACA airlines transport over 100 million passengers to 650 holiday destinations worldwide. IACA members consider themselves as efficient airlines, as they make optimal use of scarce resources, amongst which slots. As such, they attach a high level of importance to the issue of the allocation process for airport slots. IACA wishes to draw the consultant s attention to the fact that the market for holiday-makers is often seasonal. Seasonality is indeed a feature of the tourism industry, resulting from nature (the climate) and the organisation of society (school holidays). Air transport, like any other business, is driven by market demand. When market demand for certain destinations is seasonal, the only efficient operational and economic response is therefore a seasonal offer. IACA hence concludes that slot allocation should serve the travel market through the requests of operators. It is a technical process and should in no case be used as mechanism to manipulate markets and policies. Avenue Louise 228 (7th Floor), B-1050 Brussels, Belgium Telephone +32 (0)2 546 10 60 - Fax +32 (0)2 546 10 70 - E-Mail iaca.hq@iaca.be - Website www.iaca.be VAT BE 424 052 821 - BANK 310-0106764-53
- 2 Apart from some implementation problems mentioned in our replies to the questions, IACA considers that there is no reason for a major overhaul of the current EU slot rules. IACA holds the opinion that there is room for a more consistent interpretation and application of the existent slot rules. IACA wishes to remind the consultant of the fact that the real issue to be solved is the capacity crunch and not slot mobility as such. Redistribution of existing slots will indeed not create additional capacity. IACA hence hopes that the wrong instrument is not used for solving a concrete problem. Also, the principle of grand-fathering of series of slots, enshrined in the EU slot rules, is the only system that allows for efficient long-term fleet planning and scheduling. Finally, some of the questions in the questionnaire can only be answered adequately with specific commercial data from carriers. IACA as industry association however does not collect statistical data from its airline members on the matter of slot usage. As such, IACA can only reply by using information known by the association. ***
- 3 Questions for airline associations In responding to these questions, please note that we are particularly interested in information relating to the following airports which we are using as case studies: - Amsterdam operational base for 2 IACA members - Dublin operational base for 1 IACA member - Düsseldorf one of the operational bases for 1 IACA member - Frankfurt operational base for 1 IACA member - London Gatwick one of the operational bases for 3 IACA member - London Heathrow IACA members are ad-hoc users at this airport - Madrid Barajas one of the operational bases for 1 IACA member; - Milan Linate one of the operational bases for 1 IACA member; Munich one of the operational bases for 1 IACA member; - Palma de Mallorca one of the operational bases for 1 IACA member; prime tourism destination for many IACA members - Paris CDG - Paris Orly operational base for 1 IACA member - Rome Fiumicino one of the operational bases for 1 IACA member - Stockholm Bromma IACA members use this airport occasionally - Vienna. operational base for 1 IACA member However, please feel free to provide information where relevant about other airports which you serve. IACA wishes to draw the attention to the fact that its Members operate into other slot congested airports, such as Malaga, Barcelona, Ibiza, most Greek Isles, Canary Islands, Faro, Innsbruck. The implementation problems mentioned in this paper refer hence to these airports as well.
- 4 Operation of the coordinator and the coordination committee 1. How well is the system of slot coordinators functioning? Are there any particular issues or difficulties with the operation of the coordinator? The above-mentioned list indicates the use of each airport by IACA member airlines. As such it illustrates the frequency of contacts with the relevant slot coordinator. IACA members report no major issues with the service provided by any of these slot coordinators. They therefore believe that the slot coordinators do function well in general. However, there are inconsistencies in the implementation and interpretation of slot rules by slot coordinators. IACA members report that most coordinated airports follow the 3-days-rule to reply to questions, but exceptions do exist. These shortcomings can be solved by a better implementation of the existing Regulation by the concerned Member States, rather than by new or additional rules. 2. Are your members involved in any slot coordination committees, and if so, how? Are these committees functioning effectively at these airports? Due to their relative importance, individual IACA members are often simultaneously involved with a number of different coordination committees. Many IACA members are an active member of the slot committees at their origin airport(s), as well as their main holiday destination airport(s). Some airlines are delegated members of the national Coordination Committees in several EU Member States. Also, in some countries they are active in slot performance subcommittees. IACA members report no major issues related to the functioning of slot coordination committees. They therefore believe that these committees do function well in general. Nevertheless, IACA members mention that many slot coordination meetings are held in the national languages of the country. They think as a matter of principle, English should be the standard language to be used in slot coordination meetings in the EU (as English is considered to be the standard language for aviation in general). Also, reports and meeting minutes should be distributed in English. The mentioned shortcomings can be solved by a better implementation of the existing Regulation by the concerned Member States, rather than by new or additional rules.
- 5 Slot requests and allocation 3. How do the coordinators make information on slots, slot allocation and schedules available to air carriers? Whilst the quality of information provided to airlines by slot coordinators may vary amongst airports, IACA members report that Information is generally made available in accordance with current EU legislation and IATA guidelines. Typically, after a slot request, a carrier receives slot clearances or an offer within a range of 2hr from the requested slot. If there is no slot availability within the 2hr range, the requested flight is allocated to the waiting list. Once capacity becomes available, an offer will be sent to the operator. If an airline is interested in knowing what slots other operators hold, it can request a SIR for a particular operator or a whole slot list of the airport. IACA advocates the use of websites where essential information on slots can be found by airlines, such as allocated slots, outstanding requests for slots, available slots, contact details, as well as operational details on the slot coordination process. As its members operate in multiple slot coordinated airports, IACA wishes that this type of information would be made available to airlines in a standard format. Websites should not only be used for information purposes, but also for the slot coordination process itself. Preferably, a common electronic platform should be developed. As an example, real-time feedback of the slot monitoring should be a part of such data. 4. Is the information you received from coordinators sufficient? What benefits would your members gain from improved transparency of slot and schedule information? See Q3 above. IACA wishes to point out that slot coordinators do not provide schedule information as suggested in the question. IACA members consider that the information on slots, when requested, received from slot coordinators is sufficient to prepare slot swaps in order to optimize their timetables. As mentioned above, IACA wishes that the provision of slot information would be organized in a standard web-based format.
- 6 5. In what ways have your members adapted your operations at specific airports to respond to slot availability restrictions (e.g. changes to timings, aircraft types, alternative airports)? Airlines take into account the slot situation at airports in their scheduling process. Therefore improved pre-conference information would smooth the process. IACA members state that slot coordination is a continuous process. In most cases they are able to resolve any slot related issues by relatively minor adjustments to their flight schedules. One IACA member notes that airlines have to adapt their schedules due to the impossibility to operate at peak days (or peak times), although this would be commercially the most attractive, as natural demand would fill easily the aircraft. 6. What factors influence whether and how your members would make changes to operations in future in response to slot restrictions, e.g. moving services to different times of day, use of different types of aircraft, etc? Airlines construct their timetables taking into account commercial opportunities and operational constraints, amongst which slots are the most important. In order to satisfy market needs and to deliver a return on investment, airlines will continuously fine-tune their schedules, taking into account slot possibilities (and the competitors flight schedules) at their home-base and destinations. Limited slot availability at congested airports obviously restricts their possibilities to match offer with demand and results in compromises. 7. Have there been occasions where your members ability to expand or amend their networks has been restricted by the availability of slots or the policies / actions of coordinators? Please explain how. At slot congested airports, IACA members have obviously been restricted to expand or amend their networks as a consequence of the availability of slots at times which were optimal taken into account natural demand and aircraft availability.
- 7 8. Has the requirement that 50% of slots in the pool are allocated to new entrants had a noticeable impact on your members networks and operations, or on the degree of competition at airports? If so, how? One IACA member states that, providing that it qualifies in accordance with current legislation, it applies for and receives a number of new entrant slots. In general the allocated slots are at, or close to, the requested timings. Another IACA member regrets that it has not really benefited from the pool, as the slots it prefers would be on peak days where no slots were available. Trading and valuation of slots 9. As part of this project, we will need to develop a model of the impact of various options for changes to the slot Regulation, including introduction of market mechanisms, such as auctions and secondary trading. To do this, we need to estimate what the market values of different types of slots would be and estimate the range of yields, and contribution to profit, airlines obtain from different types of service. We understand that much information in this area is likely to be confidential; please could you assist us by providing what information you can in the following areas (even if as ranges or approximate) How would your members determine the valuation of a slot for the purpose of buying, selling or leasing? How do you expect the value of slots at major coordinated airports to change in the next 10-15 years and why? How do airline yields and contribution to profit vary by different types of service (in particular, short haul v long haul; by season and by time of day)? As mentioned above, IACA members believe that the EU slot regulation does not require a revision. The real issue to be solved is the capacity crunch and not slot mobility as such. Redistribution of existing slots will indeed not create additional capacity. As a consequence, IACA members are strongly against monetary primary slot trading. They consider that such trading would be anti-competitive, distort the market and cause serious problems for long-term planning for any airline. In general terms, IACA holds the opinion that : - there should be no primary auctioning - there should be no confiscation of slots - slot swapping should always be allowed (with or without a subsequent financial transaction) - slots should only be allocated to aircraft operators
- 8 10. What information is publicly available on trading in slots which has occurred between airlines? Would your members benefit from improved information on slot trading? If so, how? See Q9 above. IACA members would like increased transparency on secondary slot trading. 11. Have any slots trades been subject to covenants restricting how the traded slots can be used? What would the impact be of prohibiting such restrictions? Such restrictions have undoubtedly been put in place but many IACA members report that they had no participation in such trading. Use of slots 12. Do your members schedule all slots that they have been allocated? For what reasons would they decide not to use a slot that had been allocated to them? According to IACA, the question appears to phrased the wrong way round. Slots are allocated in response to requests from the airlines to match a planned programme they are not allocated to the airline first and then applied (scheduled) to a programme. Market forces, economic conditions, unforeseen circumstances and booking levels may result in a change of destination or route for a particular base airport slot or, occasionally, result in the return of allocated slots.
- 9 Changes to the Regulation 13. To what extent do you believe that the following aspects of the current Regulation are functioning effectively? If there are problems with any of these aspects please explain. Selection of airports for coordination Determination of airport capacity Independence and neutrality of coordinators Provision of information Coordination committees Fair and transparent principles for slot allocation (including new entry rule) Transfer of slots Accessibility of new slots (e.g. through 80/20 rule) Enforcement. In general, IACA members state that they do not encounter any significant problems with the current Regulation and its implementation. Minor inconveniences surface from time to time but these are resolved by dialogue with the appropriate coordinator. Nevertheless, IACA members would like to draw the attention of shortcomings in the Regulation s implementation in certain EU member states. IACA would like to speed up the independency of slot coordinators from the airport management bodies and airlines, in application of article 4 of the Regulation. 14. Please explain what you believe the impact of the following options would be, and why. Please distinguish between any impacts on the number of slots for which services would actually be scheduled; any impacts on the proportion of slots for which services have been scheduled which are actually used; any impacts on the mix of traffic (eg. type of carrier or aircraft used); and any other impacts. Please note that you will also have an opportunity to submit views on the impact of these options in writing through an open stakeholder consultation process. This is expected to be launched at the end of August. IACA wishes to draw the attention to the fact that slot allocation should serve the travel market through the requests of operators. Slot allocation is a purely technical process and should in no case be used as a mechanism to manipulate markets and policies. IACA hence challenges seriously the wording e.g. type of carrier in the above question (third bullet point)
- 10 IACA is deeply disappointed that so much energy is put in a debate on how to reallocate existing slots, as illustrated with the options C1 to C8 of the list. IACA s members would rather like to see initiatives by Regulators to steer the creation of new slot capacity at congested European airports. Option Description B1: Strengthen the independence of the coordinator This option would amend the Regulation to enhance the independence of the coordinators, by requiring that these are separate from, and do not have any obligations to report to the airport managing body, a service provider or any air carrier operating from the airport concerned; that they are not reliant on any one body for their funding; and potentially by limiting the other related activities that coordinators are permitted to undertake. IACA considers that strengthening the independence of a slot coordinator would have no impact on the number of slots for which services would actually be scheduled; no impact on the proportion of slots for which services have been scheduled which are actually used; no impact on the mix of traffic The currently effective Regulation already prescribes the full independence of slot coordinators. Any further strengthening of the independence of slot coordinators would however result in a fairer level playing field amongst carriers. IACA also finds it obvious that coordinators should have to be responsible towards the users of the airport. B2: Improve transparency of schedule data This option would strengthen and/or extend the requirements placed on coordinators regarding schedule data, for example to require them to put schedule data (including the historic slot file) in a consolidated online database available to all stakeholders. IACA considers that improved transparency of schedule data would have no impact on the number of slots for which services would actually be scheduled; no impact on the proportion of slots for which services have been scheduled which are actually used; no impact on the mix of traffic
- 11 Transparency of schedule data would however result in a fairer level playing field amongst carriers. In accordance with the current regulation coordinators are required to provide this data on request. Many coordinators have an on-line system which allows registered stakeholders to view most of the information. Making this access compulsory within a short timeframe at a wider range of airports would be more constructive and more useful. B3: Better define correct use of slots This option would address the problems of late hand-back and non-use of slots, by introducing slot reservation fees or penalties for non-use of slots. In most countries penalties for non-use, or misuse, of slots already exist. IACA considers that better defining correct use of slots would have only a small impact on the number of slots for which services would actually be scheduled; only a small impact on the proportion of slots for which services have been scheduled which are actually used; no impact on the mix of traffic Late hand-backs of slots may occur due to a number of causes such as fluctuations in the market, delayed aircraft delivery, etc In that case, responsible air carriers will contact the coordinators in advance and explain that the possibility exists. Decisions regarding penalties for late hand-back are taken by coordinators, with backing from the slot monitoring committee, after due consideration of evidence requested from the concerned air carriers. It would not be fair to penalise carriers in whatever manner for unexpected business conditions beyond their control which may result in a non-use of an allocated slot. IACA strongly opposes slot reservation fees on principle. We consider that these fees would penalise simultaneously good airline behaviour as well as abuse of the slot system by a small minority of airlines. B4: Clarify definition and rights of general/business aviation This option would allow business aviation to gain historical rights if its operations follow a regular pattern. According to IACA, general/business aviation operators have equal rights and obligations compared to other operators under the Regulation. The vast majority of business aviation does not follow a regular pattern and as such it should not have any preferential treatment with regard to access to historic rights to series of slots. It should also be kept in mind
- 12 that the majority of business aviation flights is operated using smaller aircraft types which could easily use smaller or provincial airports which are not slot constrained / controlled. B5: Clarify the role of the airport managing body as responsible for control of the activities of all operators present at the airport. This option would extend Article 14(1) of the Regulation to give the airport managing body the right to refuse to allow an aircraft to land if it does not have a slot (except in an emergency) IACA considers that 2 questions have been raised. 1. The concept B5, as explained in the left column IACA opposes absolutely any such proposal. The airport is an infrastructure that processes passengers, their luggage, as well as cargo, between their arrival for check-in and their flight. Therefore they should strive to provide enough capacity and infrastructure to meet the demand from the travel market. 2. The right for the airport management body to refuse an aircraft to land without a slot Refusal of landing permissions is, and must remain, within the purview of governments and/or the air traffic control authorities. Airport management bodies should not be allowed to get involved in operational ATC, slot allocation or airline activities. The slot abuse as mentioned in the question can be dealt with by slot sanction schemes allowed under the Regulation. C1: Expressly define the ownership of slots Under the current Regulation, the ownership of slots is not explicitly defined. This option would seek to explicitly define the legal basis for slot ownership, as licences to use the public property. To the extent that the current regulation defines a slot as : permission given by a coordinator in accordance with this Regulation to use the full range of airport infrastructure necessary to operate an air service at a coordinated airport on a specific date and time for the purpose of landing or take-off as allocated by a coordinator in accordance with this Regulation, there is indeed no actual definition for the ownership of a slot. IACA nevertheless considers that the above-mentioned definition is quite adequate for the purpose and needs no amendment. The current regulation has performed adequately without any definition on slot ownership.
- 13 Ownership and licensing would ultimately refer to financial aspects. IACA members are strongly against monetary primary slot allocation. They consider that such trading would be anti-competitive, distort the market and cause serious problems for long-term planning for any airline. C2: Define an EU regime for secondary trading This option would explicitly permit secondary trading of slots, subject to several possible provisions, such as: limitations on total holdings, requirements for post-trade transparency, and the prohibition of restrictive covenants on slot use. The study will also consider both centralised auctions and bilateral trades. Currently, the slot allocation process works well without a formalized secondary slot trading process. Secondary slot trading does take place and is driven by market needs. Any move to monetize/formalize a commercial arrangement around slot trading could distort the allocation process unnecessarily. However, where it exists, IACA members would like increased transparency on secondary slot trading. C3: Introduce a two-stage hybrid process of slot allocation This option would allocate new slots, or slots returned to the pool, through a hybrid auction and administrative process. Airlines wishing to obtain slots would first compete for scheduling rights (which would entitle them to operate either a weekly take-off or landing slot on one day of the week within a broad time window) via an auction, which would assign scheduling rights for the large majority of the available capacity. The specific slot within the time window would then be allocated on administrative criteria. The merits of different possible types of auction would be assessed; it is assumed there would be secondary trading to address any deficiencies in the initial allocation. The study will consider both an EU-wide regime, and allowing States to establish national systems of auctions. A two-stages process would bring an unnecessary level of complexity without any real benefits. So called broad time windows are useless in flight scheduling and will only complicate unnecessarily the currently adequate system.
- 14 C4: Introduce onestage allocation of slots by auctions This option would allocate new slots, or slots returned to the pool, entirely through auctions. The merits of different possible types of auction would be assessed; it is assumed there would be secondary trading to address any deficiencies in the initial allocation. The study will consider both an EU-wide regime, and allowing States to establish national systems of auctions. As previously stated, IACA strongly opposes any proposals for monetised primary trading in slots, as there are no real benefits associated with auctions. C5: Introduce withdrawal of slots and auctions In this option, a proportion of slots currently held by airlines would be withdrawn each year, and put up for auction. These could either be through a one-stage auction or the two-stage hybrid process discussed above. It is assumed that secondary trading would be permitted to address any deficiencies in the initial allocation. This could be restricted to airports at which virtually all slots are allocated on the basis of historical preference. As previously stated, IACA strongly opposes any proposals for monetised primary trading in slots. IACA considers that the option C5 includes an unacceptable system of confiscation of slots. Also, for this confiscation process, a definition of ownership is needed, which will determine the beneficiary of slot auctioning proceeds. Refering to IACA s answer to C1, there is no need to introduce such slot ownership definition. IACA considers that any enforced random withdrawal of historic slots is a completely ludicrous proposition, especially at airports at which virtually all slots are allocated on the basis of historical preference. There is not, and never should be, a mandate whereby coordinators have some arbitrary power to influence which services may or may not be operated by an air carrier. If at a full airport new business is to be introduced then this requires additional infrastructure to be put in place to accommodate it rather than a reduction in (or re-allocation of) the existing business.
- 15 C6: Introduce alternative criteria for slot allocation through increased flexibility of local rules Administrative criteria for local rules for slot allocation could be strengthened by policy criteria. These could include, for example, environmental and regional accessibility objectives as capacity goals. This would allow the exact method of primary slot allocation to be decided at local level, for instance by an enlarged coordination committee (where regions could also be represented and have voting rights), which would be able to use local knowledge to select the most appropriate method for the particular airport. IACA would like to mention that local rules regarding environmental issues, particularly night movements and noise control already exist in many airports. In the past, some coordinators have introduced local rules designed, in their view, to optimise the utilisation of available slot resources. Upon an action by IACA, one of these local rules was found to be in breach of the existing regulation and had to be withdrawn. IACA also successfully rejected plans by another airport to introduce a local slot rule which conflicted with EU Regulations. Far from creating flexibility the majority of local rules actually seek to impose greater restrictions than are necessary. IACA concludes that there should be only one set of criteria for slot allocation. Increased flexibility for slot rules would decrease transparency and legal certainty for carriers that have invested in routes. C7: Amend existing rule on new entrants At present, the rule on new entrants encourages newly available slots to be allocated to airlines with only a limited presence at a given airport. Since this restricts slots from being allocated to the incumbent s main competitors, this may not help increase competition. The current rule would either be modified to permit new entrants to have a higher number of slots, or removed and replaced with a rule giving priority to requests from carriers other than the dominant carrier at the most concentrated airports. IACA considers that this proposal appears to be anti-competitive in the extreme and displays a complete failure to grasp even the rudiments of a complex subject. As a result, IACA recommends an in-depth impact analysis for any proposed change in the new entrant rules.
- 16 C8: Strengthen the 80-20 rule There is anecdotal evidence that the 80-20 rule has not been sufficient to deter inefficient use of slots. This option would seek to improve slot use by strengthening this rule, by raising the utilisation ratio to 90% or 95%. IACA is in favour of maintaining the 80-20 rule. IACA considers that the 80-20 rule has not resulted in any perceived inefficiency in slot use. Any inefficiency to obtain full capacity at airports is not related to the 80-20 rule, but to market forces and seasonal demand. IACA would like to mention that the 80-20 use-it-or-loose-it rule is a global, worldwide concept. If it changes on one end of the world, it automatically leads to a change at the other end of the route. Also, the 80-20 rule is linked to the definition of a series of slots, meaning 5 slots held for the same day and time at an airport. The 80-20 rule means: if an airline operates less than 4 of the 5 slots, it looses all 5 of them in the next year. This is why a 90-10 rule does not make sense (as 5/10 = 0.5 slot and you can t operate half a slot). The 80-20 rule provides a certain amount of operational flexibility within the system for determination of historic rights. For example it allows a series to be scheduled including flights on public holidays when it is known from the earliest stages of the process they will be cancelled. The 80-20 rule allows this to take place without unnecessary fragmentation of the schedule at the initial stages. Also in terms of the charter market, it would make the post March clock change period a complete lottery every year. Such a proposal would only serve to encourage a much more fragmented style of scheduling which is something both air carriers and coordinators abhor. * * * *
- 17 For further details, please contact: Koen Vermeir Director Aeropolitical & Industry Affairs The International Air Carrier Association - IACA Tel.: +32 (0)2 546 1066 Email: koen.vermeir@iaca.be IACA airline members: