Category: Business

The past twenty years witnessed an increase in commercial air travel; consequently, a the demand exceeded the airport capacities. This phenomenon resulted in massive congestions in many airports worldwide. Today, it is crucial to develop techniques and strategies that can be used to address the increased traffic and simultaneously reduce associated delays. Among the suggested solutions, there is an idea to provide more slots. In addition, proper administration procedures need to be employed in the allocation of slots among the competing airlines including both large and small couriers. However, research indicates that the USA has implemented these procedures in four airports only. In other airports, the slots are given on the line-up basis; the airlines queue for the slot privilege that would allow their planes to take off and land at the congested airports. Although the existing methods have been supported by many people and businesses, they have proved to be ineffective. Airports should allocate more slots to small couriers; using better techniques for slot allocation will promote the competition and growth in the industry.

The trends show that larger couriers have all needed resources to be awarded the slot privileges. This practice discriminates against smaller couriers as larger couriers possess a better competitive advantage. Although the economists and policymakers acknowledge the benefits of increasing the number of slots as a means to address the delays and the congestion, they criticize the existing administrative procedures. This indignation is based on the misconception that the approach is sub-optimal. The policy makers tried to pass ineffective procedures including slots auctions, trading, and peak pricing. This situation caused heated debates as the proponents call for providing more slots to smaller couriers. The opponents, on the other hand, prefer the aforementioned methods and consider them an effective tool for reducing the airport congestion.

Airport Capacity Constraints

The constraints and search for appropriate solutions to the slot allocation problem continue to be a major challenge for the governments, airport operators, and the airline industry, in general. States’ policies and practices in dealing with the issue also vary. The concerns and inconveniences caused by the constraints of the airports’ capacity, as well as the search for viable solutions for the allocation of slots continue to be a considerable challenge for operators, governments, and customers. So far, the existing policies and practices offered by the state with regard to the slot allocation issues have appeared to be ineffective. This ineffectiveness is clearly proved by continuous constraints and delays that customers are frequently forced to endure.

Statistics from Futterman indicate that the current delays are concentrated in the major airports. However, it can give an idea of the similar trends and situations at smaller airports. For instance, the airports in New York have a high level of congestion. The research also suggests that the airports in this region including the John F. Kennedy and La Guardia ones are likely to continue experiencing congestion in the nearest future. This forecast is quite probable because of the high level of constraints that is a characteristic of the airports. In Atlanta, the runways that were opened in 2006 and the introduced flight procedures have helped to increase the capacity of the airports. However, they remain under the threat of delays that result from high demand for these services. The other problem is a tense schedule of departures and arrivals of the major airlines at the airports. According to Futterman, the delays are expected to continue up to 2020 if better measures are not implemented. 

As the traffic at the airports continues to cause the outstripping of the available runways, parking, processing capacities, and shortages of the slots continue to take place at an exponential rate. As seen in the examples above, the situation differs from one region and airport to another. The International Air Transport Association (IATA) reports that the number of airports that face capacity constraints and are considered to require the coordination system by IATA increases each year.This increase is an indication that better mechanisms need to be adopted to address the constraints effectively. 

If the traffic rate increases faster than the investments to expanding the capacity, most American airports will have to seek other ways of dealing with the congestion. So far, there are indications that a better process of slot allocation seems to be the most viable solution. According to Corollia, Lullib, and Ntaimoc, there is a direct relationship between the patterns of traffic and availability of slots. The practice of hub operations has resulted in a tense schedule of planes that arrive at the airports from different countries and depart immediately to other destinations. Although this practice assists significantly by reducing the time that travelers spend to change the planes, it results in a cycle of peak periods across the day. In turn, it also reduces the slots availability at the airports. It means that the slot allocation process requires compatible and aligned rules to manage the situation. The methods that are currently in use have shown that there still are many issues and loopholes that need to be addressed if the system is to be more improved.

According to Ferreira, ineffective procedures used for the slot allocation have many consequences. Among other, it impacts the ability of small carriers to exercise their rights that were granted by the services agreement. For instance, at the recent summit of the airports economists, smaller carriers complained about the difficulties that they face when they try to secure slots at the major airports, at which they were interested to operate. Small carriers argued that the challenges and difficulties had a negative impact on their access as well as operations on some routes.

Small carriers held the view that the policymakers should consider the application of reciprocity and equity that were stipulated in the Air Service Agreements while resolving the slot concerns. It is evident that although the development of infrastructure and increased use of the current resources can be a solution to the existing congestion, better policies can work more effectively. Consequently, small carriers will have more operations and, thus, will reduce both delays and congestion at the same time.

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Slot Allocation to Smaller Couriers 

According to the ASA, one of the significant thrusts is that in the process of ensuring access to markets and making it more liberal, enough consideration should be paid to the capacity constraints and long-term requirements of the infrastructure. The guideline goes ahead to assert that all slot allocation practices should be not only fair but also nondiscriminatory. In addition, the whole system should be transparent. The guidelines also stipulate that the strategies should take into account the interests of all stakeholders and aim at optimizing the effectiveness as far as the use of the airport capacity is concerned. The states are advised that in the process of addressing various issues with slot allocation, they should consider the legal framework that was created at the Chicago convention. They should also consider the obligations that were defined by the airports services agreements that are applicable at the national level. Finally, voluntary mechanisms that are supposed to manage the insufficient capacity of airports should also be considered. 

Although most airports have developed new runways and taken appropriate steps to improve the utilization of the airports, there still are many airports that face slot constraints. In addition; the constraints levels continue to increase. Most smaller carriers have found it difficult to get a required number of slots. The efforts of the State to assist these carriers have so far been unsuccessful. As expected, the situation has created frustration among the carriers.

Slot Allocation Policy and Program Resources

The AIAT system has provided guidelines that comprise rules that were formulated by the coordinators of airlines and slots.The guidelines have already been executed in some countries, for example, the UK. Other countries have opted to adopt own customized regulations that rely on the IATA principles. For instance, in the USA, independent regulations for slot allocation were enacted. These regulations have been gradually modified over the span of 15 years. In other countries, the issue has been addressed based on bilateral service agreements. There are some cases in the past, for instance, in the USA, where slot trading was used in the major airports. This approach was heavily criticized for the unfairness in terms of smaller carriers.

From the discussion above, it is evident that the allocation policies and programs lack a required sanction mechanism. In turn, this fact has identified the necessity of adopting better practices that can increase the efficiency of the allocation process. One of the poor policies that are used currently is overbidding by the major carriers; which puts smaller carriers at a serious disadvantage as they do not have required financial resources. If the congestion and delays are to be solved, the deficiencies of the current policies need to be addressed. It is especially true for the negative outcomes that the insufficient capacities and slots have on the carrier’s ability to exercise their market rights.

Better Slot Allocation Policies

Based on the nature of the problem, it is rather challenging to come up with a global solution since the capacity shortages are different in each airport. However, the governments, airline carriers, and the operators need to come up with a better solution for the issues with slot allocation from a broader perspective. The process should also be based on the long-term needs of both customers and airlines. In the creation of solutions, capacity needs and constraints need a due consideration. This approach will ensure that any inefficiency factors that might result from the lack of considerations are addressed in time.

With regard to the disputes presented by small carriers concerning the unfairness of the slot allocation process, one of the practical and effective approaches would be to address the issues based on the recommendations provided in the ICAO guidelines. Among the solutions, the slot regime approach presupposes free allocation rather than auctions. According to this approach, airports must first establish the level of the peak flights. Subsequently, they have to set the required number of slots in order to satisfy the demand. After this step, airports can allocate the slots to both large and small carriers. 

There are two options used in the slot regime; the first one is the free allocation method, and the second is the auction method. According to the first approach, selling the slots has to lead to the right outcome. Essentially, the system will set a trading price that will be the same for all carriers. Although this approach might not work for the congestion pricing, it is perfect for the fair slot allocation since the available volumes will be known in advance. 

The method above will solve all the disputes as all carriers will be offered a level playing field. If no trading system is implemented, the slots may be allocated to carriers that do not even need them. In turn, this situation will force the government to make final judgments, which usually are incorrect. However, if the trading is employed, the market will facilitate the slots allocation in a fair and equal manner based on the need of the carriers. This approach is better than auctions, in which the costs increase making the whole system unfair in regard to smaller carriers. There should also be policies that will force carriers to sell the slots that they are not using to the companies that need them. This strategy will ease both the congestion and delays and ensure that the slots are used to their optimum.

According to Corollia, Lullib, and Ntaimoc, the maximum user chargers coupled with the free auctions are the instruments that will increase the efficiency of the slot allocation process for both large and small carriers. Trading can be used as a mechanism to enhance the overall efficiency by fixing primary allocation systems. The trading approach can be used alongside proper market and administrative policies. The market will be the key determinant for the acquisition of the highest number of slots. The market mechanism will be used to assign slots to those carriers that have the most need for them. This issue will not only take into account the needs of large carriers but also prevent smaller carriers from missing out the chance to use some.

Conclusion

Small carriers have filed numerous complaints concerning the process of slot allocation by the airports. Some discrepancies that were brought forward include the unfairness of the process as larger carriers usually get more slots, some of which are underutilized or not used at all. The discussion highlights various difficulties that are faced by airlines today. Some of the challenges arise from the high level of constraints that is characteristic of most airports, especially the big ones. In Atlanta, for instance, runways that were launched in 2006 and flight procedures helped to increase the capacity of airports. Although this approach seems to be effective, airports remain under the threat of delays that result from the high demand for the services.

To increase the liberty of the airline market, better and more effective policies and principles need to be implemented in the current slot allocation procedures. From the discussion above, it is evident that the policies and programs for the allocation lack an appropriate sanction mechanism. This omission, in turn, has created the need for the adoption of better practices that will increase the efficiency of the allocation process. Overbidding by the major carriers is one of the poor policies that are currently used; it puts smaller carriers at a disadvantage as they do not have as many financial resources as large companies have. The slot regime, according to which, the market first embellished the demand and then the slots are created, is among the best solutions to the slot allocation. The discussion shows how this approach can be used to make the allocation process fair to both large and small carriers.

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