How airport slots work and how they affect us (especially in Australia) – Sydney Morning Herald

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In 2020, when Air New Zealand ceased its service to London’s Heathrow, it sold its slots – the right to operate flights into and out of the UK’s main airport – to another carrier for a cool $US27 million ($39.3 million). That was for a single slot pair, the right to operate just one daily flight into and out of Heathrow. Steep as it was, that’s far from a record price for slots at a busy airport.
A multitude of planes take off from Sydney Airport every day, making it one of the world’s “Level 3” airports where slots are tightly controlled.Credit: Wolter Peeters
A slot is an agreement between an airport operator and an airline that allows the airline to operate take-offs and landings at a specific time and date. Their primary function is to allow airports to run smoothly, not to force airlines to adhere to strict schedules.
Not all airports use the slot system. Airports that have sufficient capacity to meet demand are excluded. Airports where capacity is constrained are designated Level 3, a “coordinated airport”, by the International Air Transport Association (IATA), and those airports use the slot allocation system. About 200 airports around the world are classified Level 3, including JFK in New York, Singapore’s Changi Airport, London’s Heathrow and Australia’s own Melbourne, Sydney, Brisbane, Adelaide, Perth and Cairns airports. While the allocation of slots at Level 3 airports is determined by an independent authority, Level 1 and 2 airports are free to allocate their own slots.
Slots operate on the “use it or lose it principle”. If an airline fails to use at least 80 per cent of its slots they can be redistributed to other airlines. That rule can be suspended, for example when airlines grounded many flights during the coronavirus shutdown.
Airlines can also sell their slots and at busy airports where slots are scarce these are big-money deals. In 2016, when it needed more flights into London’s Heathrow, Oman Air purchased a slots pair from Air France-KLM for $US75 million ($109 million). Slots can also be leased or rescinded. In the aftermath of Russia’s invasion of Ukraine, Aeroflot and several other Russian airlines were banned from operating flights into Heathrow and their slots reallocated to other airlines, with no compensation to the Russian carriers and no cost to the beneficiaries.
Provided they continue to use their allocated slots, airlines usually have no trouble retaining their slots from one year to the next. It’s a system that favours the legacy carriers, and makes it hard for new airlines to get a foothold at busier airports.
Across most of the aviation world slots are allocated according to guidelines determined by IATA’s Worldwide Airport Slot Guidelines. The Worldwide Airport Slot Board (WASB), which carries out those guidelines, comprises seven members each from IATA, the Airport Council International and the Worldwide Airport Coordinator Group. The WASB has been managing slot allocation since 1970.
Australia does it differently, with a private company, Airport Co-ordination Australia (ACA), charged with allocating flight slots at all of Australia’s Level 3 airports. Qantas owns a 41 per cent shareholding in ACA, Virgin Australia 35 per cent, and the ACA has recently come under fire from consumer regulators and airport management, claiming the domination by Australia’s two leading airlines favours their interests, strangles competition and therefore keeps airline ticket prices high.
At a Senate Select Committee on Commonwealth Bilateral Air Service Agreements held in Canberra in October 2023, Professor Rod Sims, former chair of the Australian Competition and Consumer Commission (ACCC), was highly critical of the power of Qantas and Virgin regarding their domination of the ACA, saying “This incentivises them to keep slot prices high to keep out competition from new entries to the airline market like Rex and Bonza. The airlines are then able to cancel flights to maintain high profits, while still maintaining a dominant market position.”
Flight Centre chief executive Graham Turner advocated that the 80 per cent rule should be changed to 90 or 95 per cent. Dean Long, chief executive of the Australian Travel Industry Association, agreed, noting that the 80 per cent rule was commonly flouted so that the level of slot compliance in Australia was commonly 60 per cent.
Canberra Airport CEO Stephen Byron cited the allocation of slots at the capital city’s airport, where Qantas has six flights to Sydney between 4pm and 5.55pm, including two that are just five minutes apart. “In terms of competitive access to Sydney Airport, the two big airlines should … give up those slots and make them available to a competitor who can use them.”
Slots are gold to an airline, and the requirement to fly at least 80 per cent of flights in its slot allocation sometimes leads an airline to operate “ghost flights”, with less than 10 per cent of passenger seats filled to maintain its slots. The term “ghost flights” was also applied to Qantas in August 2023, when the ACCC accused the airline of selling tickets for flights it had already cancelled.
A quarter of the airline’s flights were cancelled between May and July 2022, according to the ACCC. As well as allegedly defrauding flyers, that enabled Qantas to maintain its existing slots that might otherwise have overstepped the 80 per cent rule. The allegation by the consumer watchdog is still before the Federal Court, with a potential penalty of hundreds of millions of dollars.
In a surprising document tendered to the court by the airline’s legal team, “the ‘service’ that Qantas supplies is not carriage on any ‘particular flight’ but rather a bundle of rights that includes alternative options to which consumers are entitled in respect of a cancelled flight … Qantas makes clear to ordinary and reasonable consumers that, while Qantas will do its best to get consumers where they want to be on time, it does not guarantee particular flight times or its flight schedules.“
Buyer beware. The matter returns to the Federal Court in March 2024. In the meantime, the revelation of tickets being sold for Qantas flights long after they were cancelled led to the early departure of former Qantas boss Alan Joyce.
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