The slot system must allow airlines to adapt to demand if carriers are to resume their role connecting the world.

Traditionally, the slot system—as outlined in the Worldwide Airport Slot Guidelines—worked well. At congested airports, airlines got to keep their slots as long as they used them 80% of the time, while the rules enhanced consumer choice by enabling new carriers to access slots.

But the coronavirus pandemic brought air traffic to a standstill and where flights did take place shifts in the network were unavoidable. It was obvious the slot system had to be temporarily suspended.

Thankfully, regulators agreed, even if some were tardy in their decision making. For the 2020 northern hemisphere summer and winter season, full waivers were implemented worldwide. The 80-20 use-it-or-lose it rule didn’t apply to any Level 3 airport.

 

Different approaches

Summer 2021 isn’t quite such a tidy picture. IATA has been working with airline members, industry partners, and regulators since early October 2020 to put the correct guidelines in place but it has been hard going.

The Worldwide Airport Slots Board (WASB), the representative body for airports, airlines, and coordinators on slot policy, agreed on a number of conditions considered force majeure in the COVID crisis, to accompany relief through early slot returns and a 50-50 use-it-or-lose-it rule as guiding principles for Summer 2021.

The flexibility provided by early slot returns and 50-50 will allow airlines to plan operations, thereby generating jobs and powering the economy once passengers can book with confidence and start flying again.

“Regulators are anticipating a recovery and are wary of relaxing rules too much, but the industry needs certainty,” says Lara Maughan, IATA’s Head of Worldwide Airport Slots. “Airports need to manage their resources and airlines have to organize crew and fleet. These things take time.”

The 2021 northern hemisphere summer season comprises three distinct approaches to slots.

There is a continuation of full waivers; the WASB recommendation for a reduction of the 80-20 rule to 50-50, accompanied with a waiver for non-used slots that were returned early in February; and, in Europe, a complex set of measures that provide the industry with little flexibility and limit the alleviation to 50% of the slots held. The latter has been imposed despite the fact that Europe is suffering more than any other region.

“How airlines will adapt to the new rules is unknown,” says Maughan. “There is global misalignment and that makes things really complicated. The reality is that in Europe airlines will have to use a lot of slots or rely on the provisions agreed under force majeure to justify their cancellations.”

It is not just about carriers going in and out of Europe, though that is difficult enough to plan. The fact is that international flights are dependent on feeder flights. A service between Lisbon and Sao Paulo may depend on flights coming into Lisbon from Madrid or into Sao Paolo from Bogota. If the Sao Paulo service doesn’t happen then the Madrid and Bogota flights are necessarily affected.

As Maughan puts it: “The Netherlands closing its border doesn’t just affect Dutch passengers.

“The worst thing that can happen is airlines having to plan flights with no demand, and it’s totally invisible right now for Easter and the peak summer season,” Maughan adds. “In current circumstances, airlines simply cannot afford to operate flights that are not economically viable, and it is also unjustifiable from an environmental point of view.”

 

Flexibility the key

Airlines need to have certainty that slots that can’t be used are treated as “justified non-use” when cancelled in advance. That will give them the flexibility to plan a network that matches supply with demand, against ever-changing country restrictions brought in at a moment’s notice.

Lufthansa—which will come out of the crisis with two fewer airlines in its group and a 20% reduction in staff—took the decision early on to only fly those services that were creating a positive cash return. It also adjusted the network to flow through one hub rather than the usual five.

But as Carsten Spohr, Lufthansa CEO, admitted during a Eurocontrol interview, “any responsible airline like ours that depends on the hub system will do whatever it takes to protect their slots.

“Giving up essential slots would cause damage for generations of Lufthansa staff,” he added. “We need those essential slots to build our network. If we are forced to fly empty that would be crazy. And we have a responsibility to the environment.”

In other words, airlines need to have the certainty of slots to build a viable network that can support jobs and trade. But forcing them to operate those slots in the current circumstances would just mean empty aircraft and unnecessary emissions, not to mention the impact on already frail airlines. It benefits nobody.

The unfolding situation in the early part of 2021 provides ample evidence of this need for flexibility. The United Kingdom gave just 72 hours’ notice on its closure of the travel corridor with Brazil, for example.

The appearance of new variants of COVID-19, meanwhile, meant all governments further tightened travel restrictions. This led not only to weaker demand in Q1 2021 for both international and domestic travel worldwide, but also destroyed future bookings.

“Airlines need flexibility to react to these travel bans, restrictions, and changes if they are to continue sustainable flying programs, as well as be in a position to react to demand as or when it reappears,” says Maughan. “Regulators and slot coordinators are essential in supporting a quicker recovery by enabling flexibility in capacity planning.”

 

Enabler not disabler

One argument advanced for stricter slot allocation is that flexibility is a means of preserving the status quo for network carriers. Actually, regional and low-cost carriers have seen the biggest network reductions. They too need the flexibility to react quickly to demand, and hopefully their rebound will be sharp and pronounced. In general, they also have multiple bases, equivalent to spreading the risk.

easyJet’s CEO Johan Lundgren spoke of the opportunity they took at Gatwick recently in a CAPA interview, preparing for the recovery, but also of the “absolute nonsense” that slot waivers are restricting competition, highlighting that waivers ensure slots are handed back for others to use should they so desire.

Another of the arguments put forward for a more restrictive slot system is pent-up demand.

Though the industry is hopeful that this is truly the case, no airline is “gaming” the system. The point is that the slot system must enable the industry recovery and not disable it. Tightening up too soon would be disastrous for airlines and airports. Lost slots translate into lost jobs, and a smaller network—terrible for passengers who want to travel again as soon as they can.

And just because an airline doesn’t have to fly that doesn’t mean that it won’t operate. Airlines want to fly. It is their business. And they will react when the demand is there.

In any case, the plan is for the use-it or lose-it rule to be slowly ratcheted up as air traffic recovers. There is no magic moment when that will happen but the WASB—as the global slot board—is committed to responding appropriately. It could be two or three years before usage rules finally reach 80-20 once again.

And it’s anybody’s guess what the network will look like when traffic does recover. Pre-COVID congested airports may not be the congested facilities of the future. The trends should become apparent once some stability in aviation returns, the data starts to flow, and the slot system reacts as required.

Crucially, though, a knee-jerk reaction to throw the slot system out in a crisis would only do more harm than good.

“The slot system has always allowed airlines to adapt to demand and we want that to continue to be the case,” concludes Maughan. “The world needs international connectivity. We can’t have deadlines or rules that don’t correspond with reality. Flexibility and slot relief help to limit airline failures and ensure more competition in the longer term, because there’s a foundation to come back to. Agile slot changes ensure a sustainable flying program.  That’s good for airports, airlines, consumers, and the economy.”

 

Credit | Ceri Breeze Shutterstock
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