Airport capacity has become a major issue as air traffic demand continues to soar. Infrastructure isn’t being built quickly enough, creating problems for passengers and cargo.
There is no substitute for the physical expansion of airports to resolve this crisis. But there is a need to manage scarce capacity with a fair, neutral, and transparent system until sufficient capacity can be built. For that, IATA’s Worldwide Slot Guidelines (WSG) is critical.
Despite airport capacity constraints, the WSG has enabled growth in all parts of the world. There were more than 2,000 new routes established at European slot-coordinated airports between 2010 and 2017, for example, enabling an extra 155 million passengers to travel.
Importantly, new entrants—including low-cost carriers (LCC)—have thrived under the WSG. According to Eurocontrol, LCC flights grew 61% between 2007 and 2016. The top airports for LCCs in Europe in terms of movements are Barcelona, Dusseldorf, London Gatwick, and Stansted—all level 3 airports (the most congested).
Similar new entrant growth is seen in other regions. “In the past five years, HKExpress has opened a dozen new routes out of Hong Kong’s essentially full airport that had no competition or only one incumbent carrier, with the effect of making all of these destinations available to far more travelers through lower fares and increased competition,” says Stephen Milstrey, Manager Network Planning and Scheduling, HKExpress. “The historic determination guidelines in the WSG enabled this by allowing us to slowly convert generally unusable, short series of slots into valuable, full-season slots.”
Full to the brim
Despite the success of the WSG, there have been calls for a radical shake-up of the system and some regulators have experimented with potential alternatives.
In large part, this has been brought on by the increasing severity of the capacity crunch. In a worst-case scenario, there could be more than 300 slot-coordinated airports in 10 years’ time. Major hubs are full to the brim and the slot pool is empty.
Regulators are thus concerned about how to develop the process to ensure new entrants can continue to compete. Coupled with this is a desire to improve the monitoring of slots, so that incumbents do not abuse the WSG process.
In addressing these concerns, it is critical that a global system is maintained. If the system descended into individual airports pursuing their own allocation criteria, the resulting patchwork would certainly confuse and constrict the network. Coordination is the key. A take-off slot at airport A only has value if there is a corresponding landing slot available at the other congested airport B at the right time.
“As a global industry, aviation always does better with global solutions to global problems,” says Lara Maughan, IATA’s Head of Worldwide Airport Slots.
The WSG maintains value even when there is nothing left in the slot pool.
Slot mobility—swapping or transferring slots to other airlines in a secondary process—allows airlines to optimize schedules to meet consumer demand with speed and agility. The majority of secondary slot exchanges take place for no monetary compensation as they allow the carriers involved in the exchanges to optimize their operation.
Even at the so-called super-congested airports, airlines can eventually get access through the WSG; Aeromexico, Air Astana, Hainan Airlines, Philippine Airlines, and Vietnam Airlines have all started operating at Heathrow in the last few years.
And once they’ve entered the market, carriers can grow, as demonstrated by HKExpress at Hong Kong International Airport. It has grown from a fleet of five aircraft to more than 20 in a short period (2013–2018).
Alternatives to the WSG
Many alternatives to the WSG are being proposed but each has its challenges. Experience continues to point the industry back to the WSG.
Peak/off-peak pricing means airlines wanting to operate in the most congested periods pay more for using the scarce infrastructure and so it encourages airlines to use the off-peak periods—in theory.
It doesn’t work for many reasons. Market demand dictates schedules, for example, not airport pricing models. Also, airlines must utilize their fleet to the full and can’t avoid peak flying. Most importantly, there still needs to be a mechanism to distribute the capacity available to the airlines. International Civil Aviation Organization (ICAO) guidance shows that peak/off-peak charges have been ineffective in prompting airlines to reschedule flights to less congested airports.
Slot auctions are a market-based measure designed to achieve efficiency in allocation. But a recent Chinese experiment at Guangzhou Baiyun and Shanghai Pudong hasn’t been repeated.
The money involved would not be sustainable in the long term. And it would favor larger carriers, potentially reducing the industry to a few globally dominant carriers and destroying the low-cost carrier business model. That would certainly limit industry growth and the many benefits it brings. It is worth noting that auctions in other sectors, such as television, mobile telephone rights and even airport concessions, have led to overbidding, forcing consumer prices up. Even more perverse is the impact auctions could have on infrastructure development. Those receiving the auction revenue would have a huge incentive to limit capacity and maintain the huge value of the slots.
Administrative allocation through slot coordination remains the best option. Following the WSG ensures transparency, certainty, consistency, and non-discrimination and is globally harmonized.
It involves an independent and neutral coordinator reviewing the equivalent season's operations. Where airlines have been able to achieve 80% usage of each slot, they retain it through historic precedence. New requests for slots are considered against the capacity available and at least 50% of new slots are prioritized for new entrant airlines.
Using the WSG means
- airlines can enter new markets without additional entry costs;
- scarce capacity is not wasted, with airports achieving 98% utilization;
- airlines operate to markets where consumer demand exists. There is no incentive to operate empty routes, and slots are not route specific, so airlines can match slot to demand;
- there is no favoring of certain airlines, business models or the ability to pay;
- reliability and stability in schedules is balanced with the need to promote competition and access to new airlines.
Though research and analysis has shown that the WSG is enabling consumer choice and competition, there is always room to improve. The WSG have evolved over decades and Maughan sees a need to further improve and clarify the process. With this in mind, IATA launched a strategic review of the WSG in July 2016.
To ensure the views of all stakeholders are taken into account, the review is being undertaken in conjunction with Airports Council International (ACI) and the Worldwide Airport Coordinators Group (WWACG).
“We cannot solve the capacity crisis with the WSG, only ensure all available capacity is allocated fairly,” says Maughan. “Making sure the WSG is as good as it can be is why we’re focusing on the strategic review.”
The scope, timelines, project details, and management have been established and agreed by the three parties. Initial conclusions and recommendations will be presented to the Strategic Review Management Group by November 2018 with the review completed in 2019. Some early ideas might even make it into the January 2019 edition of the WSG. And regulators will be kept in the loop at all times.
The review is composed of four task forces (see The Task Forces, below). Clarification on performance monitoring, a greater focus on transparency and independence, and the possibility of a revamped new entrant rule are likely to be areas of especial interest.
The timelines and process details that are involved in slot allocation will also be examined in light of today’s dynamic market and new technologies.
“As the global coordinators association, with many years of experience managing the slot process at the world’s busiest airports, our members have an excellent overview of the different challenges and issues from different parts of the globe,” says Eric Herbane, COHOR (French Airport Coordination) and WWACG Chair. “We contribute this expertise and experience in defining the best possible processes for the future WSG and therefore fully support the strategic review.”
Herbane stresses that independent coordination is a key principle of the WSG, to ensure a neutral, fair and transparent approach is maintained, and while there are areas of the WSG that need review and enhancement, “broadly the policy and process work.”
“The WSG is essential,” Maughan reiterates. “If governments and airports resorted to local and unique solutions, it would cripple airlines’ efforts to provide their customers with the services their want, to the places they want to fly, when they want to fly, and at a price they want to pay.
“IATA is fully committed to the WSG and its ability to support the growth of the aviation industry and certainly not reluctant to ensuring the review delivers meaningful outcomes.”
The Task Forces
Four task forces comprise the strategic review of the WSG:
- Slot performance monitoring. The aim is to increase the overall performance of the network by enhancing the monitoring of slots and ensuring that slots are being used correctly.
- Access. Encouraging access for new entrants is the goal, most likely through the tweaking of the new entrant rule and a better understanding of available capacity through additional requirements for transparency.
- Historic Determination. Timelines will be examined to see if they meet the demands of an increasingly dynamic industry while also accounting for an airline need for certainty so that tickets can be sold in advance.
- Level 2 airports. Guidelines for this interim level of airports need more teeth so a valid process is in place before these airports become congested.
There are 200 slot coordinated airports, with 90% following IATA’s World Slot Guidelines