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Use it or lose it rule – and why this rule became a problem?

Written by Dean Boljunčić.

Photo: © Avioradar
Boeing 767

 

Today when everybody talks about coronavirus and its consequences, aviation sector received one of the hardest hit. Aviation sector are actually airlines, aerodromes (not the same as airports) and air traffic control.

We can often read about problems and (un)justified loses of airlines due to a current corona crisis, but we cannot read a lot about aerodromes and airports and their problems and challenges.

Within this article, I will try to explain complexity and challenges of airports on which directly or indirectly pretty outdated EC directive EC 95/93 and IATA guidelines (WASG – Worldwide Airport Slot Guideliness), influence a lot.

Just to make this clear, Airport slots are not to the same as CTOT (Calculated Take Off Time) which is responsibility of Eurocontrol (at least for Europe).

Basically airports (aerodromes with a special purpose for passenger and/of cargo transport) are divided according to:

  • Level 1 airports: A Level 1 airport is one where the capacity of the airport infrastructure is generally adequate to meet the demands of airport users at all times.
  • Level 2 Airport: A Level 2 airport is one where there is potential for congestion during some periods of the day, week, or season, which can be resolved by schedule adjustments mutually agreed between the airlines and facilitator. A person responsible for facilitating slots at Level 2 airport is a Slot Facilitator. Split and Dubrovnik airport are Level 2 airports.
  • Level 3 airport – a Level 3 airport where demand for airport infrastructure significantly exceeds the airport’s capacity during the relevant period. For operation at a Level 3 airports, airlines must obtain official slots, which are defined according to a certain time period ( a slot is defined when exactly an airplane can land or depart from a certain airport). To makes it more simple, an airplane should have one slot for landing and one slot for departing from a Level 3 airport. A responsible person for slot allocation and coordination at Level 3 airport is a Slot Coordinator. A Slot coordinator has to be independent and cannot be an airport or an airline employee.

Amsterdam, London Heathrow and Frankfurt are for example Level 3 airports.

As stated above, all slot allocation rules and guidelines are defined in the pretty outdated directive EC 95/93 and WASG which is updated annually, but is still mostly based on the EC 95/93.

Use it or lose it rule is defined in the article 10, section 5 of the EC 95/93 and article 8.6 of the WASG. Basically an airline should use 80% of allocated slots to receive historic rights for 100% of their originally allocated slots. Simplified, if an airline has 100 slots at an Level 3 airport for a certain season, this airline could use only 80 slots and still receive historic rights for all 100 slots for a following same season (summer and summer season and winter and winter season are being monitored).

This rule was defined in the early 90’s when it is was suitable and aligned with needs and demands of an aviation market in early 90’s. It protected airlines that used their resources and stimulated market, but also airport, because this rule gave them a certain stability that airlines are going to use their slots (or at least 80% of allocated slots).

Meanwhile, aviation sector during early 90’s and now in the middle of the biggest aviation crisis ever are completely different, and old directive EC 95/93 should be adapted and adjust according to a current demand, but also according to post-corona market (could be a subject for another article).

During the last 10 years, when skyrocketing and aggressive growth of LCC airlines (Ryanair, Wizz Air, EasyJet etc.) found place, but also some of the FSC (Full Service Carriers) like Emirates and Qatar, airport noted that quite often airlines are misusing current regulation and guidelines to obtain extra slots and capacity at Level 3 airports. For example, airline groups with multiple AOC’s are requesting slots based on a New Entrant status (A New Entrant airline has priority and 50% of a new capacity should be allocated to New Entrants).

Bending the Use or lose it rule is happening a regularly basis and airports call this a double-dip scenario. What does it mean actually?

If we are talking about a summer season, 31st of January is defined as a HBD (Historic Base Deadline), which means that slots that airlines have on this specific date are going to be a base for determine if an airline has used 80% of allocated slots in the summer season.  

This is certainly clear and justified, but…

Article 8.7.2.2. of the WASG defines that The cancellation of periods of less than 5 consecutive weeks does not reduce the period eligible for historic precedence, provided the total number of cancellations is 20% or less of the period between the first and last date of the series of slots.

And this leads to a double dip scenario and makes it possible.

Again to make it simple, if an airline has 100 slots and cancels (return) 20% of the slots (in this case 20 slots) 5 weeks before HBD, at HBD this airline will have only 80 slots. Furthermore, according to Use or Lose it rule, an airline has to use 80% of allocated slots at HBD, this means that in this case that this airlines has to use 80% of 80 slots at HBD, which makes 64 slots. And if an airline used 64 slots, this airline will receive historic rights to all 100 originally allocated slots.

This way Use it or lose it rule or 80/20 becomes 64/36 and everything is according to regulation and guidelines I am afraid.

Of course, this trick is more than useful for airlines that are keeping their capacity with using very minimum of allocated slots, but from the other hand this is not good for airports  since they cannot utilize their full capacity and lots of allocated slots are actually unused.

Airports think that this situation is not a fair game, because they believe if an airline cannot or will not use at least 80% of their allocated slots, it should cancel them and return them to a slot pool, so maybe a new airline or a current one that still has capacity and power to extend its network can use them.

This way airports cannot utilize their capacity but it is also raising question about lost profit by not utilizing their full capacity.

If we go back to a current crisis, it was justified and realistic that EC and EU issued a slot waiver and cancelled the Use it or lose it rule for summer season (S20) and winter season (W20), but again a tipping point was a EC suggestion to adjust 80/20 rule for summer season 2021 (S21) to 40/60. This means that airlines has to use only 40% of their originally allocated slots to receive historic rights (for S22) to 100% of originally allocated slots. 

ACI (Airport Council International) and  EUACA (The European Airport Coordinator Assossiation) had a suggestion to adjust 80/20 rule to 50/50 and to make a double dip scenario not possible, but unfortunately EC haven't accept this suggestions and issued a new suggestion to EU parliament with 40/60 rule and keeping the possibility of a double dip scenario.

At the end, this means if an airline use their old double dip trick, this airline have to use only 32% of originally allocated slots to receive historic rights to 100% of originally allocated slots.

Nota bene, originally allocated capacity was given for summer season 2019 (S19).

Maybe you are asking yourself why is this relevant actually for airports in Croatia since Croatia has no Level 3 airports, but the answer is that this regulation has indirect also influence to all European airports. We can simply monitor how many passengers and flights are coming from Level 3 European airports to airport in Croatia. It is quite possible that airlines in S21 are not going to use slots allocated for flights to Croatian and thus also airports in Croatia could not utilize their planned capacities. 

Personally, I cannot imagine that anybody can still have rights and capacity based on the situation in summer season 2019.

Airports certainly cannot plant their investments and capacity according to 2019, so we are wondering why airlines can.

It is time to accept the fact that market in S21 is not Force Majeure anymore, it is just a new state of market demand and we have to adjust our regulation according to it.