UK regulators have come out in favour of legal trading of take-off and landing slots at congested European Union airports, but are recommending that such trading should be unrestricted and made transparent in order to prevent anti-competitive behaviour by airlines.

Present EU slot-allocation rules are considered by many to be inflexible and provide little incentive to carriers to surrender legacy, or "grandfathered", slots to competitors. Proposals to reform the system are expected to emerge later this year and the European Commission sees market-based secondary slot-trading as a potential way to make slot allocation more efficient.

But there are concerns that slot-trading could generate anti-competitiveness by allowing airlines to secure a more dominant position that would be possible under the current system.

In a joint study released today the UK Civil Aviation Authority and the country’s competition regulator, the Office of Fair Trading (OFT), state that there is a strong case for introducing secondary slot-trading.

“If airlines are able to buy, sell and lease slots this will sharpen up the opportunity cost of holding on to slots,” says the study. “It will provide them with far greater incentives to sell slots to airlines that would use them more efficiently. This should reduce current rigidities in the system and increase the opportunities to obtain slots.

“In turn this would increase the ability of new airlines to launch downstream services and for existing second-tier airlines to expand and better challenge incumbent airlines.”

But it acknowledges the possibility that slot-trading could lead to anti-competitive behaviour and is proposing that the following safeguards be put in place across all co-ordinated airports to ensure that competition is enhanced:

  • Restrictive covenants in slot trades or leases, such as those preventing the purchasing airline from competing with the vending carrier, should be prohibited
  • Trading information should be published, perhaps by an independent authority, to increase transparency and clarify the opportunity cost of retaining slots

In their study the CAA and OFT say that “heavy-handed regulation” risks “stifling” the benefits which the EC is trying to generate. “In the main the fewer restrictions on secondary trading, the greater the likely efficiency benefits,” says the CAA.

Should potential concerns arise at individual airports, these could be investigated on a case-by-case basis by national competition authorities. These authorities could then propose specific local remedies to be put in place before trading begins.

This article first appeared on Air Transport Intelligence, an online business intelligence service for the air transport industry with 24 hour news and data available to subscribers.

Source: Flight International