London Heathrow Landing Slots

Posted on 3/25/202222.08.2017by admin

A landing slot, takeoff slot, or airport slot is a permission granted by the owner of an airport designated as Level 3 (Coordinated Airport), which allows the grantee to schedule a landing. UK Aviation News reports that JetBlue has secured London Heathrow slots for it planned new London service starting in 2021. Report: JetBlue Secures Slots, Will Serve London Heathrow In April 2019, JetBlue announced it intended to serve London (and eventually additional destinations in Europe) using Airbus A321XLR aircraft.

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Whilst the cost of landing at Heathrow is determined by the CAA and Heathrow Airport Holdings, the allocation of landing slots to airlines is carried out by Airport Co-ordination Limited (ACL). Until 2008, air traffic between Heathrow and the United States was strictly governed by the countries' bilateral Bermuda II. To clarify, there are strict rules governing the allocation of landing slots at airports such as Heathrow, which are the responsibility of an independent slot co-ordinator, and it is therefore not. Take-off and landing slots at London’s Heathrow airport. These mysterious entities dictate just about everything we do as an airline and determine the timings of every one of your flights. To find out more we spoke to a world expert on airline slots. Fortunately, we didn't have to go far, he works right here at Virgin Atlantic.

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Imagine this. You’re sitting on a plane at a congested airport hub when the pilot announces “We’ve missed our slot,” which in turn leads to a delay until air traffic control is able to facilitate a departure outside of the original slot time. If you travel frequently, sure enough you’ve been there.

But why does it happen? Simply put, it’s because commercial airline jets are unable to depart or arrive as and when they please. Instead, most airports — specifically hub airports — divide up 24 hours’ worth of departures and arrivals into a grid of slots. If a slot is obtained by an airline, it’s a guarantee that it may operate a flight on a certain day and time, at a certain frequency level (i.e daily, weekly), for as long as the airline owns the slot.

Each airport slot pair (one for departure, one for arrival) grants the airline full use of runways terminals, taxiways, gates and all other airport infrastructure necessary to.

There is some leniency in the strictness of ‘sticking to your slot’, however. For example, while an airline may have a slot for 14:05, there’s a little breathing room for delays or early arrivals. That’s because slots are less about controlling the punctuality of airlines at the airport, and more about ensuring they control the number of flights operating to or from the airport over the course of an entire day.

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How Are Slots Determined?

Slot allocation in the UK is governed by the EU Airport Slot Regulation, which came into force in the early 1990s and still stands today. The most valuable airport slots in the UK — and, in fact, some of the most valuable in the world — are at London’s Heathrow Airport (LHR). Heathrow is one of the busiest airports in the world, with global flight connections, terminals dedicated to major alliances and, of course, the main airport serving what many regard as one of the greatest cities in the world.

With Heathrow operating at almost 100% capacity, it’s incredibly tough for any airline to attempt to obtain a slot. And without a slot, it’s impossible to launch a flight to or from the airport.

Since the UK High Court ruled over a slot deal between British Airways and KLM in 1999, Heathrow slots are able to be resold on the secondary market. An airline purchasing one slot from another airline is, in theory, not a financial trade, but an exchange of one slot for another with a fee on the side. Airlines are also able to sell to ‘outsiders’ (an airline that has never operated to Heathrow before), but this tends to be on a lease basis, rather than an outright sale.

But is purchasing an airport slot a simple shopping experience for the airlines? Far from it. In fact, it’s one of the most fiercely competitive, secretive and difficult purchases an airline will ever make. If successful in securing a slot, a standard evening slot-pair at Heathrow can often be one of the largest assets of an airlines’ balance sheet.

How Much Are Slots Worth?

The value of each slot pair varies considerably by time of day. Around 10 years ago, an early morning slot pair (i.e., an arriving red-eye JFK-LHR flight, departing back to JFK a few hours later) was reported to be worth around £15 million. By midday, the value of slots would fall to around £10 million, and then drop again to £5 million in the evening. However, in a competitive European market, and with Heathrow more capacity-constrained than it’s ever been, the price airlines will pay for slots is skyrocketing.

While it’s kept mostly hush-hush, a leaked document revealed Oman Air set a record by paying £58 million for a pair of take-off and landing slots at Heathrow in early 2016. The Gulf carrier is understood to have bought the pair, which includes a highly prized early morning arrival, from Air France-KLM.

A year later, Scandinavian Airlines made news when it revealed that it sold two slot pairs at Heathrow for almost £60 million.

British Airways is the biggest holder of slots at Heathrow, with more than 50% of those available. The airline has been able to grow its slot portfolio mainly through secondary slot trading, which has ensured the airline remains Heathrow’s most dominant player.

If the expansion of Heathrow Airport proceeds as planned, there is an expectation that the new runway will create 356 new daily slot pairs from expansion. The expected growth is good news for airlines wishing to operate to the London airport hub, such as JetBlue or easyJet.

‘Use It or Lose It’

In order to guarantee the continuity of flights at one of the world’s busiest airports, Heathrow and other UK airline operators adhere to a ‘Use it or lose it’ rule, whereby slots must be used immediately after purchase, or the airline will face having them revoked. For the airlines, this can make matters a little complex, as they are forced to fly anything in order to ensure they’re able to cling on to those sought-after slots.

With the recent suspension of Jet Airways operations, its three Heathrow slots were thrown into the spotlight. The slots actually belonged to Etihad Airways (a former major investor in Jet Airways) and were leased to Jet Airways in 2013. With the future of the Indian carrier looking bleak, Etihad was forced to come up with a plan to protect its Heathrow slots as part of the ‘use it or lose it’ rule — or else it could lose one of its most valuable assets.

Etihad Airways announced that it’ll take over those slots and will, in turn, boost its Heathrow operations by adding extra frequencies to Abu Dhabi. Etihad leased the remaining slots to its partner airline Air Serbia, which will double its presence at Heathrow.

For now, attempting to establish a flight to and from Heathrow remains a complex underworld of the industry with mammoth, yet unwritten price tags. Though with potential expansion at Heathrow, that could change.

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The COVID-19 pandemic has upended many airlines' strategic plans. Yet other airlines -- especially those with strong balance sheets and a focus on the leisure market -- are forging ahead with their plans, seeing the pandemic as an opportunity to gain market share from weakened rivals.

JetBlue Airways(NASDAQ: JBLU) is firmly in the latter camp. While the company has deferred some aircraft orders, it still plans to take delivery of its first Airbus A321LR next year, allowing it to launch its long-awaited service to London. Earlier this week, one of the last puzzle pieces fell into place, as the airline was granted slots allowing it to operate up to three daily roundtrips to London starting in the summer 2021 season.

JetBlue secures slots

Several of London's major airports are typically overcrowded. As a result, airlines must apply for takeoff and landing slots if they want to fly to London. Heathrow Airport, the region's primary airport, is the most extreme case. The cost of a single slot-pair, allowing one roundtrip flight, has averaged tens of millions of dollars when traded on the private market. Gatwick Airport has also been operating near capacity in recent years.

The big prize remains elusive

While having JetBlue's flights split across two London airports is not ideal, it's not a shocker, either. More than a year ago, company president Joanna Geraghty said the airline might fly to two London airports.

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The bigger disappointment was that JetBlue wasn't able to get slots at Heathrow, the preferred airport for most business travelers. JetBlue's planned London flights would almost certainly be more successful at Heathrow than at any other airport.

That wasn't exactly a surprise, though. (Heathrow only awarded four new weekly slots, good for two weekly roundtrips. Airlines had requested 1,394 weekly slots!) JetBlue's management thinks the pandemic could ultimately make it easier to pick up slots at Heathrow, but slot holders have no incentive to give up slots until the use-it-or-lose-it rules are reinstated. Remedy slots designed to ensure adequate competition could provide another avenue for JetBlue to gain access to Heathrow, but probably not until at least 2022.

This can work -- for now

Gatwick Airport is a well-established alternative to Heathrow and has sustained plenty of flights from the U.S. over the years. However, many pundits are concerned that JetBlue's planned Boston-London flights via Stansted Airport are doomed to fail. Previous attempts to offer transatlantic service from Stansted haven't been commercially successful.

In reality, JetBlue's prospects aren't that bleak. JetBlue mainly caters to leisure travelers -- even for its premium lie-flat 'Mint' service. Leisure travelers tend to be more flexible about which airports they use (particularly if they're getting a good deal). Furthermore, Stansted is the closest major airport to Cambridge, a key U.K. tech hub. Boston is also a major base for technology companies, so JetBlue could potentially develop a lucrative niche carrying tech-related business traffic between Boston and Stansted.

Additionally, Gatwick is a major base for Norwegian Air, which was struggling before the pandemic and is now on the verge of collapse. Even if Norwegian does survive, JetBlue will probably be able to pick up additional Gatwick slots in 2022 if it decides Stansted isn't working. Beyond that, there's a chance that regulators will force other airlines to make room for JetBlue at Heathrow in the next few years to preserve competition in that key market.

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For now, JetBlue just needs a foothold so it can offer access to London to its customers and start to build name recognition in the U.K. The slots it has secured at Gatwick and Stansted will allow it to do just that.

Adam Levine-Weinberg owns shares of JetBlue Airways and is long January 2022 $10 calls on JetBlue Airways. The Motley Fool recommends JetBlue Airways. The Motley Fool has a disclosure policy.

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