By Howard Wheeldon
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--Slots - the valuable takeoff and landing times airlines can swap, use or lose but never own - are back in focus.
The pact between Swiss International Air Lines (SWIN.Z) and British Airways PLC (BAY.L), unveiled Tuesday, will enable BA to use eight of Swiss' slots at London's Heathrow - BA's congested hub where new slots are harder to come by than any other airport in Europe.
Neither airline would disclose the cost of the slots but when BA acquired seven Heathrow positions from SN Brussels last year, analysts estimated the total value at GBP25 million. Still, most experts are loath to put a true value on slots.
The simple definition of a slot is a time period during which an airplane can take off or land.
But Peter Morrisroe, managing director of Airport Coordination Ltd. - the not-for-profit company owned by 10 U.K. airlines that manages allocation of slots - offers a better description.
In evidence to the House of Lords Select Committee on European Communities back in 1998, Morrisroe said a slot was actually "permission to trespass on private land."
This hasn't stopped "slot trading" among airlines - trading that's presumably based on the old adage that possession is nine-tenths of the law.
But if a slot is just a right to trespass, then what's the difference between a ground slot - the kind in question with the latest BA/Swiss deal - and an air slot?
Plenty.
Air slots are controlled in the U.K. by National Air Traffic Services, which is partly owned by the government and airlines.
Ground slots are based on the number of flights an airport can handle. For example, Gatwick - the single-runway airport south of London - can handle around 50 flights an hour. Assuming the airport is open 18 hours a day, that's 900 slots.
Airlines also view a slot as an infrastructure - a place to land and park, somewhere for the passenger to go when in the airport and everything else that goes with it.
Airlines often reckon they have property rights over slots and the language of who owns them can get heated.
When BA tried to merge with AMR Corp's (AMR.US) American Airlines in 1996 and faced the prospect of giving up a large number of Heathrow slots, Chief Executive Robert Ayling (who has since quit) said this would be wrong, irrational, unfair, potentially corrupt and against the public interest.
In these difficult times, with borrowing stretched to the hilt, airlines might love to carry a value for slots on the balance sheet, but they can't.
They can swap them, but if they don't use them for a year they could also lose them.
At Heathrow and Gatwick, landing slots are determined by the Civil Aviation Authority, working in tandem with BAA, the former British Airports Authority that was privatized in 1987.
Even if BA swaps slots and funds are exchanged with other airlines - as in the Swiss deal and again last year with Bulgaria's indebted Balkan Airlines - analysts still can't put an actual value on the slots themselves, as neither party has any property rights.
Not that any questions ever seem to be asked. Depending on the time of the slot the value will probably range between GBP1 million and GBP2 million.
Hardly surprising, then, that BA balked at giving up 224 weekly slots at Heathrow - equivalent to 16 daily takeoff and landing times - when it had a second go at merging with American Airlines in 2001.
Strictly speaking, the airports own the slots, and despite all the lobbying to the contrary that's probably the best solution.
Of course, if slots are still a national asset then the government could float them off - or chase an additional license fee from the airlines that use them.
(Howard Wheeldon was a senior equities analyst for 20 years, and has been a columnist at Dow Jones for the past year. He can be reached at +44 207-842-9251 or by e.mail:
[email protected])