Amendments to EU Slot Regulation casts struggling airlines a lifeline.

On 15 February 2021, the EU adopted an amendment to the ‘Slot Regulation’ (the Regulation) tempering the so-called ‘use it or lose it’ rule.  Slots are essential for airlines at congested or coordinated airports (those where demand exceeds capacity). Without a slot, airlines cannot operate to or from those airports. The number of slots at those airports is limited and therefore demand exceeds capacity, which creates entry barriers. To ensure that the aviation sector remains competitive, with benefits for EU consumers, it is therefore important that slots are allocated in a non-discriminatory manner to the airlines that make the best use of them. The provisions of the Regulation aim to strike a balance between giving airlines the stability they need to run their operations and, ensuring unused slots are made available to competitors or new entrants.  Under the general EU airport slot requirements, airlines must use at least 80% of their take-off and landing slots to be allowed to keep them the following year. The intention is to promote competition within the industry and ensure a fair deal for the consumer.  It prevents larger airlines taking slots, not using them, and by doing so reducing choice and capacity within the industry as well as forcing up ticket prices.

Covid 19 impact

The sudden emergence of the Covid 19 pandemic in early 2020, and the many travel bans, and restrictions related to it, rendered the Regulation’s 80% requirement unworkable.  Fulfilling the 80% requirement would have forced airlines to operate ‘ghost flights’ with no passengers and, no associated income stream.  The cost of this would have resulted in probable bankruptcy for many, and near destruction of the passenger airline industry .  Additionally, the adverse environmental impact of ‘ghost flights’ would have been significant.   In recognition of these factors, in March 2020 the EU opted to completely waive the Regulation for the summer 2020 season.  Secondary legislation was then enacted to extend the full waiver to cover winter 2020/2021.  Originally it was hoped that by the start of the summer 2021 season the pandemic would be under control and airline traffic would return to normal levels allowing for a return to the usual 80% usage requirement.  However, with Eurocontrol figures indicating a continued 74% year on year fall in air traffic from June 2020,  vaccines not readily available to all, and the epidemiological forecasts still uncertain, ‘normality’ seems to be a distant concept.  In view of this, whilst the EU is keen to take initial measures to relaunch the airline industry and encourage competition, it recognises that some flexibility on slot usage is still required.

Amendment to the Slot Regulation

The principal features of the amendment are:

  1. The amendment allows airlines to benefit from a full waiver for slot series returned before a certain date (8 days after publication of the amendment).
  2. In general, the number of slots that can be returned is limited to 50% of the slots that an airline holds at a particular airport.
  3. The possibility to hand back 50% of the entire slot series only applies to summer 2021. However, airlines will have to return any slot they do not intend to use, no less than three weeks before the planned flight, so that other airlines have the possibility to take up this unused capacity.
  4. An exception to point 2. is made for airlines with limited operations at an airport.  These may  return all their slots.  Both EU and non-EU airlines may benefit from this provision.
  5. An airline must use 50% (rather than 80%) of their remaining slots to retain its right to them in future years. An exception may be made if the route is affected by measures adopted in the context of the Covid 19 pandemic.

Future extensions

The Commission has been empowered to adopt delegated acts for one year in relation to the amendment.  This will allow it to extend the scheme through the next winter and next summer travel seasons if it believes such extension to be necessary.  The three-week rule referred to in point 3. above will also apply in this circumstance.   Additionally, the Commission has been granted flexibility to alter the 50% slot usage requirement within the range 30-70%.  This will allow it to adjust the scheme in accordance with actual and forecast travel data as well as other indicators including those relating to the spread of the pandemic.

Reactions

The EU Council, Parliament and Commission have acted swiftly in adopting the amendment to give the industry a stable legal framework to plan operations for the coming seasons. The new rules will be in place in time for the start of the 2021 summer season on 28 March 2021.   Airlines for Europe (A4E), except for Ryan Air, have welcomed the new legislation although it falls short of its request for full alignment of the EU’s proposal with the Worldwide Airport Slot Board’s recommendations (WASB). A4E  has stressed that since there are minor differences with WASB it is vital that the European Commission ensures EU carriers are eligible for relief in important markets such as China, Japan and the United States. Ryan Air, however, strongly objects to any form of slot relief on the grounds that it allows airlines to ‘squat’ on slots that airlines such as itself could utilize.  It, therefore, argues that the EU is in fact stifling competition at the expense of consumers.

Assessment

Whilst Ryan Air may well have a point in respect of certain slots and routes, to apply a no assistance approach across all slots would most likely result in the financial collapse of many existing operators. Thus the ‘competitive’ approach advocated could ultimately result in a lack of competition within the industry and less choice for the consumer.  This would be disastrous for countries, such as Cyprus, which are heavily reliant on the tourist industry.  Indeed, the lack of flights in 2020 coupled with Covid measures not only reduced Cyprus’ visitors to 20% of their 2019 levels they also had a dramatic impact on the transport of mail and other cargo into and out of the country.  The amended Regulation should at least allow for some restoration of flights and enable the islands feeder airlines and European airlines in general to stay in business with a view to a return to normality in 2022.

This three-week rule will also apply if the measures are extended by delegated acts. The rules on handing back slots are an example of the measures to start relaunching the industry and encourage competition that are included in the regulation.

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