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View Full Version : Sold -16 Heathrow slots for £30 Million.


LTNman
24th Sep 2003, 12:49
Extract from the Financial Times:



As part of the deal with Swiss, BA on Tuesday announced the biggest single acquisition ever made of highly valued take off and landing slots at London's Heathrow airport. It will acquire eight of Swiss's 14 Heathrow daily pairs of take off and landing slots, which are understood to have a market value of between £30m and £35m. The deal tops last year's acquisition of seven Heathrow slot pairs from SN Brussels Airlines.
http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1059480058372

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Seems like going to a football match and finding that all the tickets are sold only to be offered some by a ticket tout at the gate for an inflated price. I thought touting was illegal but isnít this the same? Do Swiss actually own these slots or is it they just have Grandfather rights to use them? If they donít own them then how can they sell them? Should BA be allowed to buy them seeing that they are the dominant airline at Thief-row?

Capt BK
24th Sep 2003, 16:29
It never ceases to amaze me what you can buy on ebay:D

Hot Wings
24th Sep 2003, 17:14
So BMed will be announcing some new routes then? "Scope clause" my a***!

Whooaahh
24th Sep 2003, 18:08
In the Swiss media they are reporting that the slots weren't actually sold, as such, although money will be changing hands.

The US$50m is actually a guaranteed loan and Swiss had to put something on the table that BA wanted to get this loan.

After the loan is repaid, if Swiss survive that long, BA keeps the slots therefore these 14 slots have only cost BA the interest they would have received on the outstanding loan balance from their own bankers. If they are smart this would have been passed onto Swiss as part of the loan repayment plan.

Whooaahh!!!

siglap88
24th Sep 2003, 21:57
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])

LTNman
25th Sep 2003, 11:53
LONDON, Sept 23 (Reuters) - European discount airline easyJet Plc (EZJ) objected to a British Airways-Swiss International Air Lines tie-up announced on Tuesday, saying it would probably demand from the authorities that the new alliance give up some of their lucrative take-off and landing slots at London Heathrow to
maintain competition there.

British Airways (BAY) and Swiss (SWIn) reached an agreement on Tuesday to operate joint flights between London and Switzerland. But the deal also effectively involves BA giving the loss-making Swiss International a 50 million Swiss francs ($37 million) credit facility in return for eight pairs of daily runway slots at London's Heathrow Airport.

Swiss has a total of 14 daily pairs of slots at Heathrow.

"We would take a very dim view if this led to a reduction in competition between London and Zurich," said Toby Nicol, the spokesman for easyJet, Europe's biggest budget airline, which flies to Zurich and Geneva from London Luton and Gatwick.

"We have no desire to go into Heathrow but other airlines might and given that it's impossible to get into Heathrow, we would probably demand this alliance give up slots at Heathrow."

BA dismissed easyJet's concerns.

"We say the routes between Switzerland and the UK are already highly competed. We don't believe there should be any significant competition issues," a BA spokeswoman told Reuters.

Chief Executive Rod Eddington told reporters later the market share of a combined BA-Swiss on routes between London and Switzerland was comfortably above 50 percent but BA was ready to discuss any competition remedies proposed by authorities.

"Clearly we've got to go to Brussels and make the case in an appropriate and sensible way," Eddington said.

Asked if the market share was more like 60 and 70 percent, Eddington said: "That's what we're speculating it is here."

The European Commission said earlier it was likely to look favourably on the deal. "We have always found a way to approve these alliances, overcoming issues of competition that have been identified," Commission spokeswoman Amelia Torres said.

The question of whether airlines have the right to trade slots at Heathrow, the world's busiest international airport, has caused problems in the past for BA in its abortive attempts to forge closer links with transatlantic partner American Airlines (AMR).

Commerzbank analyst Dominic Edridge said the key issue was the reception the BA-Swiss agreement, which includes codesharing, received from the European Commission.

"At the end of the day I think it is a pretty reasonable move and BA at the end of the day don't have any direct financial exposure to Swiss," Edridge told Reuters. "But the big question is about competition."

Attempts by BA and American to cut costs by virtually merging their transatlantic businesses have been blocked several times in the past as competition authorities have demanded the airlines give up valuable Heathrow slots in return for any regulatory blessing.

But Edridge said the competition authorities may examine the BA-Swiss tie-up in the light of total competition across all London airports on the Zurich and Geneva routes instead of just focusing on Heathrow.