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Virgin Atlantic study urges shake-up of Heathrow slots

A Virgin Atlantic-backed study is calling for a shake-up of runway slot allocation at Heathrow to boost competition as part of the London hub’s expansion plans.

The research by WPI Economics, commissioned by the carrier, found that around one in four passengers using Heathrow only had the option to fly with British Airways owner International Airlines Group.

The report estimates that IAG operated 77 monopoly routes out of Heathrow this summer.

IAG is Heathrow’s biggest customer, operating 55% of all take-off and landing slots. The next largest groups are Lufthansa with 8% and Virgin Atlantic/Delta with 7%, according to the report.

Heathrow expansion with a third runway  is due to lead to 260,000 extra flight movements a year – more than a 50% rise in capacity and the equivalent of around 350 new daily slot pairs at the severely constrained airport.

“The allocation of significant new capacity presents a unique opportunity to tackle this and increase effective competition and choice at Heathrow,” the study says, recognising that the government has already signalled concern that the existing system of allocation might not deliver on its objectives for expansion.

But the ‘Ticket to Fly’ report highlights the lack of competition on some routes out of the UK’s largest airport and claims that the existing rules of capacity allocation “will not deliver what the government wants from Heathrow expansion”.

The existing capacity shares of airlines means that the major hub carrier and its joint venture partners holds the majority of capacity at Heathrow.

“The remaining capacity is split between a large number of airlines holding very small shares, leading to fragmented competition and no airline with sufficient scale to provide effective competition to the existing hub carrier,” according to the research.

It says a “bespoke approach” is needed to maximise the benefits of the “unique circumstances” of Heathrow expansion and outlines three “credible alternatives” that could be used.

The study concludes by saying that “we strongly believe that a bespoke process of allocation should be used for allocating new capacity created by Heathrow expansion.

“Without this, the once-in-a-generation opportunity to boost competition, lower fares and improve service and passenger choice could be missed.”

The report comes ahead of the expected publication of the government’s aviation strategy white paper later this year, which is expected to include proposals for the reform of the slot allocation process at UK airports.

“Expansion provides an opportunity to totally rethink how we allocate take off and landing slots to enable the creation of a second flag carrier that can compete,” said Matthew Lesh, head of research at the Adam Smith Institute told the Financial Times.

“Consumers need competition to ensure that disruption to one airline doesn’t destroy travel plans and that they can access more flights to more destinations.”

A spokeswoman for Virgin Atlantic said that it was “essential” that Heathrow expansion leads to “effective competition that delivers for the whole nation and this simply cannot be achieved by the continued dominance of one airline group”.

However, IAG said that Virgin has had the opportunity over the past two decades to increase its slot share at Heathrow by buying slots on the secondary market.

“The airline has failed to create more competition at the airport – it closed Little Red on domestic routes, pulled off long-haul routes and rents out the slots it owns to other airlines,” a spokeswoman told the FT.

 

 

 

 

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