New carriers would welcome move for more transparency, but any plan for change is likely to meet opposition

A UK think-tank close to the government has recommended auctioning all slots at London Heathrow and London Gatwick airports. The recommendation follows the recent approval by the European Parliament of a European Commission (EC) proposal to reform allocation of airport slots.

The Institute for Public Policy Research will issue a report in the fourth quarter calling for auctions to encourage airlines to fly to less-used airports. The slots at Heathrow alone could be worth £1.2 billion ($1.9 billion) a year, believes the report's author, Simon Bishop.

Auctions of existing or new landing rights have been recommended as a way of reducing congestion and increasing competition. The effect of additional charges could reduce traffic growth in south-east England and remove the need for more airport construction, Bishop says.

The UKhas already backed the ECproposal to reform slot allocation, which is awaiting approval from European transport ministers. The EC's intention is to establish "neutral, transparent and non-discriminatory rules" for the allocation of slots. The commission avoids the issue of slot trading and refers to slots as "a right of usage" rather than of ownership.

Any plan for change is likely to meet strong opposition, warns analyst Andrew Lobbenberg of JP Morgan. Risking the loss of assets worth billions, with the consequent disruption of schedules, would add another burden to airlines already struggling to stay afloat. "[Auctions] will be fervently opposed by the carriers,"he says, adding: "I suspect it is unlikely to attract support in Europe."

Airport landing slots are an asset, the EC believes, but their trade between airlines generally operates in a legal grey area. Technically slots cannot be resold, but airlines have paid millions to acquire space at Heathrow from other carriers.

However, the present situation is not a transparent market. For this reason, Lobbenberg believes "full transparency would not be opposed by airlines", allowing overt trading in slots, but auctioning every Heathrow or Gatwick slot every five years would be "politically untenable "for the foreseeable future.

New carriers, "continually complaining about slot hoarding" according to Bishop, would welcome any move to increase slot availability.

Source: Flight International