London Heathrow Airport is one of the most heavily slot restricted airports in the world. There’s a limited amount of capacity, and there’s a lot of demand. As a result, airlines have to purchase “slots,” which give them the right to operate a flight at a specific time.
These slots can be sold between airlines, and in some cases can go for a lot of money. For example, just under a year ago Oman Air paid a record amount for a Heathrow slot. Oman Air paid $75 million to buy a Heathrow slot from Air France/KLM.
The value of a slot can vary significantly based on when the flight is due to operate. Part of the reason the slot that Oman Air bought was so expensive was because it was for a peak early morning arrival and departure, which is generally the most desirable.
Anyway, Delta has just entered into a deal with Croatia over a Heathrow slot.
Delta Air Lines will pay Croatia Airlines $19.5 million for a 5x weekly London Heathrow slot, which they’ll take over starting April 1, 2017. That’s a lot of money, though also only about a quarter of what Oman Air recently paid. Why is it cheaper?
- Because it’s 5x weekly, and excludes Monday and Friday service, which are two of the most desirable days, especially for a business market like London
- This is a late morning slot, which isn’t quite as valuable as an early morning slot
According to Croatia Week, Croatia Airlines has lost 37.5 million Euro on the route since 2002. They plan to use the money from this sale to invest “in maintenance and the restoration of engines of our fleet” (which sounds mildly concerning — hah).
Once the deal is complete, Croatia Airlines will continue to have four weekly Heathrow slots, which are for the afternoon. Those aren’t nearly as valuable. Furthermore, Croatia Airlines operates flights from London Gatwick Airport to Split, so I wouldn’t be surprised to see them expand service out of Gatwick.
I found this story interesting because it’s incredible how much money a slot at a busy airport can be worth. When most people consider how expensive airline operating costs can be, that doesn’t account for the financing costs (or at a minimum, the value) of having potentially hundreds of millions of dollars tied up in these slots.
In theory a third runway is in the works at Heathrow Airport, which should open up more slots, and in turn, make each slot less valuable. At the same time, it’s still highly questionable whether that will happen, and if it does, it’ll likely be a decade before it’s completed.
I’ll be curious to see what Delta uses these new slots for.
@ Rick Ross - here's a handy starting point: https://en.wikipedia.org/wiki/Landing_slot
The list is based on an IATA definition, and it's not complete, although it does list DCA and LGA, which don't meet the technical IATA definition but are slot-controlled nonetheless.
I see two missing cases I know of:
* Tokyo - Haneda
* Long Beach, which has separate categories for mainline and "commuter" flights. The mainline slots are currently fully assigned, but...
@ Rick Ross - here's a handy starting point: https://en.wikipedia.org/wiki/Landing_slot
The list is based on an IATA definition, and it's not complete, although it does list DCA and LGA, which don't meet the technical IATA definition but are slot-controlled nonetheless.
I see two missing cases I know of:
* Tokyo - Haneda
* Long Beach, which has separate categories for mainline and "commuter" flights. The mainline slots are currently fully assigned, but there are lots of commuter slots available. The slot definition is based on weight, a commuter slot has an MTOW max of 75,000 lbs. (I believe CRJ-700 is largest allowable jet in a "commuter" slot.)
New York LaGuardia and Washington National also have "perimeter rules" - these limit flight distance: 1,500 miles for LGA. 1,250 miles for DCA. There are some exceptions - the rule doesn't apply out of LGA on Saturdays, DEN is "grandfathered" in at LGA, and National has a few specific exceptions authorized.
I'm sure there are more...
Interesting article. Thanks.
PeteyNice says:
January 12, 2017 at 7:47 pm
@steve Virgin Atlantic has already moved the former DL flight SEA-LHR to 5:50PM from the much more desirable (to me) 8PM time.
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Yeah - but you're building a big hub and you have NO flights on your own metal? - and BA has 2 most days? I bet there will be some readjustment. SEA but I can also see PDX as others have posited, IMO.
Of course the same logic could apply to LAX but there is so much more competition.
@Martin 8PM from SEA means I can do a full day at work and then go to the airport. 5:50PM means I have to leave early.
This isn't BA. There aren't a ton of onward connections from LHR on Virgin Atlantic. Unless you are going to Lagos, Delhi, or Johannesburg. Or the excellent SEA-LHR-SFO mileage run. SEA-LHR on VS (or DL) is O&D.
John, actually CVG does have non-stop Delta service to Europe already. Just not to London, but to Paris, using a 767.
Trivia note - it's the only airport in Ohio, Kentucky and Indiana to have non-stop service to Europe.
CVG is a nice airport and well-placed for connections, so why not CVG-LHR?
@ML and TCI +1 to you both
Norwegian wouldn't be able to consistently have darling little fares if they were running out of LHR instead of LGW.
Petey, 5:50 pm works better for me because it arrives at a better time in London, enabling onward travel.
8 pm from LAX means you don't get to London until mid-afternoon, killing that day
Which other airports in the world are heavily slot restricted?
What about San Francisco? I'd gladly take the Delta lounge at SFO over LAX.
@steve Virgin Atlantic has already moved the former DL flight SEA-LHR to 5:50PM from the much more desirable (to me) 8PM time.
Actually DL will be ceasing SEA-LHR on their own metal March 26, instead code-sharing with Virgin Atlantic on their aircraft, so my guess would be LAX-LHR or perhaps even an additional SEA-LHR frequency. All of the other DL Hubs have service, except CVG and I don't see that happening.
@anon - a decade for a new runway sounds crazy, but Heathrow is not surrounded by vacant land. It is a built-up area, and the proposed new runway will run right through dozens of existing buildings that need to be bought or condemned by the government and then demolished. That process takes many years and is highly controversial, because people will lose their homes and businesses. Not to mention that the plan is opposed by...
@anon - a decade for a new runway sounds crazy, but Heathrow is not surrounded by vacant land. It is a built-up area, and the proposed new runway will run right through dozens of existing buildings that need to be bought or condemned by the government and then demolished. That process takes many years and is highly controversial, because people will lose their homes and businesses. Not to mention that the plan is opposed by the mayor of London; a decade is honestly optimistic. This isn't like Dubai where you can use foreign slave labor to build an airport in the middle of the desert in a couple years.
Sorry, meant SLC not LAW there. Not sure what I was thinking.
Or SEA, I guess.
Nick, there is a lot of competition between LAX and LHR. Not only BA, Virgin and United, but the Air New Zealand fifth freedom route that personally I would take.
Maybe if Delta has ambitions to build LAX up as a hub it might make sense but for connections LAW or even CVG might make more sense
One slot might be for the PDX Non-stop beginning in May. Last time I was in Portland, Delta was had quite a signs advertising that new route.
Well, with a late-morning arrival slot one could reasonably assume a West Coast to London flight. My money is on Delta restoring the LAX-LHR flight they shed last year, since they already have frequencies to London from Seattle and Salt Lake.
It also seems shady for Delta to be paying Croatia Airlines in USD to access a British airport. Paying in GBP would be a more transparent and customer-friendly move.
Since we're talking about this (eventual) third runway, will LHR have enough gates to provide (dis)embarkation for the number of new slots it opens up? Will they just start cramming remote stands in all over the place or what?
This puts established airlines in the interesting position of opposing the expansion of Heathrow as the value of assets they own, the slots, would decrease in value.
@hosea
What the other people said about gates vs slots. Gates at Heathrow are called gates.
Also, the "quirks" of English as spoken by English people are not quirks. They are English. The words you crazy lot in North America, Australia (or wherever else you are) use instead of words like "lift" and "lorry" are the quirks.... :) Don't get me started on what terms like fanny pack mean in English English...
It's a landing slot, not a gate, US uses that terminology too.
https://en.wikipedia.org/wiki/Landing_slot
@hosea
Gates are not slots. They are different. Slots are about the runaway capacity while gates are about the terminal. Heathhow can build more terminals but cannot build one more runway at this moment.
I knew that trucks are called lorries and elevators are called lifts, but despite all my travels to London I never realized that gates are called slots. All the quirks of "the Queen's English" are one of my favorite things about visiting the UK.
My guess would be a 4:30-5:00pm departure out of Seattle, beefing up some holes in service competing against BA.
Thank you for reading Croatia Week for me ...
Tell that to Brandenburg airport lolol.
LOL a decade to put in a new runway. Entire international airports are constructed in less time.