Aigle Azur : the battle of airport slots (L’Opinion)

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*** Local Caption *** La compagnie Aigle Azur cherche des repreneurs

As the future of Aigle Azur’s 1,150 employees is at stake, another strategic battle is unfolding in the background : the access to airport slots. If Aigle Azur goes bankrupt, no less than 10,000 slots will be available in Orly airport. This is the first time since the Air Lib bankruptcy in 2003.
A slot represents a right to take off or land at an airport at a certain time. At most airports, the allocation of this right is not an issue, given the low number of flights operated each day. But this is not the case for large congested platforms such as Frankfurt, London Heathrow, Roissy CDG or Orly: the supply of slots is lower than demand, particularly during peak hours. In Orly, the number of slots is capped for noise nuisance reasons at 250,000 since a 1994 decree and few slots are available.
Faced with this shortage, a planning system has been set up, entrusted to a regulator : its mission is to allocate slots from one season to another in a transparent manner and in accordance with three rules.

First rule: that of the “grandfather’s right”. A company that has operated a slot may claim to keep it for the following period. This rule confers an advantage on the incumbent companies.
The second rule is the 80/20 principle : any slot allocated must be at least 80% used by the holder, otherwise it will fall back into the common pot.

Third rule, the 50/50 principle : if slots become available, the coordinator allocates half of them to new entrants, defined as companies with less than 5% of the slots.

The strategy of an insider is therefore not to lose a single slot in order to limit the development of its competitors. For new entrants, the only way to enter a congested airport is to buy a competitor: easyJet entered Gatwick by taking control of GB Airways in 2007.
This shortage management system has led to proposals for reform at European level: strengthening the rule for the use of slots according to a 90/10 ratio ; increasing the number of movements through productivity gains on runways; regular delivery of a percentage of slots to the common pool, slot auctions, etc. However, these proposals were never successful, given the risks of destabilisation for incumbents faced with the rapid surge of low-cost airlines.
In the case of Orly, the low-cost threat is all the more daunting as this airport enjoys a privileged geographical location, at the gateway to Paris, the second largest tourist destination in Europe after London. Its positioning on short- and medium-haul flights makes it an ideal airport for low-cost flights, which are point-to-point : they do not have to bear the specific constraints of large platforms such as Roissy, which handles long-haul and connecting flights ; rotations can therefore be faster there, which is the key to profitability in the airline industry.
It is in Orly that tomorrow the real battle of low cost will take place in Paris. A battle between the historical company, with its low-cost subsidiary Transavia and competitors as formidable as easyJet, Vueling, French Bee or Norwegian and why not… Ryanair, which currently operates in Beauvais.

Emmanuel Combe is Vice-President of the Competition Authority, Professor at Skema Business School.

 

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