vs25
Posts: 64
Joined: Thu Jun 17, 2004 1:53 am

Auction For All LHR Slots

Sat Dec 18, 2004 4:06 am

I'm interested in people's views on solutions to the LHR slot problem. I hope I can say that we are all in agreement that the lack of US-UK open skies is not good for competition and that competition is a good thing.

Now we all know that there is a terrible lack of slots at LHR and that the chances of a 3rd short runway being built anytime soon are very very slim. So, what I propose is that the UK Govt (or BAA) "take back" all the slots at LHR, that includes BA, Virgin and BMI and then auction the slots off to the highest bidders. Obviously the incumbents won't like this at all and claim that they "own" the slots, however it would open the airport to competition. If CO, NW, DL, etc want slots they will have to bid for them like VS and BA. The incumbents would have another couple of years (say 2008) and then it would go into the auction. Each pair of slots could be rented for 3-5 years from BAA/UK.gov

I know that some of the most of the US carriers are in no position for a bidding match, but BA and VS are hardly sitting on piles of cash. If an airline thinks they can make money from a LHR route then let them bid. (The LHR slots already have an unofficial "trading" price of £1 million each) They will have a price that they can afford that would enable them to run a profitable service on the route. Let the market decide.

What does everyone think?
 
B747-437B
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RE: Auction For All LHR Slots

Sat Dec 18, 2004 4:16 am

That is in direct violation of both EU law and ICAO agreements.
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vs25
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RE: Auction For All LHR Slots

Sat Dec 18, 2004 4:24 am

Restricting competition is also against EU law and laws can be changed.

My point is, would this be a feasible way to fairly open up competition at LHR ?
 
Arsenal@LHR
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RE: Auction For All LHR Slots

Sat Dec 18, 2004 5:35 am

A feasible idea but i don't think any of the parties involved will get enthusiastic about buying slots. Not least UA and AA who inherited the vacant Heathrow slots from Pan Am and TWA. IIRC BA has never bought any of it's slots at LHR (only some from UAL recently) and VS were given them as they were naturally a home carrier. So i cannot see any of the airlines buying slots, not least UA or AA who alone would need to be allocated at least 30 to 35 take-off and landing slot allocations. And if the unofficial trading price of a slot is a million quid, then that alone would amount to 30-35 million GBP, don't think United has that sort of money lying around.

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buckieboy
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RE: Auction For All LHR Slots

Sat Dec 18, 2004 5:45 am

Can I be a little controversial?

I know carriers (especially US ones) want to maximise their income and LHR may be a good way to do it. But as a passenger, I try and avoid LHR as much as possible. Because I live in Switzerland, if I need to go to London proper, I will choose LCY and in transit, AMS, FRA and even CDG would be much more comfortable for me.

Plus, the BA T1/T4 thing doesn't work for me at present, picking up and dropping off hire cars is a pain, and T2 is a claustrphobic dump, even for someone who is barely 5'. Maybe T5 will improve matters, however, I do not like LHR at all at present.
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vfw614
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RE: Auction For All LHR Slots

Sat Dec 18, 2004 10:20 am

They cannot be auctioned off as from a legal point of view they cannot become an airline's property (it is diffrent in the US).
 
TrappedinMKG
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RE: Auction For All LHR Slots

Sat Dec 18, 2004 11:33 am

This would not benefit US carriers, because a) no US airline can afford it, with the exception of *maybe* NW or CO, and b) LOTS of US travelers are scared to death of LHR. I regularly hear it referred to as a "third world country in and of itself."
 
whitehatter
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RE: Auction For All LHR Slots

Sat Dec 18, 2004 11:37 am

The issue of the UK-US treaties concerning LHR operations, and Heathrow slots, are two entirely separate matters. There seems to be some confusion in this thread over the basics, that permission to fly the route is needed before any new carrier can try to obtain LHR slots.
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gkirk
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RE: Auction For All LHR Slots

Sat Dec 18, 2004 11:42 am

IMO, BA should be given more slots.
I believe they only have about 41% of all slots, whereas LH and AF at their respective hubs have about 60 or 70% of all slots
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JoFMO
Posts: 1840
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RE: Auction For All LHR Slots

Sat Dec 18, 2004 1:34 pm

@Kirk:

But that is not a legal point. That is BA's foult. Why did they choose to hub at an airport that doesn't have enough slots? They should have bought more slots two decades ago as they still were available.
 
rtfm
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RE: Auction For All LHR Slots

Sat Dec 18, 2004 7:43 pm

JoFMO - now let's think - why did BA chose to hub at the main airport of the capital city of their home country (which incidentally sits in one of the most densly populated parts of Europe).....?

Unfortunately the commercial air transport industry has grown quicker than LHR's infrastructure (and far faster than than the decision making ability of successive UK governments...)

As for taking all the slots away and then auctioning them off - well apart from the various legal reasons already mentioned, how about the legal challenges from all the airlines that currently hold those slots? How about the fact that there are enough dumb ideas floating around airline regulation at the moment without adding another one? How about the fact that those airlines that have held those slots for years and have invested time and money in building up the traffic and business and their own operations to support them? Maybe the government should try that with all the houses in your street....?
 
aussie747
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RE: Auction For All LHR Slots

Sat Dec 18, 2004 9:49 pm

"The issue of the UK-US treaties concerning LHR operations, and Heathrow slots, are two entirely separate matters. There seems to be some confusion in this thread over the basics, that permission to fly the route is needed before any new carrier can try to obtain LHR slots."


You are so right there QF just paid $55million AUD for their additional two pairs of daily slots into LHR. Yet from BAA it still only has permission to start only 7 of those 14 flights into and out of the country . It will have to renegotiate the remaing 7 (to avoid losing it's slots that it purchased it's using the services of Flightlines BAE146's to run LHR/MAN feeder serices).

 
vs25
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RE: Auction For All LHR Slots

Sun Dec 19, 2004 2:05 am

So assuming that all the relevent bilateral treaties are in place (ie Bremuda II goes the way of the dinosaurs), how does a new carrier (eg CO, NW, DL) get slots at LHR? BA, VS and BD are going to be too happy giving up their slots for competition, so why not take all the slots from everyone and start again on a level playing field?

To the best of my knowledge slots do not have the same rights under law as land. If you don't use your slots, you will lose them, which is not the same for land. Even under land law the govt can issue a complusory purschase order for your land.

Its not possible to please all the interest groups. BA, VS and BD won't give up their slots without a fight. Carriers from other countries want access to over crowded LHR... so let all the carriers bid for the rights to fly to LHR for a number of years. In essence, rent the slots. This would undoubtably be a money spinner for BAA/UK Govt. You could even get rid of the landing fees/pax charges and just rely on the auctioning of slots every few years.

Just a thought...
 
747firstclass
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RE: Auction For All LHR Slots

Sun Dec 19, 2004 3:06 am

I can tell you straight away that this proposal will simply not fly with US carriers or the US govt. No foreign airline has ever paid as much as one cent for any slot ay any US airport. Period. BA would find itself paying for slots at JFK,LAX,ORD etc. etc. I repeat this plan will not go over with the US govt. or US carriers.
 
A350
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RE: Auction For All LHR Slots

Sun Dec 19, 2004 6:25 am

I think it's a great idea to let the market decide which flights are the most important ones. It will probably also lead to more longhaul connections, while the frequency of european connections mights be reduced.

AFAIK, the european commission wants to make a slot auction mandatory for all airports with slot restrictions. This will take time, but at the end, it will make sure that any slot will be used in a way to produce a maximum of wealth out of it.

A350
 
roseflyer
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RE: Auction For All LHR Slots

Sun Dec 19, 2004 7:17 am

747firstclass,

I agree that there would be large repercussions. If the BAA decide to issue an auction and carriers with very little cash on hand (yes I know they have about a Billion dollars, but that isn't available to purchase assets) like AA and UA would end up losing many of their slots or might suffer more consequences. The United States government would not let that stand, and would likely enforce some pretty hefty fees to BA and other UK carriers.

Here is a hypothetical way that the auction could work is that if all of the slots were purchased at market price (as government are required to do when repossesing land or property) and then were auctioned off. UA and AA would be paid for their slots and would likely just buy them back, but if another carrier desperately wanted some slots it could outbid others like BMI or UA. The outbid carriers would lost a slot, but would be paid for it so they will get needed cash. It could be a good infusion of cash at some carriers, and allow anyone that has enough money to get into the market.

Overall I think that is a horrible idea though. Having BAA rake in the money from financially troubled airlines is like them shooting at the person that feeds them. In my opinion, the UK should not profit out of something like an airport. If there was a huge profit opportunity in owning an airport, then you would see private investors building airports and charging high fees for them. Overall if a carrier desperately wants a slot now, they can get it if they are willing to pay enough. That is how economics control things, and it is logical. Having too much government intervention is not a good thing. But then again, someone is justifying Bermuda II.
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777ER
Crew
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RE: Auction For All LHR Slots

Sun Dec 19, 2004 1:30 pm

If the LHR slots were auctioned off then it would be unfair for the airlines that can not afford to spend big money on slots.
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A350
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RE: Auction For All LHR Slots

Sun Dec 19, 2004 10:04 pm

If the LHR slots were auctioned off then it would be unfair for the airlines that can not afford to spend big money on slots.


That's market economy: if a resource is rare, it is sold to the one who makes the largest economic use out of it, i.e, who can pay the highest price. When airlines think it's not woth it, they can well change to STN.

A350