Air New Zealand Sells Heathrow Slot For $27 Million

Filed Under: Air New Zealand

Air New Zealand has recently sold their Heathrow Airport slot for ~27 million USD… but who is the buyer?

Air New Zealand is ending London flights

Air New Zealand will be ending service to London Heathrow later this year:

  • Back in the day the airline flew from Auckland to Hong Kong to London, and also from Auckland to Los Angeles to London
  • Several years ago the Hong Kong to London flight was canceled, leaving the Los Angeles to London flight as the only remaining flight to London
  • As of October 2020, Air New Zealand has decided to launch an Auckland to Newark flight, and in the process will cancel the flight between Los Angeles and London

Air New Zealand has sold Heathrow slot

Heathrow is one of the world’s most slot restricted airports, and for the most part airlines “own” the slots, and they have the ability to buy and sell them.

Given that Air New Zealand is ending flights to London, they no longer need this slot. Forbes is reporting that Air New Zealand has sold their Heathrow slot for ~27 million USD. The sale was closed in late January.

There’s huge variability in terms of the price at which Heathrow slots are sold. In 2016, Oman Air made headlines when they purchased a Heathrow slot at the record price of $75 million.

Oman Air set records for their Heathrow slot purchase price

That was exceptionally expensive, though in general these slots do sell for tens of millions of dollars.

One big variable is also what time of day the slots are for. The Oman Air slot was for prime morning hours, while the Air New Zealand slot is for an ~11AM arrival into Heathrow, and a ~3PM departure from Heathrow, which is certainly less premium.

While the deal was completed in late January, I imagine the price could have pretty easily shifted higher or lower based on a couple of current events:

  • In late February a court blocked a third runway from opening at Heathrow, which presumably increases the price per slot, since it doesn’t look like capacity at the airport will be increasing; the deal was closed prior to this announcement, though
  • With the coronavirus situation and huge decrease in global travel at the moment, presumably that would decrease the price per slot, since demand is lower right now than it was before; this deal was closed around the same time coronavirus became a global news story, but before it got as bad as it is now

What airline purchased the slot?

As of now the buyer of Air New Zealand’s Heathrow slot hasn’t yet been revealed. I’m sure I’m not alone in wondering who the buyer is. A few possibilities come to mind:

  • Vistara just got their first 787 with which they’re going to launch long haul flights, and London is expected to be their first destination; will they be willing to pay the premium to fly to Heathrow rather than Gatwick, though?
  • JetBlue plans to start London flights in 2021, though personally I think it’s unlikely they’ll fly to Heathrow, based on the cost to purchase slots
  • The Gulf carriers always have to be considered, so Emirates and Qatar can’t be ruled out; both carriers have expressed interest in increasing Heathrow service, and that’s despite flying to other London airports as well
  • I suppose American, Delta, and United, can’t be ruled out either

Vistara plans on launching London flights soon

That’s about all I can think of off the top of my head, though I’m sure there are other possibilities.

Bottom line

Air New Zealand has sold their Heathrow slot, which doesn’t come as a surprise, given that the airline is ending flights to London in October. The real question is what airline was the buyer…

What airline do you think purchased Air New Zealand’s Heathrow slot?

Comments
  1. Where would the AA’s SEA-LHR slots come from if it’s not substitution for one BA freq?

  2. Indeed sale was announced back in late January by NZ in a stock market filing by NZ.

    Certainly not case of “just sold” as story indicates.

  3. I would assume UA, they have a good relationship with NZ and UA just made their DEN-LHR flight year round which requires them to reduce an EWR-LHR flight in winter. This would give UA the ability to keep their EWR schedule in winter and possibly add additional summer frequency from one of their hubs. In addition the slots would line up well for an SFO flight, as the last SFO flight on UA leaves at 1130am, this way UA could offer a later last departure to SFO.

  4. @Mark – depends on what combination of business and leisure travelers JetBlue is looking for. The arrival is too late and departure too early for a lot of business travelers – if you used those times to arrive in London for a typical one-week business trip you’d lose the better part of an entire day. Also, that’d put the departure time from JFK somewhere around midnight, which is far from ideal.

    Also, I’m not sure JetBlue would want to launch the service with a single daily flight, and it’s hard to say when more slots might become available and at what price.

    I still think they’ll go with Gatwick if they can – it offers a balance between cost and easy access to London and frequent express trains to London, with Victoria Station as accessible as Paddington to central London.

  5. How tiresome these ‘I knew that’ people sound. Then start your own blog and report it.

    I was not aware and I’m sure many others also. Just an interesting tidbit in the forever changing airline industry.

  6. What about qantas with project sunrise consideration which would be a third flight into LHR?

  7. A ridiculous move which brings into question in a wider context whether an airline benefits when executive pay can be boosted by asset sales creating artificial profits.

    Air NZ is now completely dependent upon the Pacific Rim, having sold the slot pair for the highly profitable LAX-LHR pair.

    But the bottom has fallen out of the Asian markets, and one of the airline’s key Asian routes has been at best marginal for years anyway.

  8. So will the same happen to the excellent Air New Zealand (STAR Alliance) Business Lounge in the LAX TBIT

  9. Fondly remembering the days when Tasman Empire was the only airline to circumnavigate the globe on scheduled service. It’s really sad to see Air New Zealand whither so.

  10. Auckland to Heathrow via Hong Kong was a short lived experiment to offer an alternative to Dubya’s WaronTerra imposition of full immigration controls on passengers simply transiting at LAX. Previously you got off NZ1 from London, your bags stayed on and you were directed to a small transit lounge, instead of border control, someone came down and opened up a small refreshment stand if anyone fancied a drink, then you got back on the same plane, to the same seat, and off on the second leg to Auckland.
    Then came Homeland Security and everyone had to go through immigration only to get back on the plane. There were tales of two hour queues, missed onward flights, no time for biz passengers to get to the lounge, etc.
    Hence the introduction of the Hong Kong to London continuation of the flight from Auckland. I believe it was very popular but, with much Asian airline competition on the HKG-LHR route, Air NZ couldn’t make a decent profit and the extension was axed after a few years.
    The latest plan, after ANZ LHR flights end, is a direct 787-9 hop from Auckland to Newark followed by a codeshare with United across the pond to London on UAL equipment. (Continental once flew DC-10s from London to Auckland via Tahiti.)
    Air NZ has a long history of flights to London. Initially its own crews flew DC10s to LAX and BA crews took them on to Gatwick. It was a while before a slot became available at LHR for the ANZ crewed 742s, 744s and 773s that flew the route ever since.
    After Continental, Qantas/BA codeshare and then United all gave up on the Pacific hop from Auckland to LAX, Air NZ had the Pacific to itself. More recently both AA to LAX and United to SFO have arrived but on a seasonal basis.

  11. Sean M,
    Azman will be flying to Gatwick.
    I don’t know wether Arik Air still have their LHR slot,which was originally Nigeria Airways’s.Its been over 4 years since they operated to LHR & the British Airports Authority had been operating a “Use them or lose them” policy on slots.

  12. Logically, United would gain the most from purchasing it particularly as they already have a partnership

  13. There is no such body as the ‘British Airports Authority’ these days. It ceased to exist in 1986 when it was privatised by the UK Government when it became BAA and BAA actualy means nothing.

    The present owners of LHR are HAL – Heathrow Airport Holdings.

    This company – Airport Coordination Limited – are responsible for slot allocations at LHR. And for fining airlines who breach the slot rules (such as for consistently not operating within the slot time)

    https://www.acl-uk.org/

  14. It could very well be Vistara. An arrival at 11am At LHR would mean a departure at ~8pm from their hub in Delhi, while a departure at 3pm would mean an arrival at ~6am Delhi time.

    Also – London is a big destination for Indians, and with Vistara’s premium positioning and financial backing, it wouldn’t go down well with their prospective clientele to fly to Gatwick.

  15. @AGB
    TEAL ( forerunner of AIrNZ) had some of the best travel posters going. Replicas can be see in lounges, including the one in Melbourne. Wonderful artwork.

  16. Wouldn’t it make sense if AA bought this slot for their new Seattle flight? I haven’t yet heard of any route reductions or other slot purchases to make that flight work.

  17. Given the decision regarding LHR 3rd runway, it seems like AirNZ left money on the table with this sale (Covid-19 has to be seen as a short term i.pact – 2-4 years is still short term).
    Wonder which ‘consultants’ were involved in the valuation and wonder even more, why Air NZ and NZ government (well represented in London via High Commission) didn’t hav3 ears closer to ground/have consultants who can read tea leaves, to make a better assessment if the likely outcome of the cort challenge to runway 3. Slot prices will definitely trend higher.

    Just sayin,

  18. Over 80 million passengers pass through the hub each year. Therefore, whichever firm takes on the slots will likely see a lucrative return on its investment. Even though the sale is for more than expected, it doesn’t come close to the record at the airport. In 2016, Oman Air purchased a slot Heathrow from Air France/KLM for $75 million.

  19. Air New Zealand use T2 at Heathrow. Would the slot sale include which terminal it is to be used at? If so then it’s likely a Star Alliance airline

  20. It’s entirely possible that Heathrow could overturn the court ruling. So don’t call it a done deal. The third runway is still a possibility. This probably doesn’t apply to you as much as it does for Londoners but the third runway has been going on for so long, the idea was first proposed in 2001 and now it’s twenty years later and it might not get built. It’s shameful on my city.

  21. So did air nz sell there second slot they had via Hong Kong a few years ago or do they still own and lease it.
    I still don’t understand why they want to pull out of Heathrow as they could of made it better traveling via another destination instead of LA.
    There service is far superior to other carriers and l felt the real problem was having to go through security again in LA.
    I still fly the route as l am used to it but will miss it when they pull out.
    I guess they might of sold it to United so they can have good connections from New York when they start the direct services from Auckland- New York in October.
    What’s annoying for me is on the website they are not showing any flight options from Vienna after October.
    Hope they sort this

  22. @KJ – There is so much factual inaccuracy with your comment that I don’t know where to begin.

    1) There is no such thing as “British Airports Authority”, at least not for the last quarter century. Even BAA plc (it’s privatized successor) no longer exists after the forced divestiture of Gatwick and Stansted.

    2) Arik Air never got any slots from legacy Nigeria Airways. Contrary to popular perception, one can obtain off-peak slots at Heathrow (viz. evening) for free through the allocation process with a little bit of lobbying and flexibility. Their slots in turn were lost (as were Nigeria Airways’ before them) when they suspended operations.

    3) Airports in the EU (and most of the world) have no say (officially) as to who gets slots. Those are handled by an independent slot co-ordinator, which in the case of Heathrow is ACL (Airport Co-ordination Limited) – a private company jointly and collectively owned by multiple UK carriers including BA, Virgin, Easyjet, Jet2, TUI and the former flyBE. ACL also handles slot allocations at numerous major airports worldwide including LGW, MAN, STN, AKL, DXB and MCT.

    4) The 80-20 “Use It Or Lose It” policy on slots is part of the IATA WSG (Worldwide Slot Guidelines) program and not something that individual airports implement. Any airport that participates in the WSG program (which is pretty much every major Level 2 and Level 3 airport) enforces this regulation, although waivers are available of course for special circumstances.

  23. Sean M,
    Sorry there were so many factual errors in my my comment,i didnt do my research, & wrote off the top of my head about the old BAA etc.
    However Azman wanting to fly to Gatwick is factually correct.
    I read up the on the IATA WGS ,that you wrote about & it was enlightening. The bizarre thing is,that how are airlines allowed to sell the slots & not just give them up if no longer needed.That will always put them out of reach of certain airlines

  24. @KJ – No worries. WSG can be a very interesting document when you read it the first time! 🙂

    Secondary trading of slots is still a grey area. Technically, slots are never “sold” but rather “traded” for other slots plus financial considerations. So even in this case with Air New Zealand, there is probably an underlying transaction somewhere where they traded their series in exchange for a random slot on a Saturday morning in February plus $27m.

    I remember the first Heathrow slot transaction I was involved with back in 2004-5. It was for a daily whole-year series of approx. 1800z arrival and 1900z departure (so not particularly peak period). The slot pair was valued at $19m back then, but the complication was that the historical owner already had an agreement with another airline to sell the slot starting with the W06 season. Therefore, they needed a “slot-sitter” to operate that slot for S05/W05/S06 seasons to maintain the 80/20. However, they also needed a bank guarantee for the $19m to secure against default, which in turn had to be secured by an insurance policy. There was also a “subsidy” involved from the historical owner to the slot-sitter to offset some of the insurance premiums. The official transaction for the slot was a trade of a 0400z arrival slot from the pool (which is inoperable without night quota allocation) in exchange for the pair (and the accompanying commercial transactions was to be conducted separately).

    But I digress…. 🙂

  25. I think it’s Cathay Pacific that is buying this as they were borrowing this spot from Air NZ previously in return for a JV deal between HKG-AKL segment.

    The timings are also perfect for HKG-LHR for timing wise.

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