Economic downturn drives down slot prices

The bleak economic outlook in Europe means airlines can snap up slots at lower prices at London Heathrow, according to a senior member of BAA’s network team.

Sarah Whitlam, network development manager at the airport operator, told delegates at the 18th World Route Development Forum, in Abu Dhabi that while slot prices remained high “the economic climate offers the chance to buy slots at a lower price.”

But Whitlam said that this situation was likely to change in the future and that “the value of slots is also likely to increase as the economic situation improves.”

Whitlam said prices were currently “flat” having dipped since their 2008-high – when one airline paid $207 million for four daily pairs. The average now stands at £7 million ($11.3 million) for a daily slot, she said.

Speaking at ‘Routes Talks: Industry Issues and Suppliers’ Whitlam outlined the benefits of slot trading at the London gateway. She told delegates that slots should be viewed as assets which can be placed on an airline’s balance sheet, adding that their value would increase.

Prices decrease throughout the day; currently the typical price for an early morning daily slot is £15 million ($24.25 million), reducing by 30% by midday and 50% by the evening. The average cost of a single slot is £0.5 million ($0.8 million), Whitlam added.

Whitlam said the cost of a daily slot could be covered by adding just £4 ($6.50) to the price of an airline ticket. She added: “Although prices are still very high, they are an asset on your balance sheet and will increase in value. Think of it as a long term investment.”

She said that airlines might not necessarily want the slot they are buying, but added that slots could be re-timed and advised delegates to consult with BAA before buying, however, to find out whether this would be possible.

Whitlam said BAA’s commitment to “making every journey better” meant slots could not necessarily be re-timed for busy periods of the day. She said selling slots gave airlines the opportunity to “realise a financial asset” but warned that trying to buy back replace slots at a later date would mean paying a higher price.

Slot trading at Heathrow is managed by Airport Coordination Limited (ACL) and trading can be done online at www.slottrade.aero. She added: “Airlines find that slot trading is a great way of growing at the airport.”