At the end of March 2020, the EU suspended the airport slot requirements by issuing a waiver1 covering the end of the Winter 2019 (W19) and the whole of the Summer 2020 (S20) scheduling season. The slot rules oblige airlines to use at least 80% of their take-off and landing slots in order to keep them the following year. The aim of the waiver was to protect the financial health of air carriers and avoid the negative environmental impact of empty flights operated only for retaining airport slots. In September 2020, the European Commission announced that it planned to extend the waiver to cover the Winter 2020 (W20) scheduling season2, citing the unprecedented reduction in air traffic that is due to the outbreak of COVID-19 and which is likely to persist in the foreseeable future.
At the same time, the Commission also acknowledged that the waiver should not obstruct the best use of available capacity even while the COVID-19 crisis persists, and highlighted a number of challenges including the timing for the advanced hand-back of slots; the difficulty for airports and related services providers to plan operations effectively, and the risks that competition is excluded from airports. Some airlines, most prominently Wizz Air, have been particularly vocal about the competition point. While most airlines have grounded and/or reduced their fleets, Wizz Air has been looking to grow its market share and gain long-term access to usually congested airports, including London Gatwick3. On the other hand, where airlines such as Lufthansa have received state aid in the COVID-19 context, this has come with conditions to preserve effective competition through the divestment of up to 24 slots per day at its hubs.
Airport capacity, particularly runway capacity, is scarce at some European airports and how slots are allocated at them is an important factor in supporting a competitive aviation industry. Making the best use of available, but scarce, capacity is essential, particularly at peak times during the day or season when many large European airports are heavily congested.
Air traffic grew by +11% between 2010 and 2018, leading to increased capacity constraints at European airports. The number of coordinated airports increased from 89 in 2010 to 98 in 2018. EUROCONTROL’s Challenges of Growth4 long-term forecast indicates that by 2040, air traffic in Europe could grow by +53% compared to 2017, with 16 highly congested airports in the summer season, compared to six in 2016.
Regulation (EEC) 95/93 established a mechanism for the allocation of capacity at congested airports. The Slot Regulation sought to ensure non-discriminatory and transparent slot allocation and was derived partly from the International Air Transport Association (IATA) Worldwide Slot Guidelines (WSG). EU Member States designate congested airports as coordinated, and independent slot coordinators seek to balance the demand for slots with the supply.
An analysis carried out in 2010 showed that the slot allocation system prevents optimal use of the scarce capacity at busy airports. As a result, the European Commission in 2011 proposed changes to the current Regulation. The Commission’s proposal was discussed under the EU’s ordinary legislative procedure, but since 2013, it has been pending in the Council of the European Union.
During 2019 and early 2020, Steer undertook a fact-finding study on the allocation of slots at European airports that updated the market analysis, data and information which underpinned the Commission’s 2011 proposal for reform. The study also reviewed other ideas proposed by stakeholders in light of developments in the market and the evolution of the Worldwide Slot Guidelines, and considered the links between the Slot Regulation and other EU aviation policy.
In the meantime though, the COVID-19 pandemic has had an extremely negative impact on the aviation industry. IATA announced that it expects European airlines to suffer a net loss of $21.5 billion in 20205 (representing a -22.1% net margin). Air traffic in Europe was down by -88% in April 2020 compared to April 2019 according to EUROCONTROL, with a gradual recovery since then seeing -51% fewer flights in August 2020 compared to August a year earlier. However, in response to COVID-19 outbreaks across Europe since mid-August, ad-hoc national restrictions have been imposed again (e.g. quarantine requirements), eroding passenger confidence and leading to more flight cancellations, with traffic in mid-November down -62% compared to the same period in 2019.
However, despite this unprecedented situation, the challenges highlighted above in the context of the slot waiver mirror closely the challenges with the application of the Slot Regulation more generally, as originally shown in 2010. The short- to medium-term effects of the pandemic may delay some of the immediate constraints caused by increased congestion, however, in the long-term, these structural factors would still be expected to impinge on growth, as long-term drivers for expanded demand remain.6
It is also worth specifically considering capacity-constrained airports. Capacity-constrained airports are likely to face slot-related issues sooner or more strongly than other airports, since airlines – in the absence of a waiver – will seek to protect their slot portfolios at capacity-constrained airports before those at airports where constraints are not as severe. To an extent, this is also reflected in the current waiver arrangements, which do not apply to slots that have been newly allocated or transferred during the COVID-19 crisis. This prevents airlines from “playing the system.” So airlines that have gained access to constrained airports during this time do not get to benefit from the flexibility provided by the waiver, but instead, have to make sure that they use the newly allocated airport capacity effectively.
Steer has a deep understanding of the long-standing issues surrounding the impact of airport capacity constraints and the slot allocation system, and continues to closely follow developments as airlines, fleets, airports and other industry players all look to react, adapt and respond to the evolving crisis.