Fri. Sep 17th, 2021


Airline Updates

Addressing the anti-competitive trends of the aviation industry is part of the usual scheme if you are a cheap airline.

The pandemic provided a wealth of new material. Ryan O’Leary, boss of Ryanair, lamented loudly about the competition against the ‘crack cocaine, state-aid junkies’ led by a wave of European lifeline, follow up with more than 20 court complaints.

His latest source of luxury is airport locks, the seemingly prosaic undertaking to obtain permission to use airport infrastructure at a certain time and date, and whether its storage will obstruct the barrier. He has a point.

One of the peculiarities of this almighty crisis is that, even in the United Kingdom, where aviation had little value in the sector’s specific support, elements of the industry that seemed ripe for disruption were previously stored in aspic.

Rules of ‘Use it or lose it’, which require airlines to fly 80 percent of the time to retain precious slots, were dropped during the pandemic as part of efforts to save cash and stop flying empty planes .

As recovery increases, with Ryanair raises its forecast if the travel restrictions ease this year, it becomes impossible to justify.

The UK, where travel restrictions remain strict but also woefully unpredictable, has suggested airlines have to fly 50 per cent of travel during the winter to preserve their slots. It comes with the cut-outs of countries on the red list of government travel restrictions, and the ability to return a full number of slots without penalty.

The EU, where the digital Covid-19 fits caused a recovery in flight, went further: it also wants airlines to fly half of their slots, but without any suspension within the EU of the rules and without the option to hand over slots for the season.

The fact that it provoked an unfortunate reaction from parties on all sides says you are probably a reasonable compromise as a first step.

The anxiety breaks down along predictable lines. Old-fashioned airlines, such as British Airways or European flag carriers, want to stick with slots for as long as possible, especially given the slow expected recovery in their most valuable long-haul routes and business fares.

Low-cost airlines such as Ryanair and Wizz Air want to increase their ability to get slots to expand. Airports like Heathrow, which on Monday said it would expect fewer passengers in 2021 than last year, simply want footfall, wherever it comes from.

In the UK, airlines can buy base slots together in the short term, although the prospect of investing in a new route only to lose it if the market recovers (as well as to encourage a competitor) is not necessarily attractive .

One mystery is how the Byzantine lock system survived for so long. The Competition and Market Authority in 2018 proposed moves to a market-based system arguing that the current rules were ineffective. The government’s aviation strategy recorded the system is not designed to “stimulate a competitive market environment”, and may result in poor results for consumers.

There may be an opportunity to reconsider the British system, which now falls under the Department of Transport after Brexit. This amounts to heresy for airlines, which regard slots as sacred assets, including their use as collateral against loan. But others in the sector concede that there may be ways to reform the system to increase competition, and to be in line with policy objectives regarding connectivity or indeed carbon dioxide.

Meanwhile, there may need to be a mechanism to shake loose slots from weakened or nationalized positions. Ryanair said on Monday that rescue services such as Portugal’s TAP and patient Alitalia had reduced their short-haul fleets by 20-30 per cent as part of restructuring and that other operators were ‘sitting on’ slots they do not use ‘.

This could mean a shortage of capacity next year and the year after, as it takes more than a year before slots are not reassigned to another airline.

Airline with slots they can not use may not last too long and hope.

helen.thomas@ft.com
@helentbiz





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