Airlines Can Now Lose Airport Slots They’ve Held For Years—Europe’s Top Court Says They Aren’t Property

Europe’s top court has just said airlines can lose historic airport slots, and that those slots aren’t protected property under the EU Charter. That started as a fight over Dublin Airport, but it has much wider ranging implications. Slots are the right to take off and land at a particular time at an airport. They determine which airlines can compete. The carriers already holding them have received a government subsidy that lets them keep out competition. I’ve argued that we should replace grandfathered slot controls with congestion pricing. What The European Court Decided The October 15 ruling in Case C-857/24 is over Dublin’s 32 million annual passenger limit, imposed through terminal permissions in 2007 and 2008. Historic slots are temporary and these permissions aren’t protected property under the EU Charter. The court says they were always conditional. At airports where demand exceeds the number of flights the government deterimines can be accommodated, that permission can be enormously valuable. The allocation usually starts with the airlines already there and they keep to keep access. For a new competitor to enter (or an existing airline to grow service) they can lease from another airline. That airline makes money by not flying, but giving the right to someone else. They received something valuable from the government And they rent it to another airline, profiting I covered the U.S. version in June, when Spirit’s creditors valued its 22 LaGuardia slots at $87 million. The FAA was threatening to retire them if they didn’t go to a low-fare carrier. That created a fight between creditors seeking the most money and government officials seeking their preferred buyer. Use-It-Or-Lose-It Creates Problems Once an airline has valuable access, regulators want it used. Otherwise the airline could prevent competitors from flying while offering passengers nothing. So we get minimum use requirements. These can encourage a carrier to operate a flight to preserve future access, even when the flight itself wouldn’t otherwise justify operating. Then capacity falls because of controller shortages, for instance, and regulators don’t want carriers flying merely to protect their slots. So they waive the requirements. As I covered in June, the FAA extended staffing-related relief at JFK and LaGuardia through October 30, 2027. Under the waiver, carriers can return up to 10% of their slots and have those treated as used. (They won’t fly, but neither can anybody else.) Charge For The Congestion A Flight Creates An additional flight at a crowded airport imposes costs on other flights: longer queues, missed connections, wasted crew and aircraft time. Airlines bear some of those costs themselves, especially when they operate a large share of the airport. A better approach is to charge for scarce capacity, with higher prices at congested times and lower prices when the airport has room. Publish charges far enough in advance that airlines can build schedules and sell tickets around them. That gives carriers choices: Pay for the busiest time if passengers value it enough to pay for it. Move a flight to a less congested period. Use a larger aircraft where that makes sense, spreading the capacity charge across more passengers. Reduce frequencies that don’t justify their costs. Aircraft don’t all consume identical runway capacity, so a sensible system would account for that too. And paying a charge wouldn’t override safe operating limits. Air traffic control still has to manage weather, separation and disruptions. This would also require usable gates and terminal access. Selling access to a runway while letting incumbents exclude competitors from the gates would accomplish very little. The objection is that large airlines can afford peak charges. Of course they can. But under grandfathering, they already control much of the peak access. A new entrant may have to persuade the very airline it wants to compete against to sell or lease it permission. With congestion pricing, access wouldn’t depend on that competitor’s agreement. How Congestion Pricing Solves Airport Capacity And Delays Think of a runway like a heavily used road approaching its capacity. As use approaches 100% of capacity, planes have to queue. Each additional flight imposes delay costs on everyone else, but the airline only internalizes its own delay cost. So airlines are incentivized to overschedule. Slots try to deal with this by capping the number of flights in a period. Congestion pricing says: “You can operate whenever you like, but you must pay the actual total cost of the delay you impose on others.” Slots are a crude cap: “X movements per hour.” They’re allocated via grandfather rights and use it or lose it. They’re adjusted infrequently and administratively. Once you have the slot, the flight becomes ‘free’ regardless of the delay it causes. Charging per flight movement that approximates the marginal delay cost to others works better. When the system is uncongested, the price is low or zero. As demand approaches or exceeds capacity, prices rise sharply. Airlines operate a flight in that time slice if they are willing to pay – if the value of the flight to passengers and the airline is greater than the congestion charge. That way, you get the flights that generate the highest value relative to the delay they cause. You also get natural spreading of flights to shoulders or off-peak times, reducing congestion, to lower costs. It can encourage use of larger aircraft to spread the cost out across more passengers, and also de-banking of hubs. A slot freezes peak delay – a “19 slots per hour” rule means you get 19 flights per hour, regardless of delay and irrespective of whether those are 19 regional jets or widebodies. There’s no incentive to move those any of those flights 20 minutes to spread out peak loads. Slots are also bad at handling weather events and air traffic control issues. Those might reduce an airport’s capacity from (say) 60 to 35 flights per hour. That’s when we get ground delay programs and ad hoc rationing. Congestion pricing can do the work for you, and prioritize the most valuable flights. Instead of stressing the system, airlines contribute towards paying for a better one. (If you want to make it revenue-neutral, cut landing fees or passenger charges to offset and just use congestion pricing for the incentives.) Ultimately, the same price applies to everyone – incumbent airline or new entrant in the market. Topics on this page