Bloomberg News

Airlines May Face Stricter EU Slot Rule, Gain Trading Right

December 01, 2011

(Updates with industry reactions starting in ninth paragraph.)

Dec. 1 (Bloomberg) -- Airlines would face a stricter European Union rule on the use of takeoff and landing slots and gain the right to trade them under draft EU legislation meant to tackle a “capacity crunch” at airports.

Current EU law requires carriers to use airport slots at least 80 percent of the time in order to retain them the following year. It is silent on the question of slot trading, a practice permitted in the U.K. and banned in some EU nations including Spain.

The European Commission, the 27-nation EU’s regulatory arm, today proposed legislation that would raise the use-it-or-lose- it slot obligation to 85 percent. The draft law would also permit EU-wide secondary trading of slots by airlines.

“Faced with intense global competition, if we do not change the way we do business we may not be doing business at all,” European Transport Commissioner Siim Kallas said in a statement in Brussels. “We have to act now.” The proposals need the support of EU governments and the European Parliament in a process that can take a year or more.

With Europe’s share of the worldwide aviation market set to fall next year from second behind the U.S. to third behind it and the Asia-Pacific region, the commission is stepping up a push for the industry to make better use of scarce airport space.

Major Hubs

The number of Europe’s saturated airports is due to rise from five, including London Heathrow and Paris Orly, at present to 19 major hubs over the next two decades without policy changes, according to the commission, which says this would lead to delays affecting half of all flights in the EU.

“Europe’s airports are facing a capacity crunch,” Kallas said. “The status quo is not an option.”

As part of the planned tougher rule on the use of slots, which are allocated in series, the commission proposed to lengthen those blocks from a minimum of five slots allocated at the same time on the same day of the week in the winter and summer seasons to 10 in winter and 15 in summer. It cited the need for “stricter discipline on airlines.”

The International Air Carrier Association representing 29 leisure operators such as Air Berlin Plc criticized the the plan to lengthen the series of slots, saying it would undermine services to southern European countries such as Greece already hit by Europe’s debt crisis because airlines won’t opt to fly the additionally required flights empty for several weeks in order to retain the slots.

Seasonal Demand

“Certain tourist regions, particularly in Greece, Spain, Italy and Portugal, will be deprived of some air services,” Brussels-based IACA said in a statement. “The current system works well for airlines, as it allows them to match their offer of flights with seasonal demand.”

The Airports Council International Europe, which represents more than 400 European airports including BAA Ltd.’s Heathrow, praised the slot-use proposals in general.

“Improving the system is overdue,” Olivier Jankovec, director general of ACI Europe, said in a statement. “The way airport slots are allocated dictates the way our facilities are used.”

The draft legislation also seeks to bolster competition in ground services including baggage handling by strengthening a 1996 EU market-opening law. This element also includes stronger rights to protect workers in the field.

In addition, the proposals aim for stronger commission scrutiny of local bans in the EU on allegedly noisy aircraft to ensure they are based on objective considerations as well as for updated definitions of noisy planes to account for new technologies.

--Editors: Jones Hayden, Patrick Henry

To contact the reporter on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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