Airport slots are essential for operating an airline and can be highly valuable. For many airlines, slots are vital assets, both from an operational and financial perspective. But what makes them useful? Why do slots at some airports cost more than elsewhere? Is it just a set price. This blog will give you the necessary information about it.
What exactly is an airport slot? Slots can be described as permission granted to a specific airline by the airport operator. This guarantees the airline the permission to take off and land at the airport during a specified time.
Without a slot, an airline can have the best planes and pilots in the world, but they can’t access the airport. Of course, aircraft lands and takes-off, so you don’t just need one slot, you need two. This is called a slot pair. Slot pairs are tradeable, highly desirable, and can be wickedly expensive.
In 2016, Oman Air broke both the Heathrow and world record price for a slot pair. Oman Air paid US$75 million for the right to land at Heathrow, including snagging a coveted early-morning arrival slot. In contrast, Air New Zealand picked up a small US$27 million for its slot pair when it exited Heathrow last year. However, Air New Zealand’s slot pair allowed for a mid-morning arrival and mid-afternoon departure – outside the peak times at Heathrow.
According to aviation consultants, IBA Aviation, six criteria determine a slot pair’s value at any airport. They are how busy the airport is, or constraint level, what the general economic environment is like, what time of the day you want to arrive and depart, how often you wish to use the slots, how quickly you can turn around your plane, and whether there are significant seasonal differences at the particular airport.
Busy airports are usually slot constrained.
A runway can only handle some aircraft movements per hour. Advances in air traffic control management can increase this, but only incrementally. Suppose an airport has more than one runway. In that case, that will open up more slot availability, mainly if simultaneous arrival and departures can occur at that airport.
Airport curfews, if any, will impact slot availability. Curfews automatically reduce the number of slots available in any 24 hours. Congestion at the airport and on the ground infrastructure will also impact slot availability. It’s not viable to land 40 planes an hour if the airport can only park and process 20 planes an hour.
These factors will impact the availability of slots at any airport, and the level of slot availability has a significant impact on the price paid for slots by airlines.
What time the slots are needed impacts the price
Airports have peak times, usually around breakfast time and in the early evening. If an airline wants a slot in peak time, they’ll usually pay more – as Oman Airlines found out at Heathrow.
Conversely, if you are happy to take slots mid-afternoon or mid-morning, as Air New Zealand did, they are worthless. If you are prepared to take midnight or early hours of the morning slots, you’ll pay even less.
Your customer base will have some influence here. Suppose you are a commuter airline catering to corporate traffic flying between cities on day trips. In that case, you’ll generally need peak time flights. A once-daily long-haul airline like Air New Zealand doesn’t necessarily need to depart at six o’clock in the evening.
How frequently airlines need the slots is also relevant to price.
If an airline only flies to an airport three times a week, they’d pay less than an airline using the matching slot pair who flies in daily. Lots of smaller airlines don’t fly routes every day. Some only fly a route once a week. Japan’s Narita Airport is notoriously busy, but Air Niugini was only sending up one flight a week earlier in 2019. They’d pay significantly less than an airline who wanted that slot seven days a week.
How quickly the plane can turn around
Getting an aircraft in and out of an airport quickly frees up space for another plane. It doesn’t directly add to slot availability. Still, a quick turnaround adds to airport efficiency. It can filter through to the amount of landing and departures an airport can offer and, ultimately, slot prices.
Smaller planes with fewer passengers and low-cost carriers that have fast turn arounds down to a fine art may benefit financially from getting in and out of an airport within the hour.
Bigger planes belonging to long-haul airlines are less agile when it comes to turnarounds. An A380 will take up more space at the airport, spend more time on the ground, and suck up more resources than a Dash 8 belonging to a regional airline. That’s also something that will impact the final price for a slot pair.
Seasonal variations matter
Finally, some airports are highly seasonal. They do the bulk of their business over a certain period. London’s airports get busier over the summer. Airports around ski resorts pick up business in winter. Caribbean airports do well when it’s winter in North America.
Some airlines, mainly leisure and charter airlines, only want to fly to specific destinations in peak seasons. They don’t want to fly in over the off-season. That strategy will impact the final price paid for a slot pair. Suppose an airport is at capacity over the peak season and half-empty over the off-season. In that case, they’ll price accordingly to attract more traffic during the off-season.
The buying and selling of airport slots is a highly sophisticated business. But the forces that determine the price are relatively straightforward. Ultimately, simple market forces have a significant role to play. Prices will be more for peak times and premium airports. Costs will be less for off-peak times and fewer premium airports. Still, there’s no such thing as a cheap airport slot. However, nobody ever said running an airline was an inexpensive business.