Alex On… the incredible value of a Heathrow “slot-pair”

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This topic contains 10 replies, has 8 voices, and was last updated by  Swissdiver 5 Feb 2015
at 13:35
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Viewing 11 posts - 1 through 11 (of 11 total)

  • Anonymous

    AMcWhirter
    Participant

    We all know that take-off and landing slots at London Heathrow are some of the world’s most expensive.

    Indeed with slot pairs changing hands for millions, cash-strapped airlines using Heathrow have kept themselves afloat either by selling just a single slot-pair or by withdrawing from Heathrow altogther.

    Some foreign airlines have been willing to pay the going rate because almost all airlines (despite what they might say publicly) prefer Heathrow over any other London airport as that is where they can make the most money.

    In June 2014 it was reported that American Airlines paid Cyprus Airways US$31 million for a pair of midday slots.

    http://www.ttgdigital.com/news/airline-pays-almost-20m-for-heathrow-slots/4691851.article

    Now comes news that Scandinavian airline SAS has sold a slot-pair to “a major international airline” which will “generate a positive earnings impact of the equivalent of MUSD 60 million.”

    The slot-pair is available for use on and from March 29.

    One presumes that MUSD60 million represents US$60 million.

    The figure has been published today by SAS Investor Relations in Stockholm.

    If correct, the “positive earnings impact” must be a record for Heathrow.

    I wonder which airline has purchased it for use at the start of the summer timetable ?

    SAS Investor Relations Stock Exchange Release:

    http://mb.cision.com/Main/290/9712156/339589.pdf


    Gin&Tonic
    Participant

    Alex
    Is it only LHR where we have this ownership of slots, I have always found the selling and buying of slots totally bemusing, especially when you see the value they exchange for. Is this really in the best interest of the passengers, or is it more a case of having assets on the books for those who can afford them?


    BigDog.
    Participant

    Very interesting Alex, thanks.
    Being totally speculative, say a third LHR runway was approved thus increasing capacity by 25% (guess).
    – On what basis will this extra capacity be allocated?
    – What will be the cost of each slot? If there isn’t an auction then how is the market value assessed – clearly will vary according to time of day?
    – Are there terms eg similar to Freehold/permanent ownership or say 10 year lease.
    – Is it just HAL or are there additional parties (govt?) who benefit from the sale of new slots?

    Clearly new (as well as existing) LHR slots are a highly valuable asset so I guess there must be guidelines for their allocation.


    libertyscott
    Participant

    My guess is Vietnam Airlines, the timing parallels its shift from Gatwick.

    I could be wrong of course, and slot “assets” are a peculiar breed, given they only have value and exist due to continuous usage. Don’t use them and they go into the pool and get allocated for “free”. Of course, this rarely happens.


    AMcWhirter
    Participant

    Thank you for all your comments.

    By the way, it’s not Vietnam Airlines. According to the LHR media office, its slot allocation was allocated using NATS Strategic ACM tool (a device which can maximise airport capacity).

    http://mediacentre.heathrowairport.com/Press-releases/Heathrow-welcomes-Vietnam-Airlines-to-the-UK-s-only-hub-airport-a99.aspx


    pheighdough
    Participant

    Looking at the NATS website, I found this interesting article about how they ‘found’ a slot.

    http://nats.aero/blog/2015/01/big-data-and-managing-capacity/


    TimFitzgeraldTC
    Participant

    Very interesting Pheighdough

    My guess is it could be Emirates possibly getting the slot for $60m as they are desperate to get a 6th daily service to Dubai. Especially if it is a midday departure slot from LHR as that would fill a hole in there current schedule.


    sparkyflier
    Participant

    I suspect a slot for Vietnam Airlines was “found” to get one over Gatwick on their battle for another London runway, to “prove” that emerging market carriers would really prefer to fly into LHR rather than LGW.


    AMcWhirter
    Participant

    In fact US$60 million, although it would a record amount, is not a lot more expensive than what Continental Airlines paid for four pairs of LHR slots back in 2008.

    At the time, Buying Business Travel reported that Continental bought four slots from GB Airways (two slots), Air France and Alitalia (one slot from each) for US$209 million.

    So each of these slots averaged out at just over US$52 million.

    http://buyingbusinesstravel.com/news/055797-continental-pays-record-fees-heathrow-slots

    For that amount of money one suspects that it would be a long-haul, cash-rich airline.

    Perhaps one of the Gulfies ?


    Swissdiver
    Participant

    Fascinating topic. Thanks, Alex!

    So we could expect the Strategic ACM tool to favour newcomers (so these ones could well wait). If this is true, then it must be an airline already flying to LHR and that is indeed cash rich. So, yes, one of the Gulfies. But it could also be SV (I don’t know how full are their RUH and JED flights, but BA lately increased capacity to JED – B777 instead of B767) or Oman Air. And it could also be a Chinese Airline…

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