Sunday Times reports “BA cancels flights to tighten grip on privileged Heathrow position” by slot use
The Sunday Times reports that British Airways has admitted it plays the system at Heathrow by “tactically cancelling” flights so it can hang on to lucrative landing slots without needing to fly more planes. BA has about 50% of Heathrow’s take-off and landing slots, and it could have 53% by next summer. It has done successive deals to obtain more slots, such as its 2012 takeover of BMI, and getting 11 pairs of slots following the closure of Virgin Atlantic’s Little Red service to regional airports, and the collapse of Russian carrier Transaero. Most of these slots had been mandated for use on UK routes, as part of a European competition ruling on the BMI takeover.But BA can now use them as it wants, after the failure of the two rival airlines. In the rules that govern how landing slots are used, airlines have to use them 80% of the time or lose them to another airline. Airlines that owns lots, which can be valued up to £40 million, are not keen to lose them. BA is using “tactical cancellations” across their network, so they can keep the 80% rule,without much overall increase in capacity. BA cancelled a daily Heathrow flight to New York, and some short-haul routes and will launch new routes, mainly to leisure destinations in Europe. While BA’s tactics are within the rules, they raise questions about whether Heathrow’s runway capacity is being used effectively.
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BA cancels flights to tighten grip on privileged Heathrow position
By John Collingridge (Sunday Times)
20 December 2015
BRITISH AIRWAYS has admitted it plays the system at Heathrow by “tactically cancelling” flights so it can hang on to lucrative runway slots without having to fly more planes.
The carrier, owned by International Airlines Group (IAG), has been gradually strengthening its dominant position at the London hub through deals such as its 2012 takeover of BMI. By next summer it will have almost 53% of the take-off and landing slots at Heathrow, one of the world’s busiest airports.
BA recently acquired another 11 pairs of slots following the closure of Virgin Atlantic’s Little Red domestic service and the collapse of Russian carrier Transaero. Most of these slots had been mandated for use on UK routes, as part of a European competition ruling on the BMI takeover. However, BA is now free to use them as it wishes after the failure of the two rival carriers.
Under the rules that govern runway slots, airlines are obliged to use them 80% of the time or lose them to another carrier. With slot pairs at Heathrow changing hands for as much as £40m, BA is reluctant to let them go.
Willie Walsh, the boss of IAG, recently told analysts: “The [Little Red] slots have reverted to us and we are required to use them or lose them. So we’ve increased some domestic capacity but we are looking at tactical cancellations across the network to operate within the 80: 20 rule so as to minimise the overall increase in capacity.”
During the summer BA quietly cancelled a daily round-trip between Heathrow and New York plus a clutch of short-haul routes. In the spring it will launch new routes, mainly to leisure destinations in Europe, and Walsh said that, by using the “same sort of criteria”, it would only slightly increase short-haul capacity.
While BA’s tactics are within the rules, they raise questions about whether Heathrow’s runway capacity is being used effectively.
This month the government delayed a decision on whether to build a third runway at Heathrow — which Walsh has labelled a “monopoly airport” trying to build a “gold-plated” runway.
Asked about the chief executive’s comments to analysts, a spokeswoman for BA said: “I’m not going to expand on what Willie said.”
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full Sunday Times story at
http://www.thesundaytimes.co.uk/sto/business/Industry/article1647355.ece
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See also:
Heathrow slots that should be ‘ring fenced’ for Scottish flights redeployed for leisure routes to Spain, Italy & France
Simon Calder reports that precious landing slots at Heathrow that had been “ring fenced” for Scottish routes are being redeployed by British Airways to open new routes to Spain, Italy and France – leaving Scotland with one million fewer seats a year. When BA bought BMI, it was forced to hand 9 daily slot pairs specifically for use on routes connecting Heathrow with Edinburgh and Aberdeen. The so-called “remedy slots” had been used by BMI to operate flights from Heathrow to Scotland, and were taken up by Virgin Atlantic, which ran them for 2 years as “Little Red”. But last month Virgin scrapped Little Red. Therefore the slots revert to BA, which is using them to launch routes to Menorca, Biarritz and Palermo (starting next spring) – as opposed to the “emerging markets” in Asia, Africa and Latin America that are often cited in support of a 3rd runway at Heathrow. There will also be increases in the number of departures to long-established destinations such as Berlin, Stockholm and Venice. ie more holiday destinations. If another contender were to come forward for the “remedy slots”, BA would be obliged to hand them over. It is difficult to see, though, an airline that could make a success where Virgin Atlantic failed.
British Airways adds more Heathrow leisure routes – Olbia, Kos, Corfu – to the existing list
Heathrow airport makes a lot of how important its flights to emerging economies are, and how limited its slots are for this. So it would be logical to imagine that spare slots would be used for just this sort of flight. Heathrow is keen on making statements like: “The UK will fall behind in the global race if it cannot connect to growing economies.” And “Global air transport provides access for our key industries to established and emerging new markets, which will help deliver economic growth across the UK.” So one might expect that, if spare slots come up, they would immediately be used for these long haul destination, to emerging economies. However, Heathrow will now be getting new British Airways flights to … guess where? Olbia in Sardinia; Kos and Corfu in Greece and Split in Croatia from summer 2015. And these will use Airbus A319s and A320s. To be fair, it is moving its Las Palmas flights to Gatwick. Other purely holiday destinations Heathrow offers in the Med are Mykonos and Santorini, which started earlier this year. There are also Pisa and Porto. And the Heathrow destination map includes many, many more … Ibiza, Nice, Tunis, Malta, Malaga….
BA uses its new BMI slots at Heathrow, not for emerging economies, but largely leisure destinations. As usual.
BA got 42 daily Heathrow slots from taking over BMI. And it said very publicly, in March, that it would be using these to fly to the emerging economies – in Asia, Africa and Latin America – which is part of the myth that the aviation industry is peddling at present. So what are the slots actually being used for? One flight per day to Seoul. The rest are domestic UK (Aberdeen Edinburgh, Belfast, Manchester, Leeds Bradford), or Zagreb, Las Vegas, Barcelona, Marseilles, Phoenix, Zurich and Bologna – with more flights to some. So that is where the money is. So much for the allegedly desperate need for slots to fly to second tier Chinese cities. This really proves what a lot of misleading PR is being put out by BAA and the airlines at Heathrow.
https://www.airportwatch.org.uk/2012/06/slots
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A long article by CAPA on Heathrow’s slots, in 2013:
Heathrow Airport’s slot machine: hitting the jackpot again?
British Airways now holds more than 50% of the slots at capacity-constrained Heathrow, thanks to its bmi acquisition. Nevertheless, BA had managed to grow its holding for years, mainly due to secondary slot trading. After years of uncertainty over its legality in EU law, the EU clarified its position in 2008 and allowed the practice. It went on to commission a 2011 study which concluded that slot trading had clear beneficial impacts at Heathrow.
In this report, CAPA analyses the small proportion of the total number of Heathrow slot trades where slot values have been reported in the media and elsewhere. For many years until the mid 2000s, the average traded value per daily slot pair calculated from such transactions was around GBP4 million. A series of trades at more than GBP20 million per pair captured headlines in 2007 and 2008 before the market went underground. Surprisingly, after such a long quiet period, 2013 has seen two deals valuing Heathrow slots at GBP15 million per daily pair.
BA’s Heathrow slot holding is above 50% for the first time, thanks to bmi
British Airways is the biggest holder of slots at London Heathrow Airport, with 50.6% of the total for the summer 2013 schedule. This is the first summer season for which BA has held more than half of the slots (although it had 52.8% in the winter 2012 schedule) and its increase from 44.1% in summer 2012 is due to the acquisition of bmi. The significant growth in Virgin Atlantic’s share is mainly due to the slot divestment for domestic services following BA’s takeover of bmi.
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and it continues with a lot of interesting detail, graphs and charts ….
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