‘Use it or lose it’ — the outdated airline slot rule can be fixed to stop incentivizing useless CO2 emissions
Read how the problem can be reframed and solved in a customer-centric and sustainable way
Even if you are a complete outsider to the airline industry, you are likely to have heard claims of thousands of empty flights uselessly emitting CO2 due to European regulation. Indeed, there is ground to consider the obsolete format of ‘use it or lose it’ slot rules as incentivizing environmentally irresponsible behaviors on top of protecting the less nimble and the less customer-centric airlines. But this problem can be reframed and solved.
In the past few weeks European media have been inundated by a public multiparty negotiation covering the impact of the ‘use it or lose it’ slot rule on the CO2 emissions and the airline business. The initial complaint coming from the Lufthansa Group, was followed by a clash between Ryanair and Lufthansa, which triggered a defensive yet accusatory response from the European Commission. That it turn was followed by a Lufthansa leaning opinion issued by IATA. On a sideline Greta Thunberg has added her bit of irony.
Yet, this entire negotiation might be missing the point. And when the problem is ill-defined, finding the right solution can only happen by accident. In our work we often see struggles with incorrectly defined problems — what we help to do then, is to reframe the problem prior to addressing it. This is what has to be done in this case, especially given the widespread impact of the problem.
To put it simply, the current ‘use it or lose it’ rule means that airlines must use at least 80% of their take-off and landing slots at European airports or face losing them to a competitor the following year. While the European Commission did suspend the rule at the beginning of the pandemic, it has started to partially unfreeze it, which has triggered the blame game.
To reframe the problem, you have to look deeper than the mere rule, down to the meaning of ‘slot’, which is the basis of the entire mechanism.
Since it is the very definition of the slot in European regulation (article 2 COUNCIL REGULATION (EEC) No 95 /93 of 18 January 1993), which makes slot preservation unsustainable and anti-customer-centric:
‘slot’ shall mean the scheduled time of arrival or departure available or allocated to an aircraft movement on a specific date at an airport […]
— the notion of a ‘slot’ itself belongs to the low-tech times, when the operators needed rigid wide space/time buffers to maintain safety. But what is particularly obsolete is the lack of direct association between the ‘slot’ and the passenger/cargo. Indeed, the regulation cares only about aircraft movement, not passenger/cargo movement. By consequence empty or almost empty aircraft movements account just as much for ‘slot’ use as high load factor aircraft movements.
The obsolete ‘slot’ definition cascades the problem to slot re-allocation in Article 10 of the same regulation.
Therefore, to reintain the ‘slots’ airlines are incentivized to maximize aircraft movements, not passenger/cargo movements. And while in a longer-term maximization of aircraft movements and maximization of passenger/cargo movements are aligned, when the demand for air transportation drops, the two feature different resistance. By consequence, aircraft movements might be kept at artificially high levels, potentially blocking the entrance of competition in a short or medium term. It is worth to note, that a demand drop might reflect a force majeure crisis situation (e.g. a pandemic), but might also be due to customer dissatisfaction. While newly entering competition might provide a better product-market fit in the best interest of passengers, cargo originators, airports and other stakeholders.
Thus, there seems to be no other reason for the slot use definition not to be tied to passengers/cargo or load factors, than to protect the least nimble players.
To address that, instead of the European Commission imposing minima solely on aircraft movements to preserve slot ownership, it could be imposing minima for per aircraft capacity utilization. Such utilization could be defined in terms of absolute numbers of passengers served, cargo loads or load factors of thereof, on a given route.
By consequence, if an airline was not willing to meet the customer needs and their willingness to pay, it would be obliged to surrender the slots for them to be redistributed to airlines, which serve customers in a more adequate way.
In a crisis situation, when the passenger numbers decrease, the Commission would still be able to regulate the market and protect the slot owning airlines. Such protection could mean decreasing the required number of passengers per flight for it to count for takeoff and landing rights preservation.
Such an approach would remove the incentive to fly empty aircraft and emit CO2 uselessly while protecting the best performing airlines in terms of customer satisfaction. It would also empower the airports by maximizing the number of passengers per available slot.
Given the climate urgency and the customer expectations further developed by the pandemic, it is high time the obsolete airline slot regulation problem was reframed and solved.
