By Doug Cameron 

Rapid growth in global air travel is prompting airlines and airport operators to shake up a decades-old system for allocating takeoff and landing slots at some of the world's busiest airfields.

Global airline traffic is set to double over the next 15 years, according to the trade group International Air Transport Association. That will pose a huge challenge to an industry already struggling to funnel passengers through more than 200 airports world-wide that are operating at full capacity, including New York's John F. Kennedy International and London's Heathrow.

Only a handful of countries, notably China, are building new gateways in significant numbers.

To better manage existing runway and gate capacity around the world, IATA in June announced changes that give airports more influence in its longstanding Worldwide Slot Guidelines system. Airlines and airports will now have an equal say in how slots are distributed, with tougher oversight of the use-it-or-lose-it rules that allow airlines to hang on to access for years.

Previously, airlines submitted bids between themselves for the slots, which were then distributed by independent coordinators at each airport or by government regulators. In a few cases, such as at Heathrow, airlines were able to buy and sell slots.

Giving airports a formal role in the process alongside airlines should provide more options to fliers as newer entrants secure access to popular airports, especially the emerging breed of low-cost long-haul airlines, such as Norwegian Air Shuttle and Malaysia's AirAsia X Bhd. Airports, unlike airlines with existing slot holdings, have an incentive to reserve space for carriers willing to open new routes or use larger planes. This will increase the number of passengers flowing through and allow airports to introduce factors in the allocation process, such as the environmental impact of each flight.

Airlines and airports reached the deal in part because of concerns governments could start to sell slots. The Federal Aviation Administration dropped a plan in 2008 to auction slots at New York-area airports after a legal challenge from airlines. The U.K. government also this year floated the idea of potentially selling access at Heathrow.

The revised IATA slot guidelines don't specify who actually owns slots. Airlines and airports continue to lobby against any effort by governments to start sales.

"Auctions benefit airlines with the deepest pockets," IATA Director General Alexandre de Juniac said at the group's annual meeting.

The existing system has allowed some airlines to build fiefs at congested airports, making it tough for new entrants. British Airways and alliance partner American Airlines Group Inc. control 55% of the daily slots at Heathrow, the world's busiest international airport by passengers.

"It's very tough for us to get slots," said JetBlue Airways Corp. Chief Executive Robin Hayes, who wants to start flights to Europe in 2021. JetBlue is lobbying regulators to give it access to Heathrow and Amsterdam's Schiphol airport, which, like most of Europe's big hubs, is effectively full.

For decades, airlines have largely divided runway access between themselves at twice-yearly meetings run by IATA. A slot gives them the right to take off or land at a particular time as well as access to airport facilities. As long as they use them, airlines are typically granted the right to use gates continually, leaving little room for new entrants.

Matt Cornelius, executive vice president at the North American branch of Airports Council International, a trade group, said the system leads carriers to hang on to slots they aren't using regularly. Some operate smaller planes to spread flying across their slots, he said, or even keep unprofitable flights to block competitors from entering the market.

Heathrow's rich mix of business passengers has made its runways the industry's priciest real estate. Continental Airlines, now part of United Airlines Holding Inc., paid a then-record GBP104 million ($130 million) for four pairs of slots in 2008. Oman Air in 2016 paid $75 million for a single pair.

JetBlue would like regulators to consider handing over slots that British Airways is due to receive back next year, having given them up in 2010 as part of the regulatory approval of its alliance with American. Three of the four slot pairs are currently leased to Delta Air Lines Inc.

The IATA slot system is used at a small number of U.S. airports under the oversight of the FAA, which divides up access at JFK, LaGuardia and Ronald Reagan Washington National. The agency also monitors access at Chicago O'Hare International, Los Angeles International, Newark Liberty International and San Francisco International.

U.S. airlines have swapped slots among themselves for years, and regulators have required some carriers to give up slots at congested airports as part of merger approvals.

American airports expect the FAA to adopt the principles of the new global guidelines, resulting in a more efficient use of runways and terminals. The FAA currently focuses on dividing up slots to match capacity on air routes between airports, rather than the actual room at each hub. As the skies have become more crowded, the FAA has left the number of available slots at airports largely unchanged, even as some such as O'Hare and JFK have expanded their runway capacity.

"The number of slots hasn't gone up, even with runway improvements," said Mr. Cornelius.

Write to Doug Cameron at doug.cameron@wsj.com

 

(END) Dow Jones Newswires

July 06, 2019 05:44 ET (09:44 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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