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Cush
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The Real Cost Of LHR Slots

Tue Sep 27, 2016 2:53 pm

I always see posts about how expensive or prohibitive it is to fly a route to/from London Heathrow (LHR), and i was curious what makes this so expensive?

I would love to see a comparison of Heathrow, Gatwick, Luton, and Stansted.

Whether there are up-front costs, landing fees, PFC charges, etc.

Does anyone have more information on this?

Thank you!
 
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Revelation
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Re: The Real Cost Of LHR Slots

Tue Sep 27, 2016 3:25 pm

Have you tried doing any research?

https://www.google.com/search?q=cost+of ... t+heathrow

The highest price paid for a pair of take-off and landing slots at Heathrow Airport was $75m, paid by Oman Air to Air France–KLM for a prized early morning arrival, reported in February 2016. A year before, American Airlines paid $60m to Scandinavian Airlines.


Ref: https://en.wikipedia.org/wiki/Landing_slot
 
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ro1960
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Re: The Real Cost Of LHR Slots

Tue Sep 27, 2016 3:47 pm

How about circling for 20 minutes before landing? Does it account for much in the cost of a flight to LHR?
 
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readytotaxi
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Re: The Real Cost Of LHR Slots

Tue Sep 27, 2016 4:27 pm

As an observation I think there is no "real cost" for a slot, it is, what ever some airline is prepared to pay because they think it is worth it.
 
vv701
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Re: The Real Cost Of LHR Slots

Tue Sep 27, 2016 6:33 pm

The real cost of the rights to use an LHR slot pair is hugely variable. Examples of top prices for high demand prime time slots have already been given in earlier posts. The other end of the payment scale is $0.

$0 is the cost of newly created slots and slots redistributed by the slot coordinator, Airport Coordination Ltd. It is also the price of so-called 'remedy' slots such as those given by BA to VS's Little Red to operate services on any of the routes previously operated by only BA and BD , a condition of the competition authorities when approving the BA purchase of BD made back in April 2012.

Note here that no LHR slots are actually owned by the operators of those slots. After their use has been awarded, purchased or redistributed to an airline and after that airline has used those slots on a minimum of 80 per cent of possible occasions for a period of time - I forget if it is two or three consecutive years - the operating airline automatically obtains so called 'grandfather rights' to the slots. This is the point where, unless some restriction nulling this. the operator can sell its rights to use specific slots to another operator. But the operator can still loose those rights (with no compensation) if it misuses the slots or fails to use them on at least 80 per cent of possible occasions.

Note also that a Summer Season slot, although more often than not paired with a matching Winter Season slot, does not always have a matching slot. Indeed there are fewer weekly LHR slots evert Winter Season than in either of the adjacent Summer Seasons.

Finally it is worth remembering that BA actually currently have the use of an excess of LHR slots. The excess was created by the short-notice return of the 'remedy' slots awarded free of charge to VS Little Red. They were returned to BA with insufficient time for BA to provide their own support - aircraft and flight and cabin crews and no doubt other requirements. So to preserve their rights to use these slots they have wet leased two Jettime 737-7s, OY-JTT and 'TY for the whole of the current Summer Season.

I mention the above because the VS Little Red experience shows that the right to use LHR slots does not hold the key to a pot of gold.

To provide support for the above here are a few numbers from the Airport Coordination Ltd web site:

At the start of the Summer 2003 Season the total number of LHR weekly slots were 9,246. For the current season this number is 9,620. So we can deduce that 374 weekly slots, equivalent to 187 weekly slot pairs or approaching an average of 27 daily slot pairs have been awarded free of charge by the slot coordinator to operators. Note here that 50 per cent of such slot pairs must be first offered to new comers to LHR.

At the start of the Summer 2003 Season BA had 3,602 LHR weekly slot pairs. This number has increased at the start of every Summer Season since then. At the start of the current season they operated 5,062, an increase of 1,460 or 40.5 per cent. Yet there has never been publicity revealing they paid the sort of sums mentioned in earlier posts in this thread. Neither has there been any detectable such outlays revealed in any of their Annual Reports.

Finally the number of weekly LHR slots at the start of the Summer 2015 Season was 9,618. At the start of the previous Winter Season (2014-15) the equivalent number was 9,256. At the start of the subsequent Winter Season (2015-16) the equivalent number was 9,218. So we are currently looking at a not insignificant 362 to 400 fewer weekly LHR slots in the Winter c.f. the Summer Season. This is more than the total operated by the third largest LHR operator.
 
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kitplane01
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Re: The Real Cost Of LHR Slots

Wed Sep 28, 2016 5:25 am

vv701 wrote:
So we can deduce that 374 weekly slots, equivalent to 187 weekly slot pairs or approaching an average of 27 daily slot pairs have been awarded free of charge by the slot coordinator to operators. Note here that 50 per cent of such slot pairs must be first offered to new comers to LHR.



First, awesome fact filled post.

Second, why the h*ll don't they auction them off, instead of give them away? Is the Airport operator and/or British Government afraid to take money?

Auctioning them would make sure they go to the most profitable use, and money is always nice to have. Only government rules require that one give away thing worth many million of pounds!!!

It would also be reasonable if the auction provided that British Airways did not buy too many, for competitive reasons.
 
Andy33
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Re: The Real Cost Of LHR Slots

Wed Sep 28, 2016 5:43 am

kitplane01 wrote:
vv701 wrote:
So we can deduce that 374 weekly slots, equivalent to 187 weekly slot pairs or approaching an average of 27 daily slot pairs have been awarded free of charge by the slot coordinator to operators. Note here that 50 per cent of such slot pairs must be first offered to new comers to LHR.



First, awesome fact filled post.

Second, why the h*ll don't they auction them off, instead of give them away? Is the Airport operator and/or British Government afraid to take money?

Auctioning them would make sure they go to the most profitable use, and money is always nice to have. Only government rules require that one give away thing worth many million of pounds!!!

It would also be reasonable if the auction provided that British Airways did not buy too many, for competitive reasons.


Note the bit in vv701's post about new entrants. It is very much in the interest of the airport operator and the UK government to encourage additional airlines to come to LHR. This often creates non-stop service to cities, or entire countries, where there was none before. It's unlikely that startup airlines, or those based in third world countries, could justify the capital expenditure on buying a slot at auction. Otherwise you just end up with an oligarchy of airlines adding hub frequencies.
 
vv701
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Re: The Real Cost Of LHR Slots

Thu Sep 29, 2016 12:10 am

Heathrow Airport Holdings Ltd (HAHL) is not owned by the British government so clearly they could not sell LHR slots.

HAHL is owned by a consortium, FGP Topco Ltd. It has seven investors comprising:

Ferrovial SA (25%)
Qatar Holding LLC (20%)
Caisse de depot et placement du Quebec (12.62%)
Government of Singapore Investment Corporation (11.2%)
Alinda Capital Partners (11.18%)
China Investment Corporation (10%)
Universities Superannuation Scheme (10%)

However everything that HAHL charges the airlines requires the approval of the British government's Civil Aviation Authority (CAA).

The CAA policy is to keep charges made by HAHL as low as is reasonable because of the importance of LHR to the British economy. So it seems very likely that if the CAA granted ownership of confiscated or new LHR slots to HAHL they would require a financial balancing reduction in the landing, passenger handling and parking charges currently levied by HAHL on the airlines using LHR. So changing the current system would achieve little except increased concern about how Airport Coordination Ltd (ACL) who again are not government owned but (pre-Brexit) control the distribution and monitor the use of LHR slots under the regulations laid down by the European Commission that apply to all slot controlled airports in the EU. And until post-Brexit any change is unlikely as the EC and not the CAA are the overall controlling body and their regulations apply to all European slot controlled airports..

In terms of the no charge 'remedy' slots for the BA purchase of BD that were used by VS Little Red but returned to BA for the current Summer Season, I now see on the ACL web site that they are requesting applications to apply for them for Summer Seas for them. Here 'them' comprises seven daily LHR slot pairs to operate services between LHR and ABZ and/or EDI and six daily slot pairs to operate services between LHR and NCE, CAI, MOS and / or RUH. So it is unlikely that BA will be buying in equipment or hiring staff to operate these slots in case a competitive airline applies to operate these up to 182 weekly LHR slots from the end of next March. Similarly there are still unused 'remedy' slots from the AA/BA/IB JBA on the LHR-JFK route. But although applications for three free slot pairs on this route (or on LGW-JFK) are currently being invited the slots will only be awarded if the number of competitive flights on LON-JFK falls below 13 per day. Note here that any applicant can specify the timing of the slots required and BA with some flexibility would have to comply with such a request. However BA would have some greater flexibility when meeting any request for peak early morning arrival slots.
 
vv701
Posts: 5895
Joined: Fri Aug 19, 2005 10:54 am

Re: The Real Cost Of LHR Slots

Thu Sep 29, 2016 12:13 am

Heathrow Airport Holdings Ltd (HAHL) is not owned by the British government so clearly they could not sell LHR slots.

HAHL is owned by a consortium, FGP Topco Ltd. It has seven investors comprising:

Ferrovial SA (25%)
Qatar Holding LLC (20%)
Caisse de depot et placement du Quebec (12.62%)
Government of Singapore Investment Corporation (11.2%)
Alinda Capital Partners (11.18%)
China Investment Corporation (10%)
Universities Superannuation Scheme (10%)

However everything that HAHL charges the airlines requires the approval of the British government's Civil Aviation Authority (CAA).

The CAA policy is to keep charges made by HAHL as low as is reasonable because of the importance of LHR to the British economy. So it seems very likely that if the CAA granted ownership of confiscated or new LHR slots to HAHL they would require a financial balancing reduction in the landing, passenger handling and parking charges currently levied by HAHL on the airlines using LHR. So changing the current system would achieve little except increased concern about how Airport Coordination Ltd (ACL) who again are not government owned but (pre-Brexit) control the distribution and monitor the use of LHR slots under the regulations laid down by the European Commission that apply to all slot controlled airports in the EU. And until post-Brexit any change is unlikely as the EC and not the CAA are the overall controlling body and their regulations apply to all European slot controlled airports..

In terms of the no charge 'remedy' slots for the BA purchase of BD that were used by VS Little Red but returned to BA for the current Summer Season, I now see on the ACL web site that they are requesting applications to apply for them for Summer Season 2017 for them. Here 'them' comprises seven daily LHR slot pairs to operate services between LHR and ABZ and/or EDI and six daily slot pairs to operate services between LHR and NCE, CAI, MOS and / or RUH. So it is unlikely that BA will be buying in equipment or hiring staff to operate these slots in case a competitive airline applies to operate these up to 182 weekly LHR slots from the end of next March. Similarly there are still unused 'remedy' slots from the AA/BA/IB JBA on the LHR-JFK route. But although applications for three free slot pairs on this route (or on LGW-JFK) are currently being invited the slots will only be awarded if the number of competitive flights on LON-JFK falls below 13 per day. Note here that any applicant can specify the timing of the slots required and BA with some flexibility would have to comply with such a request. However BA would have some greater flexibility when meeting any request for peak early morning arrival slots.
 
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kitplane01
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Re: The Real Cost Of LHR Slots

Thu Sep 29, 2016 5:01 am

vv701 wrote:
Heathrow Airport Holdings Ltd (HAHL) is not owned by the British government so clearly they could not sell LHR slots. ...
However everything that HAHL charges the airlines requires the approval of the British government's Civil Aviation Authority (CAA).
... and lots more interesting details



It seems quite reasonable that the British government could find some way to sell these assets if they chose to. Maybe they would need different contracts, or to have made different arrangements, but it's possible, and would make them more rich than giving away valuable assets.
 
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kitplane01
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Re: The Real Cost Of LHR Slots

Thu Sep 29, 2016 5:03 am

Andy33 wrote:
Note the bit in vv701's post about new entrants. It is very much in the interest of the airport operator and the UK government to encourage additional airlines to come to LHR. This often creates non-stop service to cities, or entire countries, where there was none before. It's unlikely that startup airlines, or those based in third world countries, could justify the capital expenditure on buying a slot at auction. Otherwise you just end up with an oligarchy of airlines adding hub frequencies.


That does make sense, and I see your point.

It seems they could have an auction among only airlines that met the qualifications needed (new entrants, third world, whatever). I understand that would reduce prices, but it's better to get some money than no money when giving away valuable assets.

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