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CO Buys LHR Slots For $209m!  
User currently offlineScbriml From United Kingdom, joined Jul 2003, 12780 posts, RR: 46
Posted (6 years 8 months 3 weeks 1 day 9 hours ago) and read 12390 times:
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CO has purchased LHR slots for a cool $209m!

http://www.atwonline.com/news/other.html?issueDate=3%2F5%2F2008

Quote:
CO will pay $116 million for the summer season and an additional $93 million for the next witner schedule




Time flies like an arrow, but fruit flies like a banana!
68 replies: All unread, showing first 25:
 
User currently offlineRoseFlyer From United States of America, joined Feb 2004, 9686 posts, RR: 52
Reply 1, posted (6 years 8 months 3 weeks 1 day 8 hours ago) and read 12052 times:

Wow is a lot of money for 4 pairs of daily slots. It will take a long time to earn that money back. CO would be lucky to post that much profit systemwide in an entire quarter. If they were to make that money back in a year, they would have to charge over $1000 per passenger as a premium over service currently existing to LGW. I hope they don't use small 757s with those valuable slots.


If you have never designed an airplane part before, let the real designers do the work!
User currently offlineCLE757 From United States of America, joined Apr 2005, 1143 posts, RR: 0
Reply 2, posted (6 years 8 months 3 weeks 1 day 8 hours ago) and read 12006 times:

They should have thrown in a CLE slot too for that much money.


Cleveland the best location in the Nation
User currently offlineBobnwa From United States of America, joined Dec 2000, 6511 posts, RR: 9
Reply 3, posted (6 years 8 months 3 weeks 1 day 8 hours ago) and read 12007 times:

If those numbers are correct, then it seems to be an awful lot of money!!!

User currently offlineBongodog1964 From United Kingdom, joined Oct 2006, 3649 posts, RR: 3
Reply 4, posted (6 years 8 months 3 weeks 1 day 8 hours ago) and read 11947 times:

Its a good deal, if the slots are still tradeable near to their present value in years to come. If they continue to rise in value, its a very good deal.

However the effect of both the possible introduction of mixed mode runway use, and a potential 3rd runway needs to be considered.


User currently offlineMasseyBrown From United States of America, joined Dec 2002, 5549 posts, RR: 7
Reply 5, posted (6 years 8 months 3 weeks 1 day 8 hours ago) and read 11859 times:



Quoting RoseFlyer (Reply 1):
Wow is a lot of money for 4 pairs of daily slots. It will take a long time to earn that money back.

Slots are like other assets, they may be subject to amortization. If you say that LHR's 3rd runway is coming in 2015 (or was that 2115?) then CO has at least seven years to write them down to an assumed value in 2015. So lets say they lose a third of their value by 2015; then CO has to write off about $10 million a year, or $2.5 million per scheduled flight. CO must figure that's not too burdensome.

Yes, I know. Sometimes slots are considered non-depreciating, intangible assets. In my view this is voodoo economics, everything depreciates in the long run.



I love long German words like 'Freundschaftsbezeigungen'.
User currently offlineAtlantaflyboy From United States of America, joined Apr 2007, 73 posts, RR: 0
Reply 6, posted (6 years 8 months 3 weeks 1 day 8 hours ago) and read 11804 times:

so will this allow them to add more flights than initially scheduled for their new LHR ops, or are these the slots to cover those ops?

User currently offlineAlbird87 From , joined Dec 1969, posts, RR:
Reply 7, posted (6 years 8 months 3 weeks 1 day 8 hours ago) and read 11729 times:

who sold these slots to CO??? Is this to do with Sky Team or was there a airline wanting to sell the slots to the highest bidder.

User currently offlineFalcon84 From , joined Dec 1969, posts, RR:
Reply 8, posted (6 years 8 months 3 weeks 1 day 8 hours ago) and read 11704 times:



Quoting Atlantaflyboy (Reply 6):
so will this allow them to add more flights than initially scheduled for their new LHR ops, or are these the slots to cover those ops?

That's what I am wondering, because I'd love to see CLE-LHR as a year-round service.


User currently offlineA330323X From United States of America, joined Oct 2003, 3039 posts, RR: 44
Reply 9, posted (6 years 8 months 3 weeks 1 day 8 hours ago) and read 11681 times:

US paid AZ around $60 million for a single pair of slots.


I'm the expert on here on two things, neither of which I care about much anymore.
User currently offlineMasseyBrown From United States of America, joined Dec 2002, 5549 posts, RR: 7
Reply 10, posted (6 years 8 months 3 weeks 1 day 8 hours ago) and read 11659 times:



Quoting Atlantaflyboy (Reply 6):
so will this allow them to add more flights than initially scheduled for their new LHR ops

This is the price of the first four. I believe the reference said they came 2 from GB, 1 from AZ and 1 from AF - although I also read EI instead of AF.



I love long German words like 'Freundschaftsbezeigungen'.
User currently offlineBongodog1964 From United Kingdom, joined Oct 2006, 3649 posts, RR: 3
Reply 11, posted (6 years 8 months 3 weeks 1 day 8 hours ago) and read 11646 times:



Quoting MasseyBrown (Reply 5):
Yes, I know. Sometimes slots are considered non-depreciating, intangible assets. In my view this is voodoo economics, everything depreciates in the long run.

Not everything by any means depreciates in the long run. Its a case of supply and demand. here in the crowded south east of England, anything which involves the use of land is fairly sure to appreciate.

Quoting Atlantaflyboy (Reply 6):
so will this allow them to add more flights than initially scheduled for their new LHR ops, or are these the slots to cover those ops?

These appear to be the slots that we have known about for quite some time. Its only now, that the full cost has appeared in CO's official filings.


User currently offlineUAL747 From , joined Dec 1969, posts, RR:
Reply 12, posted (6 years 8 months 3 weeks 1 day 8 hours ago) and read 11629 times:

$200 million is not a bad price for luctrative LHR slots, 4 of them at that. It will generate much more revenue from high-yeilding pax than LGW, and I am assuming that is what CO is after. Also, remember, that CO pays about the same amount of money for just one Boeing 777. So while it's not pocket change, it's definitely a good deal.

So does 4 "Pairs" mean 4 arrivals and 4 departures?

UAL


User currently offlineFUN2FLY From United States of America, joined Dec 2006, 1074 posts, RR: 1
Reply 13, posted (6 years 8 months 3 weeks 1 day 7 hours ago) and read 11540 times:

I know CO wants another evening slot on the EWR>LHR route, but at $52mm per slot, that certainly gives some favor for the 77W vs. adding a third EWR>LHR slot.

Quoting CLE757 (Reply 2):
They should have thrown in a CLE slot too for that much money.

If they did, CO would need an extra widebody to haul cargo to offset the cost. The cargo is certainly there. I don't think we'll see those a/c available for a few years. So, LGW it is for now.


User currently offlineJfk777 From United States of America, joined Aug 2006, 8450 posts, RR: 7
Reply 14, posted (6 years 8 months 3 weeks 1 day 7 hours ago) and read 11472 times:
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Continental realizes the value of LHR and is willing to pay the price of admission. The selling airlines were not getting the value from their flight these slots are worth. Alitalia sold three LHR slot pairs for about 150 million US since they are closing Milan Malpensa.

User currently offlineMasseyBrown From United States of America, joined Dec 2002, 5549 posts, RR: 7
Reply 15, posted (6 years 8 months 3 weeks 1 day 7 hours ago) and read 11320 times:

Quoting Bongodog1964 (Reply 11):
Not everything by any means depreciates in the long run.

I know what they teach in Acct. 101; but even land depreciates in some cases, Florida being a massive example. I believe that land should be subject to a periodic test for impairment and that anything else intangible (goodwill, slots, routes, in the case of airlines) should be depreciated over some time period not exceeding 25 years.

During CO's last earnings conference call, Pres. Jeff Smizek mentioned that CO was in the market for more LHR slots. One of the analysts piped up that UA had some.

[Edited 2008-03-05 08:49:24]


I love long German words like 'Freundschaftsbezeigungen'.
User currently offlineB747-4U3 From United Kingdom, joined Jan 2002, 991 posts, RR: 0
Reply 16, posted (6 years 8 months 3 weeks 1 day 7 hours ago) and read 11284 times:



Quoting Bongodog1964 (Reply 4):
Its a good deal, if the slots are still tradeable near to their present value in years to come. If they continue to rise in value, its a very good deal.

However the effect of both the possible introduction of mixed mode runway use, and a potential 3rd runway needs to be considered.

One also needs to consider the cost of not having the slots. If CO did not get these slots, then CO would be the only major US International carrier not serving LHR. They might find that not serving LHR means they lose customers to DL from JFK and not serving LHR would mean 4 more slot pairs for their competitors, NW/DL/AA/US...etc. It might well work out that CO will not recover the cost of these slots, but that loss would be nothing compared to the amount they would lose if they didn't have these slots.


User currently offlineFlyingClrs727 From United States of America, joined Apr 2007, 733 posts, RR: 0
Reply 17, posted (6 years 8 months 3 weeks 1 day 7 hours ago) and read 11202 times:



Quoting Bongodog1964 (Reply 4):
Its a good deal, if the slots are still tradeable near to their present value in years to come. If they continue to rise in value, its a very good deal.

However the effect of both the possible introduction of mixed mode runway use, and a potential 3rd runway needs to be considered.

But even with a third runway, any slots for the existing runways will still be more valuable especially for long haul carriers that will be scheduling wide bodies to LHR. The third runway may be useful for landing heavies, but they'll only be able to take off from the currently exiting runways. The third runway will mostly be used for narrow bodies and regional jets, but having more slots available for connecting flights will help keep long haul traffic going through LHR rather than AMS, CDG, or FRA. More early morning heavy slots will become available for airlines flying from North America to connect with the early banks of connecting flights.


User currently offlineFlyingClrs727 From United States of America, joined Apr 2007, 733 posts, RR: 0
Reply 18, posted (6 years 8 months 3 weeks 1 day 7 hours ago) and read 11187 times:



Quoting Bongodog1964 (Reply 4):
Its a good deal, if the slots are still tradeable near to their present value in years to come. If they continue to rise in value, its a very good deal.

However the effect of both the possible introduction of mixed mode runway use, and a potential 3rd runway needs to be considered.

But even with a third runway, any slots for the existing runways will still be more valuable especially for long haul carriers that will be scheduling wide bodies to LHR. The third runway may be useful for landing heavies, but they'll only be able to take off from the currently exiting runways. The third runway will mostly be used for narrow bodies and regional jets, but having more slots available for connecting flights will help keep long haul traffic going through LHR rather than AMS, CDG, or FRA. More early morning heavy slots will become available for airlines flying from North America to connect with the early banks of connecting flights.


User currently offlineWorldTraveler From , joined Dec 1969, posts, RR:
Reply 19, posted (6 years 8 months 3 weeks 1 day 7 hours ago) and read 11179 times:

This price is in line with what the market is charging for slots at LHR on an open basis.

Slots are amortized over a period of years which can be as high as 40 years; slots and route authorities can also be held as assets with no time limit. As long as they justify it from an accounting standpoint, they can put them on the books any way they want. The point is that this is the price of admission for CO to LHR.

IN contrast, DL and NW undoubtedly didn't pay anywhere near as much money for access to LHR because the slots are part of revenue sharing agreements. AF/KL has an incentive to use its assets at LHR most effectively and in turn allows its closest US partners to grow at LHR while competing under their own brand - which probably has more value across the Atlantic from London than AF/KL does. Either way, though, revenue sharing is part of the agreement and DL would not agree to revenue sharing with AF until AF helped it obtain access to LHR.

Because CO is not interested in revenue sharing with foreign carriers, it had to pay market prices. I'm not sure any of us with the information we have can say that one formula will work better for each carrier.

I will say - and some of you may fall out of your chairs - but I think CO has higher quality LHR slots than DL or NW have.


User currently offlineBobnwa From United States of America, joined Dec 2000, 6511 posts, RR: 9
Reply 20, posted (6 years 8 months 3 weeks 1 day 6 hours ago) and read 11124 times:



Quoting UAL747 (Reply 12):
So does 4 "Pairs" mean 4 arrivals and 4 departures?

No, as has been written here many times, it means 2 arrivals and 2 departures.


User currently offlineIkramerica From United States of America, joined May 2005, 21560 posts, RR: 59
Reply 21, posted (6 years 8 months 3 weeks 1 day 6 hours ago) and read 11126 times:

It's no different than buying a pair of 767s for the routes. About the same price. People don't balk at buying a depreciable asset to fly a route in the form of planes.


Of all the things to worry about... the Wookie has no pants.
User currently offlineB747-4U3 From United Kingdom, joined Jan 2002, 991 posts, RR: 0
Reply 22, posted (6 years 8 months 3 weeks 1 day 6 hours ago) and read 11082 times:



Quoting Bobnwa (Reply 20):


Quoting UAL747 (Reply 12):
So does 4 "Pairs" mean 4 arrivals and 4 departures?

No, as has been written here many times, it means 2 arrivals and 2 departures.

No,

4 pairs means 4 arrivals and 4 departures (4 pairs = 4 x 2 = 8 slots)
4 slots would mean 2 arrivals and 2 departures.


User currently offlineBrianDromey From Ireland, joined Dec 2006, 3926 posts, RR: 9
Reply 23, posted (6 years 8 months 3 weeks 1 day 6 hours ago) and read 11050 times:



Quoting FlyingClrs727 (Reply 17):
The third runway will mostly be used for narrow bodies and regional jets, but having more slots available for connecting flights will help keep long haul traffic going through LHR rather than AMS, CDG, or FRA.

The BAA are now looking into building a fll length runway, because the greens will make a huge fuss either way. Very few regional jets in Europe, thankfully, much less at LHR. Among the only regional jet services are BD's ERJs, these are merely slot-holders.

Quoting Bobnwa (Reply 20):
No, as has been written here many times, it means 2 arrivals and 2 departures.

No, 4 pairs is just that. 8 slots. 4 arrivals and 4 departures.

Brian.



Next flights: MAN-ORK-LHR(EI)-MAN(BD); MAN-LHR(BD)-ORK (EI); DUB-ZRH-LAX (LX) LAX-YYZ (AC) YYZ-YHZ-LHR(AC)-DUB(BD)
User currently offlineCommavia From United States of America, joined Apr 2005, 11816 posts, RR: 62
Reply 24, posted (6 years 8 months 3 weeks 1 day 6 hours ago) and read 10858 times:



Quoting WorldTraveler (Reply 19):
IN contrast, DL and NW undoubtedly didn't pay anywhere near as much money for access to LHR because the slots are part of revenue sharing agreements.

However, DL and NW won't derive as much revenue from their LHR slots - at least theoretically - as CO, since they'll have to split the revenue 50/50 with their joint venture partners, where as 100% of any revenue/profits CO derives from LHR they will keep entirely.

There's a reason why DL and NW didn't have to pay as much to AF and KL for the slots: because AF and KL are going to get half the revenue from them, so they require a lower price upfront.


25 777gk : They are well-timed, especially the prime EWR-LHR (CO28/29). That's the price you pay for premium slots, I suppose.
26 Post contains images AeroMojo : Not really because CO will make a killing with the extemely lucrative high yield pax like our business travelers. Not to mention the extra CO will ma
27 Ikramerica : Not sure if it's 50/50, but one assumes no matter what the split, AF/KL doesn't have to split the cost of operating. They get their share by providin
28 AeroMojo : I would LOVE to see this! I think with the expansion of CO in CLE, CO could easily make it a Europian Hub. CO could just fly everything over the pola
29 Post contains images Scbriml : So, when can I get some shots of those nice CO 777s at LHR?
30 BrianDromey : Is it 50/50 or in proportion to the seats each puts into the operation? For example if KL put 45% of the capacity and NW 55% would the revenues not b
31 Luisca : Cans somebody please educate me as to what the obsession with LHR is? I flew this December to LHR, LGW and LCY and I didn't notice any difference betw
32 2travel2know : I see the point of CO flying EWR-LHR in addition to EWR-LGW not to lose passengers to DL JFK-LHR, but to fly IAH-LHR or CLE-LHR? I've flown a CO B777
33 Post contains images Viscount630 : It's actually quicker! Hence my own puzzlement as to why the airlines are so LHR-obsessed. They should market LGW better IMHO! Why they don't probabl
34 Drerx7 : What did it look like up front? If they didn't fly IAH-LHR they loose pax to BA. IAH-LON is one of the most high yielding routes - I know for BA it i
35 BCAL : As a general rule, on average, a full-service scheduled operation at LGW with a fare structure that is identical to a similar operation at LHR produc
36 BP1 : This is a great deal for CO. Actually, I think they would have paid more if they had to for the access. Interesting enough, I have not heard much abou
37 Post contains images Bennett123 : I prefer LGW as well, but what do I know
38 Post contains images Lightsaber : Might as well. If trying to accommodate is just as difficult as putting in an A380 ready runway... go full gauge. LHR needs another runway, now! Not
39 LH748i : other wise it would not make sence. Why would AF and AZ give one slot of a pair away. That would mean they could touch down, but couldn't take off ag
40 Sxmarbury33 : Wait, your saying they should depreciate an intangible? I agree that they should test for impairments such as new MLW restrictions or somthing but how
41 Viscount724 : If CO didn't think LHR was an important market they wouldn't have been codesharing on VS between the U.S. and LHR for many years.
42 Nrcnyc : Assuming slots, or any asset, will always appreciate is what started the whole CDO meltdown. The slots could lose value for many reasons as stated abo
43 MasseyBrown : You wouldn't depreciate the computer, but you could depreciate your right to use it. In the example you cite, the $150 would be expensed all at once
44 Bobnwa : 4 pairs does mean 4 arrivals and 4 departures but 4 slots means 2 arrivals and 2 departures. Mt mistake, I should have read closer.
45 Post contains images Flysherwood : Then again, there is the townhouse that just sold in Manhattan for a cool $ 49 million. Don't think there was a lot of depriciating going on there.
46 Post contains images AeroMojo : Many of our pax do want to to fly into LHR because they say "Thats where everything is." I havent actually been to the UK yet, unfortunatly, So I can
47 VV701 : And it has nothing to do with interconnections? BA operated IAH-DTW-LHR as well as IAH-LGW direct simply because of the connections at LHR and not be
48 WesternA318 : I currently pay above $4000 for myself and my underlings per trip from SLC to LGW, and I'd gladly pay more to head into LHR. LHR flights are currentl
49 Breaker1011 : My two cents and it might not mean a darn thing, but I'll bet a year from now, yeilds into LHR aren't going to be anything to party about for any US a
50 VV701 : But how many of the flights will be new. Are not most simply transfers 40 miles up the road from LGW to LHR? I mean AA and BA already fly DFW-LON. CO
51 WarRI1 : 209 million for 1 Summer and 1 Winter season, are they nuts in this economy in the US and the price of fuel. simply astounding to me. what are they go
52 Breaker1011 : You are exactly correct. My point here being that the "attraction" of so many carriers to LHR over LGW has been the yeild premiums that the select fe
53 777STL : True. You would still have to value it in some fashion, i.e. impairment.
54 WarRI1 : My mistake, I did not read the link first, I thought that was madness for that short period of time.
55 DeltaL1011man : Guys DL and NW don't have to pay much for there LHR slots because DL/NW LEASED there slots from AF/KL. So really DL or NW dont have LHR forever.
56 2travel2know : Out of the 90 passengers flying IAH-LGW that day only 15 or so were business. In my opinion, for CO, IAH-LGW is pretty much a Houston connecting pass
57 777gk : Come on now, you know that's just anecdotal evidence based on ONE observation. IAH-LGW has been one of CO's best performing transatlantic routes for
58 AeroMojo : Come on guys look at the bigger picture. This may sound like madness to most of you however, hear me out. Under the Open Skies aggreement CO could be
59 Flysherwood : With so many 787's on order, I'm not so sure they plan to make LHR the stepping stone to other destinations. Why would they do that when they will be
60 777STL : Doubtful. They don't have enough slots nor do they have an alliance partner hubbed at LHR ala BA and AA.
61 Post contains images Ikramerica : Let's not confuse Open Skies success or failure with the value of slots. Should airlines not be as profitable as they thought on LHR-USA, it doesn't
62 AeroMojo : This is true, I was merely speculating. But, my real fear maybe realized that having access to LHR is just hype and it was acquired just because we f
63 Mptpa : That is called "opportunity costs". If they can generate additional say 20-40M per year from these slots, they can recover the cost - depreciation in
64 777gk : Not just a good competitive move, a no-brainer. IMO, anyone who says otherwise is penny wise and pound foolish.
65 AeroMojo : Thanks, I appreciate your input. I thought about this as well. I just dont want to see LHR be a big mistake.
66 Ikramerica : If anything, it would be a wash. I don't think it will be a net negative for CO, DL or NW. It will possibly be a boon, but we'll see how AA, BA and V
67 MasseyBrown : US-London business fares are already MUCH cheaper than CDG fares. (So much cheaper I flew to London and took the train to Paris last fall.) I think t
68 Atmx2000 : 5th freedom rights would be more valuable if you had some sort of cost or other advantage over the carrier based in the foreign city. That's not goin
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