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48 KNOWLEDGE
Deloitte.
The skies may be open according to Brussels – but
the tarmac certainly isn’t, as Graham Pickett reports
Many may have wondered about the benefits of operating from Whilst EU and country government regulations are in place to
Heathrow over the last few months, given press comment and ensure landing slots are allocated fairly, the analysis above
personal experiences. So the regularly-made comment that the indicates that, at Heathrow, they have generally failed to
right to take off and land at Heathrow and other South East airports significantly erode the presence of the ‘national flag’ carrier airlines
is immensely valuable may have appeared questionable to some. at key airports. So the UK airlines have a very substantial asset
currently unrecognised on their balance sheet. You would expect
But recent analysis may go some way to telling us why so many that they will fight hard to keep it.
airlines operate from the most crowded airport in the South East and
force us to travel from it. It also shows how the benefits of the recent Regardless of the regulations, airlines keen to rival the incumbent
Open Skies agreement may accrue differently than some expected. players may find it difficult to secure landing slots. Trading in slots, a
bit of a grey area in terms of regulation, can be an extremely
Firstly, some facts. At Heathrow, this summer, there are a total of 9,562 expensive business. Financing the purchase would be a challenge.
slots available to all airlines. 99% of these are held by legacy/flag But there could be the potential to use landing slots as security
carrier airlines - those already established at the airport. Of these 41% against borrowings if the airlines recognise their value on the
of the Heathrow slots are held by British Airways, with BMI holding a balance sheet.
further 11% and Virgin Atlantic holding 3%. One interesting result of
this is that just 1.0% of slots are available for allocation to new entrants The high value of landing slots is not, of course, just limited to
and many of these are unusable because of their timing, or other Heathrow. In Europe the most valuable landing slots, after
factors. So, although the skies may now be open to new airlines Heathrow, are Charles de Gaulle, Gatwick and then Frankfurt. And
according to Brussels, the tarmac at Heathrow certainly isn’t. the impact of the Open Skies agreement signed earlier this year
could impact those airports significantly as transatlantic travel in
These slots are very valuable. Based on recent transactions, the particular moves in response to the desire to fly direct, rather than
implied value of a pair of peak time slots at London Heathrow is through a spoke and hub arrangement.
currently worth between £25 and £30 million. This is based on
purchases in the last six months, such as the transaction by But the Open Skies agreement is almost certain to lead to greater
Continental Airlines who paid US$209m for four pairs of take-off and demand between airlines for landing slots at Heathrow as that
landing slots to GB Airways, Air France and Alitalia. A simple airport is still seen as the ‘Crown Jewel’ for landing slots. Where
extrapolation would indicate that the total value of the above previously just four airlines could operate flights from Heathrow to
summer slots would be approximately £130 billion. As the value of the US, the Open Skies agreement opens the market to new
slots varies, primarily depending on the time of day, the actual value entrants and it is logical for other airlines to look to acquire slots
would be less than this, but the figure is, nevertheless, extraordinary. there. So don’t count on the queues reducing just yet.
To put the above figures in context, the current market value of Source: Graham Pickett of Deloitte 01293 761232
British Airways is approximately £2.6 billion and the total assets of gcpickett@deloitte.co.uk.
BMI were approximately £0.4 billion per the last accounts. Are
some analysts’ calculators already clicking you start to wonder?
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