Explanatory Memorandum to COM(2011)827 - Common rules for the allocation of slots at EU airports

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dossier COM(2011)827 - Common rules for the allocation of slots at EU airports.
source COM(2011)827 EN
date 01-12-2011


1. CONTEXT OFTHEPROPOSAL

1.1. Context

1. At airports where demand among airlines for landing and takeoff slots exceeds the airport's capacity, slot allocation mechanisms are used to define a set of rules 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 (runway, taxiway, stands and, for passenger flights, terminal infrastructure). Depending on the characteristics of the airport, slot allocation may be necessary at specific times of the day or during certain busy periods. The objective is to ensure that access to congested airports is organised through a system of fair, non-discriminatory and transparent rules for the allocation of landing and take-off slots so as to ensure optimal utilisation of airport capacity and to allow for fair competition.

2. The European Community adopted Council Regulation (EEC) No 95/93 of 18 January 1993 on common rules for the allocation of slots at Community airports (the Slot Regulation) in 1993 and amended it in several important respects in 2004. Because aviation is by its nature a global business, but also subject to local regulations, it is important to note that slot allocation works differently in different parts of the world. In Europe, the Slot Regulation draws on the global guidelines of the International Air Transport Association (IATA).

3. The main features of the current slot allocation system are the following: Member States must designate an airport as coordinated if a thorough capacity analysis proves that there is a significant shortfall in capacity at this airport1. A second step is for the Member State to appoint an airport coordinator. The coordinator is in charge of allocating airport slots and is obliged to act in an independent, neutral, non-discriminatory and transparent manner.

4. Slots are allocated for the summer scheduling season or for the winter scheduling season. If an air carrier has used a series of slots2 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 ('historical slots', grandfather rights or 80-20 rule). 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 entrants3.

5. There are currently 89 fully coordinated airports in countries where the Slot Regulation applies (the European Economic Area plus Switzerland). Of these airports, 62 are coordinated year-round, and 27 are coordinated seasonally. These

Airports with potential for congestion at certain periods only will be designated as schedules facilitated.

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At these airports the procedure is based on a voluntary cooperation between air carriers. A schedules


facilitator will be designated and its role is to facilitate the operations of air carriers.

A slot series is defined in Article 2(k) of the Slot Regulation: '[…] at least five slots having been

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requested for the same time on the same day of the week regularly in the same scheduling period and


allocated in that way or, if that is not possible, allocated at approximately the same time'.

A new entrant is defined in Article 2(b) of the Slot Regulation as a carrier with only a limited presence

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airports include some where demand substantially exceeds capacity at all times, such as London Heathrow and Paris Orly, and others where capacity is scarce during certain peak periods. 18 Member States have at least one coordinated airport and should therefore appoint a coordinator.

1.2. Reasons and objectives for the proposal

6. The implementation of the Slot Regulation has significantly improved slot allocation at busy European airports in terms of neutrality and transparency, making a major contribution to the creation of the internal market in aviation. The Slot Regulation was introduced at a time when the European air transport market was still dominated by a small number of traditional national carriers. Nowadays, however, there is much more competition. Since 1992, the number of intra-EU routes operated has more than doubled and there has been a 150 % increase in long-haul flights departing from European airports. In 1992, just 93 European routes were served by more than two airlines. In 2010 there were 479 such routes. It is questionable whether such progress could have been achieved without a system to ensure that slots at busy airports are allocated free of any undue influence from government, national carriers or airports.

7. As highlighted by Eurocontrol and ACI-Europe4, one of the key challenges facing Europe is airport congestion. According to Eurocontrol's Long Term Forecast in December 20105, even taking into account currently planned infrastructure enhancements, as much as 10 % of demand for air transport will remain unmet in 2030 due to a shortage of airport capacity. Moreover, the impact assessment accompanying this proposal demonstrates that the EU's busiest airports are unlikely to see any improvement in the current situation, even taking into account planned capacity enhancements6.

8. In view of the shortage of capacity at critical airports and the spill-over effect on the mobility of European citizens, building new runways and airport infrastructure is the obvious answer. However, the impact of infrastructure on the environment and on land planning is a growing concern. In addition, the current economic crisis reaffirms the importance of ensuring the long-term sustainability of budgets. Instead of relying on expanding hard infrastructure, more cost-effective solutions have to be found to tackle congestion.

9. Clearly, slot allocation cannot generate additional capacity. Moreover, slot allocation cannot solve the many problems created by a lack of capacity, such as how to adequately cater for air links to Europe's regions from capacity-constrained airports, or provide congested hubs with better connections to all world regions. Enhanced slot allocation schemes will never satisfy these important needs. However, they can be an effective tool for managing scarce capacity.

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10. Therefore, it is necessary to review the Slot Regulation to determine to what extent it can be improved with a view to matching capacity to demand for air transport in all


Airport Council International Europe (www.aci-europe.org">www.aci-europe.org).

www.eurocontrol.int/statfor/gallery/content">www.eurocontrol.int/statfor/gallery/content. The figures in the Eurocontrol report refer to IFR (instrument flight rules) flight movements only.

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sectors (long-haul, regional, cargo, etc.). The importance of slot allocation in creating an integrated and efficient market for the Single European Transport Area was recognised in the March 2011 White Paper on transport, which is itself part of the flagship initiative on a resource-efficient Europe launched under the Europe 2020 Strategy. Accordingly, the Commission has given serious consideration to the introduction of market-based mechanisms for the use of airport slots, since appropriate incentives and benefits can positively influence the behaviour of players in the market (airlines) so that the available scarce capacity is used by those able to make best economic use of it. In this way, although there would be no extension of the physical capacity, a more rational use of the limited capacity available would be achieved.

11. Such a market in airport slots (in the form of secondary trading) has been in operation at UK airports for some time, as the Commission recognised in a 2008 Communication7. Indeed, slots at London Heathrow have changed hands for high prices: in March 2008 it was widely reported that Continental Airlines had paid $ 209 million (or € 143 million at the then exchange rate) for four pairs of slots at Heathrow.

12. Recent years have seen greater attention paid to the need to strengthen the performance of the aviation system at European level. The changes to the management of air traffic in Europe from 2009 onwards as part of the Single European Sky initiative reflect the fact that, in certain respects, management is best conducted at European or regional level. This is seen in the creation of functional airspace blocks and in the strengthening of central functions such as network management. Given the nature of the network, which comprises both point to point and hub and spoke operations, the impact of problems in one part of the network (for example, closure of an important node) cannot be isolated to that part of the network. This becomes even more apparent when critical parts of the network are running at or near capacity, which reduces the margin available for accommodating diverted flights, for example. Consequently, improving the performance of the European system also implies improving its resilience.

1.3. Objectives of the proposal

13. The general objective is to ensure optimal allocation and use of airport slots in congested airports. The specific objectives are:

(1) to ensure strengthened and effectively implemented slot allocation and use; and

(2) to enhance fair competition and competitiveness of operators.

1.4. Provisions in force in the policy sphere of the proposal

14. The proposal concerns the amendment of Council Regulation (EEC) 95/93 of 18 January 1993 on common rules for the allocation of slots at Community airports. Slot allocation is not dealt with directly by any other provisions.


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1.5. Consistency with the other policies and objectives of the European Union

15. This initiative is one of the actions necessary for the Single European Transport Area as described in the Commission's White Paper: Roadmap to a Single European Transport Area — Towards a competitive and resource efficient transport system [COM(2011) 0144]. It is also part of the airport package of measures identified as a strategic initiative in the 2011 Commission Work Programme [COM(2010)623], contributing to tapping the potential of the Single Market for growth.

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Contents

1.

RESULTS OF CONSULTATIONS


WITH INTERESTED PARTIES AND

IMPACTASSESSMENTS

2.1. Consultation of interested parties

16. After first consulting the interested parties in 2007, and after adopting the Communications of 2007 (COM(2007)704) and 2008 (COM(2008)227), in September 2010 the Commission launched a comprehensive online public consultation, the objective of which was to evaluate the current operation of the Regulation and to elicit stakeholders' comments on a detailed list of policy options which could be addressed through the revision of the Regulation. A second stakeholders' hearing was organised on 29 November 2010 and was attended by 16 Member States and representatives of each of the relevant stakeholder groups.

17. A summary of the consultation is published on the Commission's website8. Air carriers are broadly satisfied with the functioning of the current Slot Regulation, so most respondents within this group do not support any changes. The fact that the slot allocation system in effect regulates access to some of the most popular airports in the world explains the sensitivity of the issue, in particular for airlines. Several airlines stress that the most important issue is the shortage of airport capacity, which changes to the Slot Regulation would not address.

18. Airports and airport associations see more need for change, so are more likely to see benefits in the options put forward in the consultation. This also applies, to a lesser extent, to the slot coordinators. There is more divergence among the Member States and other respondents, although these stakeholders generally support amendments to the Slot Regulation.

2.2. Collection and use of expertise

19. Continuous monitoring by the Commission of the functioning of the Regulation has been accompanied by several external studies, the results of which are available on the Commission website9. In particular, the Commission decided in 2010 to undertake a thorough assessment of the current situation for the period 2006-201010.

ec.europa.eu/transport/air/studies/airports_en. The summary is included in section 8 of the study on possible revisions to the Slot Regulation (Steer Davies Gleave, 2011). In particular we would mention: Study to assess the effects of different slot allocation schemes, National Economic Research Associates (NERA), 2004, and Study on the impact of the introduction of secondary trading at Community airports, Mott MacDonald, 2006. All the studies mentioned here are available at ec.europa.eu/transport/air/studies/airports_en.

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This concluded that the efficient use of airport capacity in Europe is currently hindered by a number of problems.

2.3. Impact assessment

20. 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.

21. 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.

22. 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).

23. 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 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.

24. The third package comprised all elements of the second package, but took the market-based 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.

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

3. LEGALELEMENTSOFTHEPROPOSAL

3.1. Summary of the proposed action

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

26. In order to encourage greater slot mobility, the proposal expressly allows airlines to buy and sell slots. Improving slot mobility will help allow airlines to adapt their slots portfolios according to their scheduling needs. The Slot Regulation already allows airlines to exchange slots with other airlines. In many cases, this involves exchanging a slot at a valuable time of day for a junk slot, i.e. a slot late in the evening or in the early afternoon, which is not particularly useful. Following the trade, the junk slot, which was only acquired for trading purposes, is returned to the pool. Under the current Regulation, a transfer of slots is permitted only in a very limited number of cases.

27. The existing new entrant rule, which accords priority to airlines with only a few slots at a coordinated airport, has not yielded the desired results. Typically, the emergence of a strong competitor at a given airport requires it to build up a sustainable slot portfolio to allow it to compete effectively with the dominant carrier (usually the home carrier). 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.

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

28. The proposal contains a number of provisions to ensure that the slot allocation process is supported by a sufficient degree of transparency. This is important not only for airlines using slots, but also for public authorities responsible for regulatory functions. This becomes even more important in a system where slots can be traded among airlines.

29. 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. On the basis of progress made, the Commission could eventually propose, at a later stage, the creation of a European coordinator responsible for slot allocation at all European Union airports.

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

30. The proposal aims to make an important contribution to strengthening the management of the aviation network at European level by associating the European Network Manager with the slot allocation process. Thus, the Commission may

request a capacity analysis at an airport, should the network manager deem this necessary for ensuring coherence with the airport operational plan (already provided for in the regulation setting up the network manager). Such capacity analyses would be carried out in accordance with standards agreed at European level. Moreover, the Commission could make recommendations to the Member State on the capacity assessment if the network manager suggests that it does not fully take into account the needs of the European network. The objective of these recommendations would be to allow the Member State to take into account the European network perspective and increase awareness of the impact of airport capacity assessment upon the whole network, for instance in terms of delays.

31. The proposal also introduces a new category of airport: the airport belonging to a network. 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.

3.1.4. 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

32. To help ensure that existing capacity is used optimally, the proposal makes some changes to the criteria for the use of airport slots in order for grandfather rights to be granted. In order for airlines to be granted priority for the allocation of a given slot in the next corresponding scheduling season, they need to have used at least 85 % of the allocated series of slots (instead of 80 % at present).

33. In addition, the minimum series length (i.e. the minimum number of weekly slots required for priority allocation for the following corresponding season) is raised from 5 to 15 for the summer season and 10 for the winter season. Increasing the series length would reduce fragmentation of the slot structure at an airport, since short series attracting grandfather rights can prevent longer series being operated by other airlines. Exceptions are provided for certain types of traffic (charter) to take the characteristics of regional airports into account.

34. 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.

3.2. Provisions that remain unchanged

35. The following provisions are taken over without substantial modification from the current Regulation: Article 2(a), (b)(i), (e), (g), (k), (l), (o) and (p); Article 3 i, i, i and (6); Article 4 i second indent, and (5); Article 5(3)(a) and (d), and i, (5) and (6); Article 6(3)(a), (b) and (c); Article 8(1)(a)(i), (ii), (iii) and (v), and (c); Article 9(3), (6), i and (9); Article 10 i, (5)(a)(i) and (iii), and (c) and (d), and (6); Article 12; Article 13 i, second indent, (b) and (c), and (3), first and second indents; Article 16 i and (5); Article 19; Article 21 i; and Article 21 i.

3.3. Legal basis

Article 91 of the TFEU.

3.4. Subsidiarity principle

36. The subsidiarity principle applies insofar as the proposal does not fall under the exclusive competence of the Union. The objectives of the proposal cannot be sufficiently achieved by the Member States for the following reasons. The harmonisation of conditions for access to congested airports in the EU remains necessary to prevent barriers due to conflicting national practices. Therefore problems related to access to congested airports require a solution at European level.

37. The objective of ensuring the functioning of the internal aviation market by reducing obstacles to intra-EU trade arising from different national standards or practices could not be sufficiently achieved by Member States. Consequently, in line with the principle of subsidiarity and given the scale and effects of the problem, action is required at EU level.

38. 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.

39. Therefore, the proposal complies with the subsidiarity principle.

3.5. Proportionality principle

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

3.6. Choice of instruments

41. Proposed instrument: Regulation.

42. The legal instrument would have to be of general application. It contains a number of obligations that are directly applicable to airport coordinators, air carriers and to entities responsible for airport and airspace management in Europe together with the Commission. Therefore, the most appropriate legal instrument is a Regulation, since alternative options would not be sufficient to achieve the proposed objectives.

4. BUDGETARY IMPLICATIONS

43. The proposal has no implications for the EU budget.

5. OPTIONAL ELEMENTS

5.1. Simplification

44. The proposal provides for simplification of legislation, since it recasts the Slot Regulation to incorporate existing amendments to the Regulation and the amendments contained in the current proposal.

5.2. Repeal of existing legislation

45. Adoption of the proposal will lead to the repeal of the existing Slot Regulation.

5.3. European Economic Area

46. The proposed act concerns an EEA matter and should therefore extend to the European Economic Area.