[Johnnyg]

Having read this week that BA slots at LHR were worth approximately £2 billion pounds, it got me wondering how did slot sales come about, what year and what was the logic behind it etc.

Surely it would have been a better longer term income stream if the slots were leased out to airlines. Or is that just too simplistic?

[transtraxman]

The answer to your question is in the title of the thread. If you look at the history of aviation you have to look at 50, 60 and 70 years ago. The big airports, where there is now a shortage of slots, tended to be the main entry points to a country, and still are. Heathrow, Schiphol, Frankfurt and Paris where Orly was linked with Le Bourget whose passenger traffic was transfered to the newer Charles-de-Gaulle.

For those who remember those years the inter European flights were dominated by the flag carriers of each nation. The flights from country to country were pooled so that the total flights e.g.from the UK to Switzerland (LHR to Zurich, Geneva and Basel) were split evenly and the revenues were shared. The published timetables of the period illustrate this quite clearly.

Thus the airlines acquired take-off and landing times (slots) to suit them. With the increase in traffic in the 70s the British government tried to move airlines and flights from Heathrow to Gatwick. The newborn British Airways reluctantly agreed as long as it did not lose out. AS ALL the foreign airlines refused because of the excellent transfer possibilities at Heathrow then the proposal fell flat on its face. That is when the, now so called, “grandfather” rights were established and accepted. The airlines which had been flying into and out of Heathrow for xxxyears at a certain time maintained that right (slot).

And it grewed and it grewed till today´s situation in which Heathrow is effectively full. Thus the law of supply and demand makes these slots very, and ever more so, valuable. In time the same system was adopted at the other airports.

Quite frankly leasing out the slots sounds like a good idea. It would mean a steady income for ……whom?? I see that it would be most difficult to convince the airlines to change the system. They would lose out because of loss of ownership of the slots. Also such a change would introduce a large measure of instability into the system which I do not think anybody would like. It would be a difficult problem to solve.

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Johnnyg

[Johnnyg]

Thanks for the explanation transtraxman, when I mentioned leasing the slots I meant originally, not now. The airport would have received the funds. I was not aware of the grandfather rights. Just imagine how much LHR would be receiving annually.

[AMcWhirter]

[quote quote=994219]Having read this week that BA slots at LHR were worth approximately £2 billion pounds[/quote]

Where did you read that JohnnyG ?

Aren’t BA’s slots more valuable ?

Consider that WY paid KQ US$75 million for a *single* peak hour slot and that SK has been selling a number of its LHR slots for around US$25 million reach.

SAS sells more Heathrow slots for $75 million

NZ has just sold its single LHR slot for a reported US$27 million.

Air New Zealand sells Heathrow slot

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ASK1945

[mscldrew]

Worth is relative… The slots only have value because of scarcity and how infrequently they come on market. You can’t base their true worth in what a handful of pairs change hands for a year.

The problem with having a ‘value’ for slots on the books and using it to borrow against, calculate total assets held or equity to debt ratio is that value will swing wildly with only small shifts in supply or demand.

So an average of 3 or 4 slots have become available the last decade. If the current situation causes bankruptcies or withdrawals, a dozen or more slots become available in a fire sale, demand softens and no company has the liquid assets to buy them. That 2 billion could become million.

[Author]

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