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Euro Capacity Crunch

European governments continue to stutter in their airport expansion plans. And tinkering with airport slot rules by the European Commission could worsen congestion problems

In 2012, some 3 billion people and 50 million tonnes of cargo are expected to take to the skies. By 2030, these figures will have nearly doubled. Yet, already, the signs of strain are showing at some of the world’s leading airports.

The UK Government still has not stepped back from its decision to rule out capacity expansion at London Heathrow; Munich voters have ruled out a third runway; and Frankfurt’s fourth runway is still curtailed by a night-time curfew.

On top of countries not building sufficient infrastructure, the European Commission is set to tinker with a slot allocation system that has been successful since the 1970s. IATA’s Worldwide Slot Guidelines (WSG) initiative provides the framework for slot allocation on a global basis. It is used at a number of major airports today and ensures a level playing field for all carriers.

By advocating grandfather rights, the WSG provides the certainty airlines need for long-term planning and consumers need for travel schedules. Aircraft cost millions of dollars and carriers need to know that they will be able to utilize these valuable assets in a manner they see fit. Furthermore, the system’s transparency ensures a coordinated network, guaranteeing airlines appropriate take-off and landing slots on a global basis.

The European Commission (EC) Airport Package, released in late 2011, has elicited a cautious response from IATA. The formalization of secondary trading, which has long been standard practice in some countries, is definitely a positive step. Strengthening the role of the coordinator, greater transparency in transactions and stiffer penalties for airlines that transgress the rules are also welcomed.

While these steps forward are welcomed, some developments are of major concern. Wording of the Airport Package makes it clear that the EC will consider an auction process for primary slots in the future, for example.

A perfect storm

More seriously for the immediate future, the EC is considering a move away from the 80/20 use-it-or-lose-it slot rule that works so well in favour of an 85/15 stipulation. The Airport Package proposal also redefines a slot series, essentially making it shorter.

Peter Stanton, IATA Head of Worldwide Airport Slots, says neither proposal makes sense and combined they are “the perfect storm”. He believes the change to 85/15 coupled with a tighter definition of a slot series would remove any chance of operational flexibility, especially when you take into account seasonal fluctuations.

“Airlines need some leeway to account for a short period of low demand or uncontrollable circumstances such as technical problems or bad weather,” he says.

The goal of the EC review was to make “better and more efficient use of capacity”, but Stanton questions whether this laudable aim would be achieved by the new proposal. “The reality is that many major airports have capacity utilization of 95% or greater,” he notes.

“London Heathrow has 480,000 slots and operates at around 99% capacity. How do you improve upon that? The only thing that would really help Heathrow is a third runway.”

Europe goes it alone

Arguments against 85/15 don’t stop there. As IATA Director General and CEO Tony Tyler has noted, proposed changes to the existing use-it-or-lose-it slot rule will provide some perverse incentives that would not be in the interest of the environment, capacity or efficiency.

“Changing to 85/15 incentivizes airlines to fly when demand is not there,” he says. “The unintended consequence of flying empty planes does not improve either competitiveness or environmental performance.”

Moreover the global standard is 80/20 and it is being used around the world at 163 airports as part of the WSG. Just as it has done with its Emissions Trading Scheme, Europe is once again looking to fly in the face of worldwide standards.

Network planning and slot issues are not easily resolved between disparate systems. China understands this and is now working to bring its own slot guidelines in line with the rest of the world. Mexico is another example of a country looking to engage in the WSG and the 80/20 rule. There are calls for India—where the Indian Ministry of Civil Aviation is introducing its own slot guidelines—to do likewise.

A decision on whether to adopt the proposals in the Airport Package is expected around the end of the year. There will be a vote in the Transport Committee in October and a plenary session in November. Any new regulation is not expected to come into force until mid-2013 at the earliest.

Stanton is confident that a strong case for 80/20 will be made and the Commission will see the sense in the arguments. “The EC has laid down the gauntlet and the industry has to respond,” he says. “But it is important to remember that we have the same ambition. The aim is for all parties to provide sufficient capacity for Europe to remain competitive.”

A grand plan

The EC is confident in its proposal. According to the analysis carried out by Parliament, the changes could be worth $6.22 billion (EUR5 billion) to the European economy and create 62,000 more jobs between 2012–2025. These figures are based on a predicted increase in utilization at congested airports of 0.2% leading to a 2% annual increase in passenger numbers.

The problem, as Stanton points out, is that this is less than a year’s growth for global aviation. Ultimately, even if given the go-ahead, the Airport Package fixes nothing. Not that anything in terms of slot management was broken.

The only possible solution to the looming congestion crisis is a grand plan for airport construction. So far, as Willie Walsh, Chief Executive of the International Airlines Group, has noted in relation to the UK market, a policy of “dither and delay” holds.

IATA has called on authorities at the national and local level to understand that runways bring global economic opportunities to their doorstep. The alternative is turning away business—something nobody can afford in this climate.

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