Airport slot auctions: desirable or feasible?

Abstract

Slot auctions have been promoted as a means of increasing competition in the airline industry and making more efficient use of scarce airport capacity. On both counts, the arguments are flawed. If there are competition concerns about the development of hub-and-spoke network airlines, there are adequate competition remedies already available to deal with this issue. On efficiency grounds, the extension of secondary slot trading - which is compatible with the current slot allocation regime - should allow the benefits of a market-oriented slot regime to be delivered without the upheaval created by undermining the well-established international principle of ‘grandfather rights’. Auctioning slots generated by new infrastructure investment could have some merit if the proceeds are ploughed back to offset the environmental costs of airport expansion. However, there are other mechanisms available to ensure that the costs of airport expansion properly reflect environmental externalities. It is difficult to see a compelling case for developing slot auctions - which are likely to disrupt the current international slot allocation regime - purely to deal with these environmental issues.