EU Slots Consultation – AEF Response

The consultation

This is what the EU on-line consultation says.

Title:Public consultation on the impact assessment for a possible revision of Council Regulation(EEC) 95/93 on common rules for the allocation of slots at Community airports

Target group: All stakeholders and organisations involved in air passenger transport are invited torespond to the public consultation. The Commission is equally interested in getting the views ofcitizens, national administrations and parliaments, the European Parliament and the Council, the Socialand Economic Committee and the Committee of the Regions.

Consultation period: [3/09/2010 – 29/10/2010]

This is what the web stie says on the objectives of the consultation.

The capacity of many of Europe’s key airports is restricted. As a result of increasing demand for air transport and financial and environmental constraints on expanding airport capacity, the shortage of capacity at key European airports is likely to become more severe in the future.

Regulation (EEC) 95/93 established an administrative mechanism for the allocation of capacity at congested airports. The Regulation was aimed at ensuring non-discriminatory and transparent procedures for allocation of slots, and was partly based on the established framework of scheduling procedures that had been developed by the air transport industry. Member States designate congested airports as co-ordinated, and slot co-ordinators at each of these airports seek to balance the demand for slots with the supply.

Where there is excess demand, the co-ordinators allocate slots on the basis of administrative criteria including, in particular, grandfather rights; where slots become available, in order to promote competition, preference is given to new entrants.

The Regulation was modified by Regulation (EC) 793/2004, which made a number of technical improvements, for example, to the processes for monitoring the correct use of slots and to the independent operation of the co-ordinator; it also introduced sanctions for abuse of slots. In addition, the ‘use-it-or-lose-it’ rule, which requires that a series of slots must be used 80% of the time to retain grandfather rights, has been suspended on several occasions, most recently due to the international economic crisis and subsequent downturn in traffic volumes.

The objective of this consultation is to evaluate the current operation of the Regulation, and to collect information to be used in an impact assessment of possible changes to it.

AEF response

The consultation was online only. We reproduce the response of the AEF below, together with the relevant question. Questions where AEF offered no response are omitted as are administrative questions relating to the response.

The full questionnaire can be found at:

This gives some background or context to the questions we answered as well as showing the question we did not answer.

3. Please can you identify your role and interest in the potential revision of the Regulation on slot allocation?

The AEF is an environmental association, based in the UK, that addresses aviation’s local and global environmental effects. The efficiency of an airport can influence the scale of the environmental impact associated with its operations. As slot allocation affects these efficiencies, the AEF has a direct interest in how the regulation of slots is developed.

4. How well do you believe the Regulation is currently functioning? What problems, if any,are there with its current operation?

The current system does not encourage efficient use of scarce resources, ie slots, and is therefore economically inefficient. Slots are economically valuable and it is therefore desirable that they should be brought into the market.

There are major environmental impacts from airports and flightsincluding noise, local air pollution and greenhouse gas emissions, as well as land-take, visual intrusion and biodiversity loss, related to the numbers of slots and infrastructure such as runways. How slots are used within the physical or constrained airport capacity, determines its efficiency;inefficient use of slots may mean that there are more flights of poorly filled planes than there could be for a given number of passengers or amount of freight. This means more noise, air pollution and greenhouse gas emissions (pollution from planes is correlated with their number, type and size rather than number of passengers.) Because the present system does not encourage efficient use of slots, it is environmentally inefficient.

Slots, and the flights and airspace they imply, also have social, environmental costs. These, albeit with some difficulty, can be converted to economic costs. There are also direct economic costs (land use and sterilisation). By putting slots into the market, there is the potential to bring in external costs. This is consistent with UK and EU policy which seeks to internalise costs where possible.

6. How has the availability of slots influenced the ability of air carriers to expand or reshapetheir networks?

The text prior to question 6 refers to limitations on availability of slots and it notes that these limitations may become more severe in the future, due to environmental and other restrictions. We agree; there are are already environmental restrictions on expansion at airports, eg Heathrow, and constraints are likely to grow. It is therefore important to make good use of existing runways and slots. We would support mechanisms that allow better use of slots in preference to increasing slots by means of airport expansion.

8.2 What would be the advantages and disadvantages of amending the Regulation tospecify that the coordinator should be organisationally, as well as functionally, separate frominterested parties such as airport management companies, and not to have any obligations toreport back to them? What administrative costs would it generate? How could theindependence of the coordinators be improved otherwise? Please suggest solutions.

We are strongly in favour of maximum separation of the co-ordinator from the user. Airspace, which is closely related to slots, is a public asset. Meanwhile aircraft noise, air pollution and greenhouse gas emissions have negative public impacts. The co-ordinator should therefore represent the public interest and not be controlled by private interests. Maximum separation, administratively, functionally and financially is therefore highly desirable. Full transparency is needed as befits a party which works in the public interest. A basic principle of economics is also relevant here – one of the necessary conditions for an efficient market is transparency and access to information.

9 What would be the advantages and disadvantages of amending the Regulation to specifythat the coordinator must keep accounts and budgets separate from any party having aninterest in its activities, and should not be financed solely by a single interested party? What,if any, administrative costs would this generate?

The advantage would be help to achieve the benefits described in our response to 8.2

10 What would be the advantages and disadvantages of amending the Regulation to limitthe types of adjacent activities that a coordinator may develop (such as consultancy services),in order to avoid any possible influence on their coordination activity? What, if any,administrative costs would this generate?

The advantage would be help to achieve the benefits described in our response to 8.2

11.2 What would be the advantages and disadvantages of amending the Regulation torequire coordinators to make historic schedule data available, for example through placing itin an online database? What, if any, administrative costs would this generate?

Access to information is necessary for efficient functioning of markets; historic data is part of that information.

15.2 What would be the advantages and disadvantages of amending the Regulation to allowbusiness/general aviation to obtain historic preference on the basis of the total number ofbusiness/general aviation flights operated? If implemented, how should this function? What,if any, administrative costs would this generate?What are the advantages and disadvantages of reserving a number of slots per hour tobusiness aviation operators?

(15.3) Should the current definition of business aviation in the Regulation be changed orupdated and if so, in what way?

If General Aviation (GA) had to bid alongside commercial aviation for slots at an airport, GA would not be able to compete and might be driven out of the airport. There may be a case for setting aside a proportion of slots for GA without auctioning.

17 Does the current lack of definition of ownership of slots cause any problems for the slotallocation system? If so, how? What would be the advantages and disadvantages ofamending the Regulation to introduce a definition of the ownership of slots ? What, if any,administrative costs would this generate?

Clear ownership would assist in achieving a more transparent and publicly accountable system.

18.2 What would be the advantages and disadvantages of amending the Regulation toexplicitly state that secondary trading in slots is permitted at all EU airports?

Secondary trading gives profits to airlines and this profit derives ultimately from the fact that the slots are initially allocated free to airlines. If secondary trading is to continue, then there must be full initial auctioning of slots. Whatever the system, clarity and transparency are desirable, so the Regulations ought to be amended to make matters clear.

19.1 What would be the advantages and disadvantages of amending the Regulation toprohibit the placing of restrictive covenants on slot transfers?

The advantage would be to increase clarity and transparency, which would assist efficient functioning of the market.

20.1 What degree of transparency regarding slot trades is required to encourage slotmobility? What would be the advantages and disadvantages of amending the Regulation torequire transparency about slot trades, including the identities of the carriers, any payment orother consideration and whether the exchange is permanent or a lease?

The advantage would be to increase clarity and transparency, which would assist efficient functioning of the market.

21.1 What would be the advantages and disadvantages of amending the Regulation toreplace the current system of decentralised, bilateral slot exchanges with centralised auctionsof slots that carriers wish to give up?

We support the principle of auctions for slots. A local system of exchanges will tend to lead to sub-optimal allocations. A centralised system of auctions should be more economically and environmentally efficient.

22.1 What would be the advantages and disadvantages of amending the Regulation toreplace the current system of administrative allocation of slots with a two stage hybridsystem, by which carriers would bid for scheduling rights, followed by an administrativeallocation of these slots between the carriers that had scheduling rights?

The two-stage process would be preferable to the current system in terms of economic and environmental efficiency. However, it is likely to be less efficient than full, one-stage auctioning.

22.3 Where should the proceeds from such auctions be allocated? Please give reasons.

The proceeds of auctions should be allocated to national governments. As slot auctioning would be carried in the public interest, receipts from auctions should logically go to government. There is no body other than a democratically elected government qualified to decide how the receipts of auctions should be applied.

22.4 If this was applied should it be EU-wide or left to the discretion of individual States?

There are arguments in favour of EU-wide application such as preventing economic distortions and unfair completion. In practice, however, giving discretion to states would allow them to progress with auctioning to meet national needs and circumstances. Attempting to impose an EU-wide system could lead to the ‘lowest common denominator’, which would achieve little in the way of change while satisfying very few states.

23.1 What would be the advantages and disadvantages of amending the Regulation toreplace the current system of administrative allocation of slots with an auction process forslots?

As noted in our response to previous questions, slot auctioning would increase economic and environmental efficiency. It would be more efficient than the two-stage process described in C3. While it may be more expensive to administer, the economic value of slots (insofar as evidence is available) can be very high and this is likely to greatly outweigh any administrative costs.

The questions asked in 22.3 and 22.4 would seem equally valid in the case of a one stage process and we consider they should have been asked. Our responses would be the same.

24.1 What would be the advantages and disadvantages of amending the Regulation tointroduce withdrawal of slots, in parallel with the introduction of auctions, at all coordinatedairports? If this was introduced, what proportion of slots should be withdrawn each year?

If only new slots are auctioned, the economic and environmental benefits of auctioning will be realised very slowly. Therefore existing slots should be withdrawn and auctioned. To maximise the benefits this process should be quick, with perhaps 25% of slots withdrawn each year until all the slots are auctioned. After that,the rate of withdrawl would correspond for the period for which the purchased slots were valid. The rate could be slower, so as not to impede long term planning by airlines.

24.3 If applied, should this policy be restricted to the most congested airports wherevirtually all slots are allocated through grandfather rights and what difference if any wouldthis make to the impacts?

Auctioning is only likely to make a significant difference at congested airports (congested for at least part of the day). At an airport that is not congested all airlines would be able to buy all the slots they needed at minimal price. It may therefore be administratively simpler and cheaper to confine slot auctioning to those airports. We do not have a view on the precise definition of a congested airport.

However, airports which are not now congested may well become so unless new runways are built. This being so, it is desirable that auctioning is introduced at all airports which might become congested in the next 15 years or so. A long advance period is needed so that the economic signals have time to develop and therefore are able to influence decisions on investment in airports.

Rather than establish complex rules about inclusion of particular airports or not, it may be simpler introduce auctioning at all airports where there are commercial flights. At the non-congested airports the price of slots would be so low that the allocation would in practice be similar to the present handing out of slots.

31. Are there any other issues with the operation of the current Regulation to which youwould like to draw our attention? Please give details.

We noted in our response to question 6 that there was an issue mentioned in the pre-amble, but the question itself did not invite us to comment. We consider the point in the pre-amble to be of crucial importance and repeat our response here.

The text prior to question 6 refers to limitations on availability of slots and it notes that these limitations may become more severe in the future, due to environmental and other restrictions. We agree; are are already environmental restrictions on expansion at airports, eg Heathrow, and constraints are likely to grow. It is therefore important to make good use of existing runways and slots. We would support mechanisms that allow better use of slots in preference to increasing slots by means of airport expansion.