The Dilemma of Slot Concentration at Network Hubs

Abstract

A number of the worlds’ major airports have a high proportion of their capacity utilised by a single airline, or alliance of airlines. At major US airports, for example, it is common for the leading carrier to account for threequarters or more of the flights; at European airports the proportions are generally smaller but often exceed 50 per cent (see Annex 1). This has lead to concerns that such high levels of capacity utilisation (‘slot concentration’) will impact adversely on competition and prices and, in turn, has inclined policy makers and regulatory bodies towards pro-active competition measures. In the US, for example, the General Accounting Office (GAO, 1996) judged that the buy-sell market in slots established at certain US airports in 1985, had failed because it was argued to have done little to reduce slot concentration and introduce competition into the market. It went on to recommend that slots should be re-distributed. In Europe, the current slot allocation regulation (Regulation 95/93, Article 10) requires that at slot co-ordinated airports preference be given to new entrant carriers in the allocation of unused, returned or new slots (that together constitute the slot pool); there is also a reluctance on the part of the European Commission to accept unrestricted slot trading because of the fear that it will reinforce dominant positions; and approval of proposed alliances between carriers has often been accompanied by conditions requiring slot divestiture.