Select Committee on European Scrutiny Ninth Report


ALLOCATION OF SLOTS AT COMMUNITY AIRPORTS


(22519)
10288/01
COM(01) 335

Draft Regulation amending Council Regulation (EEC) No 95/93 on common rules for the allocation of slots at Community airports.
Legal base: Article 80 (2) EC; co-decision; qualified majority voting
Document originated: 20 June 2001
Forwarded to the Council: 22 June 2001
Deposited in Parliament: 10 July 2001
Department: Transport, Local Government and the Regions
Basis of consideration: EM of 20 July 2001
Previous Committee Report: None
To be discussed in Council: March 2002
Committee's assessment: Politically important
Committee's decision: Not cleared; further information requested

Background

  6.1  Council Regulation No. 95/93[20] regulates the allocation of slots at Community airports with the aim of introducing an efficient distribution of slots in a transparent and open manner. In accordance with the Regulation's provision for an ongoing review, the Commission entered into a consultation process with the industry and third parties and reports were also commissioned from various sources.[21] Both the reports and the consultation concluded that there were many shortcomings in the Regulation and that substantial modifications were required. Three main difficulties were identified.

  6.2  First, the position of new entrants vis-a vis incumbents is inequitable: the current system of allocating slots is based on "grandfather rights" or slots founded on historical precedence.[22] Consequently not only do incumbents have a built-in advantage, but when they have spare slots, instead of releasing them into the pool for distribution to other carriers, they tend to keep them as a guarantee for maintaining their number of future slots. These rules therefore encourage inefficiency and inflexibility.

  6.3  Secondly, there is lack of clarity, in particular legal clarity, within the Regulation, which has resulted in differing legal interpretation in the courts of Member States.[23] There have also been problems with the legal nature of the slots. Whereas some airlines argue that slots are part of their property assets, airports believe that slots are an inherent part of their infrastructure and should therefore be construed as part of their property rights.

  6.4  Thirdly, the consultation and the reports revealed that the Regulation did little to promote competitive behaviour in the allocation of slots.

  6.5  The Commission has therefore embarked on a two-stage process to revise the Regulation. The initial stage seeks to introduce 'technical' modifications into the Regulation in order to address the problems of inefficiency and lack of competition; the later stage will be concerned with the introduction of specific market-access mechanisms.

The document

  6.6  The Government's Explanatory Memorandum states that the objectives of the technical measures are to:

"—  Clarify the legal nature of slots. There is currently no clear legal guidance about who owns slots. The Commission proposes that slots should be considered as entitlements to use the airport infrastructure for the purpose of landing and take-off at specific times of the day during a scheduling season. These entitlements have to be used by airlines according to specific rules otherwise they return to the pool for reallocation, the "use-it-or-lose-it" principle;

"—  Promote efficient slot allocation through the introduction of rules and procedures. The Commission proposes clear rules on methods and procedures to better define airport capacity and provide for transparent, neutral procedures of consultation and mediation with airport users, air traffic controllers and airports.

"—  Encourage the efficient use of slots. The proposal aims to reduce congestion at European airports through tight monitoring, sanctions against abusive practices, and incentives for airlines to use their slot portfolios efficiently through exchanges and re-timing possibilities of slots, as well as through better access to routes serving intra-Community routes and specifically the regions;

"—  Enhance competition between incumbent carriers and new entrants. The Commission hopes to ensure that there is a balance between incumbents and new entrants, providing that unused slots return to the pool where new entrants get first choice of up to 50%, while at the same time confirming the world-wide practice of grandfather rights; and

"—  provide for a stable environment for hub and spoke networks while promoting services to the regions as well as a stronger link to inter-modal transport."

The Government's view

  6.7  The Parliamentary Under-Secretary of State at the Department for Transport, Local Government and the Regions, David Jamieson, in his Explanatory Memorandum of 20 July 2001 expresses considerable doubts about the proposals. He states:

"The Government believes that implementation of the Commission's proposals in their present form could have the effect of 'glueing up' the slot system, preventing airlines from seeking to improve and modify the slots that they are allocated. As a consequence, many will argue that these proposals are more than a 'technical updating'. Firstly the proposal would outlaw the current grey market in slot trading between airlines. The exchange by airlines of a commercially attractive slot for an unattractive one (which is returned to the pool) plus cash has been a major way by which airlines have been able to develop their operating schedules so as to best meet customer needs. Secondly, the proposal seeks to change priorities whereby new entrants would have first refusal on unused slots in the pool rather than them being first made available for retimings of existing slots. This could again make it more difficult for airlines to modify operating schedules.

"The proposals remove the provision in the existing regulation which allows for slots to be reserved for regional services. The new proposals do, however, acknowledge the possibility of reserving a number of slots to meet public service obligations. The definition of new entrant has been widened in order to allow any carrier, whatever its presence at the airport, to be considered as a new entrant and obtain up to four slots a day if it intends to operate a direct scheduled service to a regional airport where no other air carrier is operating on that route on that day.

"The Commission intends to conduct a thorough analysis of the options for future market mechanisms including trading and auctions. It acknowledges that this review will have to address competition, economic, international and environmental aspects. However, by proposing to make these changes now and then review the situation in 3 years, more fundamental change would seem even further away. This view is supported by the fact that these 'interim' measures are in the opposite direction to a move towards market-based mechanisms."

Conclusion

  6.8  Reform of the system of allocating and re-allocating slots at EU airports is clearly needed, and the objectives, set out in paragraph 6.6 above, are worthwhile ones. However, we note the many concerns which the Government has, including removal of the provision allowing slots to be reserved for regional services and the possibility that these interim changes may in practice delay fundamental reform. We understand that the proposal is unlikely to be discussed before the Barcelona European Council in March 2002. In the meantime we ask the Minister to provide us with:

  • information on the outcome of the consultation being undertaken with interested third parties;

  • a regulatory impact assessment; and

  • a list of measures which the UK will be advocating to improve the proposal.

  6.9  We do not clear the document.


20  OJ No. L 14, 22.1.93, p.1. Back

21  Coopers and Lybrand in 1995 and Price Waterhouse Coopers in 2000. Back

22  This means that an air carrier needs to show that it has operated its slots for at least 80% of the time during the period for which the slots have been allocated in order to be permitted to have the same series of slots in the next equivalent period.  Back

23  The High Court observed on 25 March 1999, in R v Airport Coordination Limited ex parte The States of Guernsey Board of Transport, that the sections of the Regulation dealing with transfers and exchanges were opaque. Back


 
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