Airports Slot Allocation (Alleviation of Usage Requirements) Regulations 2022

Baroness Foster of Oxton Excerpts

Thursday 10th March 2022 Grand Committee

[Viscount Younger of Leckie (Con)]

My Lords, I beg to move that the regulations be considered.

Slots are a means of managing scarce capacity at the busiest airports. Ordinarily, airlines must operate slots 80% of the time to retain rights to them the following year. This is known as the 80:20 rule or the “use it or lose it” rule. In normal times, this rule helps ensure capacity is used efficiently and prevents airlines from hoarding valuable slots without using them.

The Committee will be aware that Covid-19 has caused exceptional challenges for the travel industry. One way in which the Government have supported the sector over the past four seasons has been with generous alleviation of these rules. On 11 February this year, we lifted most remaining travel restrictions, which means that people can now travel abroad and visitors can come to the UK more easily, whether for a holiday, for work or to visit loved ones. We have reopened the country, and our slot alleviation plans for the summer season are designed to support this process.

This package was developed following consultation with industry. We received 48 responses from air carriers, airports and industry bodies, which supported a wide range of different measures. Views ranged from calls for a full waiver to support for full reinstatement of the 80:20 rule, with most responses somewhere in between. We have carefully considered these views, alongside the available data, to develop this package of measures.

I shall give some brief background to this. When the pandemic initially struck, the 80:20 rule was fully waived to avoid expensive and environmentally damaging flights with few or even no passengers on board. Following the UK’s departure from the EU, the UK Government chose to extend the European Commission’s waiver of the 80:20 rule to cover the summer 2021 season, which lasted until 30 October 2021, through the Airports Slot Allocation (Alleviation of Usage Requirements) Regulations 2021. Taking the opportunity of our departure from the European Union, we then used the Air Traffic Management and Unmanned Aircraft Act 2021,or ATMUA, to create a more flexible set of powers that could adapt to the specific circumstances of the sector. That legislation was recognised as an essential tool to help to manage the impacts of the pandemic, and received cross-party support.

For the winter 2021 season, we used these powers for the first time. As recovery remained uncertain, our focus was on supporting the sector. Our measures were generous and exceeded the alleviation package provided by the EU. By allowing airlines to hand back full series of slots, we gave them certainty that they could retain their slots, even if not operated, which helped to mitigate some of the commercial impacts of the pandemic. This is because otherwise airlines might have chosen to incur the cost of operating near-empty flights merely to retain slots. This also reduced the likelihood of needless emissions from near-empty aircraft. We are proud that, thanks to these measures, we are not aware of any flights that have taken place solely to retain an airline’s slots.

As required by the ATMUA Act, we have determined that there is a continued reduction in demand, which is likely to persist. We consider that further alleviation measures are justified for the summer 2022 season, which runs from the 27 March to 29 October 2022. On 24 January, we therefore published this statutory instrument, setting out the package of alleviation measures that we propose to put in place for this coming summer. The draft instrument applies to England, Scotland and Wales. Aerodromes are a devolved matter in relation to Northern Ireland and, as there are currently no slot co-ordinated airports in Northern Ireland, the Northern Ireland Executive agreed that it was not necessary for the powers in the Act to extend to, or apply in relation to, Northern Ireland.

In the draft instrument we are considering, our measures aim to encourage recovery, while protecting carriers where severe international travel restrictions remain. This includes changing the minimum usage ratio to 70:30. This means that airlines are required to use their slots at least 70% of the time to retain the right to operate them the following year. This is lower than the 80% in normal times but higher than the 50% ratio adopted for the winter season, thereby reflecting progress towards recovery.

The draft regulations include stronger provisions to avoid low-volume flying, by expanding the reasons which airlines may use to justify not using slots to include existing Covid-19-related restrictions. This will apply where measures, including flight bans and quarantine or self-isolation requirements, are applied at either end of a route and have a severe impact on demand for the route or on the viability of the route. Unlike during the winter season, this will also apply when restrictions could reasonably have been foreseen, so as to protect carriers in markets with long-term restrictions in place. There will be a three-week recovery period during which the provisions may still apply following the end of the Covid restrictions.

In addition, we will allow earlier applications for justified non-utilisation of slots. By this I mean that, where there is an official government announcement, either domestic or overseas, about the duration of the Covid restrictions, at that point the carrier will be able to ask the slot co-ordinator for justified non-use to cover the whole period. This can be done in advance and will mean that the carrier will not have to reapply every three weeks, as at present. This will allow earlier hand-back of slots, so that other carriers will have an opportunity to use them, and it will remove some of the administrative burden on airlines.

In the winter 2021 season we made provision for “full-series hand-back”—in other words, allowing an airline to retain rights to a series of slots for the following year if it returned the complete series to the slot co-ordinator for reallocation prior to the season’s start. We have decided not to continue full-series hand-back this season. It was a generous measure that reflected the uncertainty around the winter season.

Given the success of the vaccine rollout, the relaxation of travel restrictions and the more positive demand outlook for the coming summer, I believe that it is now time to move towards a normal usage ratio, but with a strengthened justified non-utilisation provision to provide protection in case of severe restrictions or the emergence of new variants of concern. These measures will cover the summer 2022 scheduling period. and we are currently considering alleviation for winter 2022. I reassure the Committee that we will consult on this later in the year.

I will say a final word about so-called “ghost flights”. Carriers in restricted markets will still be protected by our justified non-utilisation provision. For open markets, the decision to operate flights is ultimately a commercial one for airlines, but carriers will be subject to a lower than normal usage ratio of 70%. The alternative of providing unlimited relief would allow incumbent airlines to retain unused slots at airports while preventing other carriers from using them, restricting competition and ultimately harming consumers.

Through this package of measures, we aim to strike a balance between supporting the sector and encouraging recovery and the efficient use of slots. The regulations that we are considering today make use of time-limited powers designed specifically to respond to the impact of Covid. However, the Government are focused on supporting the industry not just in the short term. As the UK’s aviation sector grows, we will review the slot allocation process as a whole to ensure that it is well equipped to encourage competition, consumer choice and efficiency. I commend the instrument to the Committee.

[Baroness Foster of Oxton (Con)]

My Lords, I thank my noble friend the Minister for his comprehensive update on the adjustment from 80:20 to 70:30. It is a reasonable and practical way forward. Could he also take into account that, although there are fewer long-haul flights to east Asia due to the impact of Covid, the closure of Russian and Siberian airspace will also have serious long-term repercussions, as the traffic from the UK naturally increases for our long-haul carriers?

Although a side issue, the knock-on effects of these airspace closures on the reduced frequency of operations will include increased fuel burn, which in turn will affect ticket prices on what are normally extremely lucrative routes. As of Sunday, carriers such as China Eastern, Air China, Cathay Pacific, Korean Air and some others with bilateral air service agreements with the UK were still flying over Russian and Siberian airspace to the UK. Some of those countries actually abstained in the vote on the invasion of Ukraine at the Security Council meeting, and will no doubt continue to fly when possible. That brings in a competition issue. I would be grateful if the Minister could take on board these points for further consideration.

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To conclude, without this instrument there would be a return to the default 80:20 slot usage rule. Although the sector is recovering, we believe there is still a need for relief to reflect lower passenger demand to avoid empty or near-empty flights, as well as to support carriers serving severely restricted markets and to protect connectivity. I hope the Committee has found this informative.

[Baroness Foster of Oxton (Con)]

Just before my noble friend’s final comments, can he address another point of concern that I made? Notwithstanding that some airlines such as those I outlined are still coming into the UK—China Airlines and so on, which are obviously using Russian airspace to come here—I emphasised that if that continues we will end up with predominantly a competition issue, apart from other issues, whereby we are building our traffic flying to east Asia but it has to go the long way round, which obviously adds cost, while the airlines I mentioned may continue to use Russian airspace, thereby using a shorter route and burning less fuel. It therefore becomes a competition issue. Will the Minister take that away, too, for his colleagues to look at?

[Viscount Younger of Leckie (Con)]

My noble friend makes a good point on incoming flights being cheaper to operate than other flights. I have got that message. All that I can do is take that back to the department; I am sure that the officials will do so.