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Newsletter March 2012: Newsletter FLO – Aviation

Arthur Flieger, Attorney at Law Flieger Law Office bvba
With the cooperation of Stijn Brusseleers, Attorney at Law Flieger Law Office bvba

 

AIRPORT PACKAGE

 

New common rules for the allocation of slots at European Union airports.

 

 

A. Retroacts

The European Community adopted Council Regulation number 95/93 of 18 January 1993 on common rules for the allocation of slots at Community airports in 1993 and amended it in 2004 on several important respects. Slot allocations work differently in different parts of the world because aviation is by its nature a global business and subject to local regulations. In Europe IATA global guidelines were paramount, since the slot regulation was drawn on said guidelines.

At airports where demand among airlines for landing and take-off slots exceeds the airport’s capacity, slot allocation mechanisms are used to be followed for the allocation of slots. The granting of a slot at an airport means the airline may use the entire range of infrastructure necessary for the operation of a flight at a given time. Depending on the characteristics of the airport, slot allocations may be necessary at specific times of the day or during certain busy periods.

The main features of the current slot allocation system are that Member States must designate an airport as coordinated if a thorough capacity analysis proves that there is a significant shortfall in capacity at this airport. However airports with potential congestion at certain periods only will be designated as schedules facilitated. At these airports the procedure is based on a voluntary cooperation between air carriers. A schedule facilitator will be designated ant its role is to facilitate the operations of air carriers. A second step is for the Member State to appoint an airport coordinator. The latter will be in charge of allocating airport slots and is obliged to act in an independent, neutral, non-discriminatory and transparent manner.

Slots are allocated in respect to summer and winter scheduling. If an air carrier has used a series of slots for at least 80% of the time during a season, it will be entitled to the same series of slots in the next corresponding season ( grandfather rights / 80-20 rule / historical slots ). If the threshold is not reached, the slots go to the slot pool for allocation. 50% of the pool slots are allocated first to new entrants. According to the Slot Regulation a new entrant is a carrier with only a limited presence at an airport.

As of December 2011, there are 89 fully coordinated airports in countries where the Slot Regulation applies. 62 of those airports are coordinated year-round and 27 are coordinated seasonally. These airports include some where demand substantially exceeds capacity at all times f.i. London Heathrow, Paris Charles De Gaulle. 18 Member States have at least one coordinated airport and should therefore appoint a coordinator.

B. New Common Rules for all allocations of slots at European Air port

The Slot Regulation was introduced at the time when the European air transport market was still dominated by a small number of traditional national carriers. In 2011/2012 there is much more competition. Eurocontrol and ACI-Europe highlighted that one of the key challenges Europe is facing in Europe is airport congestion. The shortage of capacity at critical airports and the spill-over effect on the mobility of the European citizens were the reason to start building new runways and airport infrastructure which is the obvious solution for those “new” challenges. However one may not oversee the impact of infrastructure on the environment and on land planning. Then we have the current economic turmoil which all reaffirms the importance of ensuring the long-term sustainability of budgets. Therefore more cost-effective solutions have to be found to tackle congestion.

It is clear that slot allocation cannot generate additional capacity, as well as the many problems created by a lack of capacity. According to the studies slot allocations schemes will never satisfy these important needs, however they can be an effective tool for managing scarce capacity.

Therefore some actions were taken in the frame of the Single European Transport Area:

Roadmap to a Single European Transport Area-Towards a competitive and resource efficient transport system.

Several consultations of interested parties took place as well.

C. Summary impact assessments

Further analysis carried out in 2010

The impact assessment provides an overview of the different options which have been considered. In summary the content of the three packages is as follows.

The first policy package included measures to improve the effectiveness of slot allocation and the use of slots, without changing the administrative nature of the current system. There would be a number of improvements to the current system, but market-based mechanisms would not be introduced. Due to the limited scope of this package, the estimated benefits are rather modest: an average annual increase of 0,4% in the number of passengers carried.

The second package incorporated the elements of the first package but added several more, including market-based mechanisms ( in the form of explicit provision for secondary trading across the EU). It also included several pro-competitive proposals, such as revision of the new entrant rule and making the criteria for granting priority for allocation of a slot for the following season (so-called grandfather rights) slightly stricter. For the 2012-25 period, the package was estimated to result in an average annual increase of 1.6% (or 23.8 million ) in the number of passengers carried, a net economic benefit of 5.3 billion, as well as a significant increase in employment (up to 62 000 full-time jobs).

This policy package will have negative environmental impacts as CO2 emissions will increase due to the greater number of flights. However, due to the inclusion of aviation CO2 emissions in the general EU emissions trading system (ETS) from 2012, there should – according to the Commission – be no growth in total CO2 emissions attributable to this policy package. Moreover, since the existing capacity would be used more intensively, the environmental impact of capacity expansion would be avoided.

The third package comprised all elements of the second package, but took the market-bases mechanism a step further by withdrawing ‘grandfather’ or ‘historical’ slots and having them auctioned. This policy package would lead to an increase of 1.9-2% passengers that travel by air, corresponding to 27.3-28.7 million passengers per year. However, as this measure has never before been implemented, the potentially positive impact has to be balanced against the risk that the option could dramatically affect airlines by increasing substantially their operating costs, as a result of disruption to their schedules and hub and spoke business model founded upon a wide portfolio of slots at congested airports. Consequently, this package would lead to less significant economic benefits of between € 2.8 and 5 billion.

In view of the assessment of the different policy packages on the basis of the efficiency, effectiveness and consistency criteria, the European Commission recommended that the second package be implemented as its benefits would be considerably higher than the costs incurred.

D. Summary – Legal elements of the new proposals are:

1. Introduction of the possibility for secondary trade in slots and increased competition

Under the current rules, airlines quickly fall outside the definition of ‘new entrant’ at an airport, even when their slot holdings are rather limited. Therefore it is proposed to broaden the definition of ‘new entrant’, to help facilitate the growth of sustainable competitors and reduce the schedule fragmentation that occurs when slots are allocated to a larger number of airlines unable to translate these slots into a viable alternative to dominant carriers.

2. Strengthening the transparency of the slot allocation process and the independence of slot coordinators

The proposal will allow stricter criteria for the independence of the coordinators with regard to any interested party to be defined. It also advocates enhanced cooperation between the coordinators, initially through the development of common projects covering, for instance, the development of common slot allocation software or even merging the coordination activities for airports situated in different Member States.

3. Integration of slot allocation with the reform of the European air traffic management system ( Single European Sky)

The proposal also introduces a new category of airport: the ‘network airport’. Such airports are not coordinated, but are identified as important since they may offer alternatives during times of network disruption. Thus, the proposal provides that coordinators gather information on the operations at these airports.

4. Amendment of the ’80-20’ rule and definition of a series of slots and resort to the airport charge system to discourage the late return of slots to the pool

To ensure that slots reserved prior to the start of an operating season are in fact operated as planned by airlines, the proposal would authorise airports to use an airport charge system to dissuade air carriers from belatedly returning slots to the pool. Reserving airport capacity and not using it generates a cost which is currently borne by the airlines operating from the airport. The proposal encourages the airport managing body to introduce a charge system to discourage behaviour that leads to less efficient use of airport capacity.

E. Subsidiarity principle

European rules on slot allocation are an essential accompaniment to the European legislation underpinning the internal market in aviation, since a fair, transparent and non-discriminatory system for allocating capacity at those airports for which demand exceeds supply is essential to give substance to the freedom for European air carriers to provide intra-EU air services, as set out in the relevant European legislation.

F. Proportionality principle

The additional burden for economic operators, slot coordinators and national authorities is limited to the one necessary to ensure non-discriminatory slot allocation and optimal allocation of scarce capacity at the most congested airports in Europe.

G. Choice of instruments

The most appropriate legal instrument is a Regulation.

H. Budgetary implications

The proposal has no implications for the EU budget.

The Commission proposes that the act concerns an EEA matter and should therefore extend to the European Economic Area.

 

Sources:
COM(2011) 827 final 2011/0391 ( COD )

Legislation:
– Current rules: Allocation of slots, Consolidated version 30.06.2009
– Proposal for a Regulation of the European Parliament and of the Council on common rules for the allocation of slots at European Union airports
– Regulation (EC) No 545/2009 of the European Parliament and of the Council of 18 June 2009 amending Regulation (EEC) No 95/93 on common rules for the allocation of slots at Community airports
– Communication from the Commission on the application of Regulation (EEC) No 95/93 on common rules for the allocation of slots at Community airports (COM(2008)2271
– Communication from the Commission Communication on the application of Regulation (EC) 793/2004 on common rules for the allocation of slots at Community airports (COM(2007)704)
– Regulation (EC) No 793/2004 of the European Parliament and of the Council of 21 April 2004 amending Council Regulation (EE) No 95/93 on common rules for the allocation of slots at Community airports
– Regulation (EC) No 1554/2003 of the European Parliament and of the Council of 22 July 2003 amending Council Regulation (EEC) No 95/93 on common rules for the allocation of slots at Community airports
– Regulation (EC) No 894/2002 of the European Parliament and of the Council of 27 May 2002 amending Council Regulation (EEC) No 95/93 on common rules for the allocation of slots at Community airports
– Council Regulation (EEC) No 95/93 of 18 January 1993 on common rules for the allocation of slots at Community airports

Public Consultation
– Public consultation on the impact assessment for a possible revision of Council Regulation (EEC) 95/93 on common rules for the allocation of slots at Community airport (deadline 3/11/2010)

Studies
– Impact assessment of revisions to Regulation 95/93 + Appendices
– Impact of the introduction of secondary trading at Community airports
– Study to assess the effects of different slot allocation schemes
– Commission with Papers Roadmap to a Single European Transport Area – Towards a competitive and resource efficient transport system (COM(2011)0144)

For further information and comment, please contact Arthur Flieger at Flieger@fliegerlaw.com, Website: www.fliegerlaw.com, telephone: +32 3 238 77 66

 

Copyright A. Flieger