The competition watchdog has supported proposed government reforms of the UK airport slot allocation system.
The Competition and Markets Authority (CMA) backs the use of market-based mechanisms to promote increased efficiency and competition to provide direct benefits to consumers and the wider economy.
The current regime often favours established carriers through historic rights to airport takes off and landing slots.
However, the CMA, responding to Department for Transport consultation, supports changes which could make the market more competitive.
It suggests a more efficient and transparent system of slot allocation.
But it cautions that small changes “may not deliver the big gains in efficiency that could be achieved from wholesale reform”.
It describes slot allocation in the current administrative systems as being “inherently flawed” and puts forward five proposals.
These include redefining the new entrant rule to “foster a more competitive environment”; a revision of the “use it or lose it” rule to potentially free up slots for smaller airlines; and limiting slot leasing to prevent the potential for large airline to dominate the market via secondary slot trading.
It also welcomes DfT proposals to examine the potential for auctions to allocate new slot capacity.
The CMA’s response says: “Currently, incumbent carriers, through historic rights to slots, have entrenched positions at major airports in the UK.
“Slot reform is therefore a further measure DfT could take to open the market further to competition in the interests of passengers.”
A “lack of dynamism” in slot holdings means that some slots have been held by airlines for a long periods.
“Together with the inability of new airlines to enter and provide services at an airport, or smaller scale existing airlines at an airport to increase their operations, this makes it likely that the existing pattern of slot holdings does not reflect the most efficient use of all slots,” the CMA adds.
“Part of the reason incumbent airlines hold onto slots is due to the difficulty of acquiring new ones. This suggests that incumbent airlines may not be making the most efficient use of some of their slots.
“If slots could be obtained easily through market-based methods, there would no longer be such a ‘retention premium’ on holding existing ones and so we would not expect the level of slot holdings of incumbent airlines at certain major airports.”
In the absence of any major increase in airport capacity, the CMA “continues to believe that the slot system should be reformed to ensure airlines pay a price to acquire a slot which reflects the economic value of that slot”.
The CMA concludes: “Although there has been significant disruption in the industry during and following the pandemic, some UK airports remain significantly capacity constrained.
“Slot reform is therefore necessary to open-up new capacity and to promote competition and efficiency in the interests of passengers.
“We acknowledge that there are challenges in implementing these changes and transitioning to a new system.
“Change is often met with resistance, particularly from those with a vested interest in maintaining the status quo, and there will undoubtedly be hurdles to overcome.
“However, we are committed to continue to work with government to advise on how to address these challenges.
“We believe that the potential benefits of these changes, such as increased efficiency and fairness, continue to be significant, for passengers, the industry and the economy as a whole.”