The story of how airport slots are allocated is not a simple one. The biggest complicating factor is that there are too few slots to go around. In an infrastructure utopia slots wouldn’t be needed. There would be enough capacity to meet people’s flying needs. But that’s far from today’s reality.
There are 189 airports that need “slot coordination”. Why? Because they don’t have the capacity to meet passenger demand at times when people need to fly.
The solution is, of course, building or expanding airports to meet demand. But that takes time—a decade or more. And people need to fly today. So there is a practical need for a system that allocates the slots that are available.
The IATA Worldwide Slot Guidelines (WSG) are the rules for how slots are allocated. Governments and the industry agree that they are fair, transparent and serve the interests of consumers. They are administered by neutral Slot Coordinators. These people are independent of airlines, governments and the airports. Their job is to use the rules to get the most out of the available infrastructure.
As a former airline CEO, I know how important the reliability of the system is. Ordering and aircraft is a major investment. And so is opening a route. The WSG process provides some fundamental predictability that is necessary to make those multi-million dollar investment decisions.
No system, of course, is perfect. And the WSG continues to evolve for the better. Right now, IATA is working with our counterpart organization Airports Council International, and the Slot Coordinator community, on a major modernization.
Some observers have called for radical change—the auctioning of slots—that I think is a step (or two) too far. I always keep an open mind on change. But auctioning slots would give governments and airports the wrong incentives—pushing slot prices higher by keeping slots scarce.
Slot auctioning would also create a barrier to entry for new competitors. Well-established carriers normally have greater resources than start-ups. And the experimental auctions proved the point—the incumbents outbid their competitors and fortified their positions.
And I would ask those advocating auctions what problem they are trying to fix with respect to new entrants. EasyJet, Hong Kong Express and GOL are among the many airlines that have successfully grown their businesses using the WSG.
One of the keys to the success of the WSG is that it is global.
Applying WSG at both ends of a route allows airlines to build schedules that their customers can rely on. What impact would consumers feel if airlines needed to outbid competitors in two auctions for slots at the right time in order to set up a route? I don’t imagine that anybody but the slot seller would be happy with the higher costs.
On the issue of costs, there is a misperception that airlines are getting a free ride because slots are allocated free of charge. Nothing is further from the truth: airlines and their passengers paid airports in Europe over $30 billion in fees last year. And that cost is rising.
The WSG may not be perfect. But, compared to the alternative, the it does well to balance interests, facilitate competition, enable new entrants and evolve with the times. But it will always be a second-best solution to having enough capacity to meet people’s needs for travel. That’s a fact that we should not let governments forget.