Etihad’s Heathrow Airport Slot Conundrum

Filed Under: Etihad

Just a moment ago I wrote about how Jet Airways is struggling to stay alive, as the airline has grounded nearly 90% of their fleet and has amassed over a billion dollars of debt. The airline has canceled all international flights, and there’s an interesting side effect to this.

The basics of airport slots

Some high demand airports are slot restricted, meaning that in order to fly to the airport you need to specifically get a “slot” that entitles you to a takeoff and landing. This isn’t the case at all airports, but rather only at airports that have more demand than they can handle.

In some cases these slots are just allocated by authorities based on what maximizes the good for the public, and don’t cost anything. In other cases these slots are sold to airlines for tens of millions of dollars.

Heathrow Airport slots are the most valuable airport slots in the world. For example, in 2016 Oman Air paid 75 million USD for a single slot at Heathrow, which is the most expensive slot ever sold.

Jet Airways’ three Heathrow slots

Jet Airways had three Heathrow slots, and these were slots that belonged to Etihad, but which they leased to the airline (given that Etihad has been a big investor in Jet Airways).

The history of these slots is interesting — these initially belonged to Jet Airways, and then in 2013 Etihad purchased them from the airline for 70 million USD, and leased the slots back to them. This was a way for Jet Airways to raise cash.

It appears that Jet Airways has just permanently transferred their three Heathrow slots back to Etihad Airways. This means that:

  • Jet Airways won’t be returning to Heathrow
  • Etihad suddenly has an additional three Heathrow slots to use

What could Etihad do with three additional Heathrow slots?

As it stands, Etihad currently operates 4x daily flights to Heathrow, and now they have access to an additional three slots. These are highly desirable slots, so it will be interesting to see what the Abu Dhabi based airline does.

There are three things they could do with these slots:

  • They could add three additional flights to Heathow
  • They could lease the slots to another airline
  • They could sell the slots to another airline

Could Etihad start operating 7x daily flights between Abu Dhabi and London? If they’re being logical, I highly doubt they’ll do that, given that they’ve sustained huge losses, and are looking to become more of a boutique airline. Operating 7x daily flights between Abu Dhabi and London doesn’t fit into their new strategy.

So that leaves the question of what airline they’ll instead lease or sell those slots to. These slots can sell for a lot, so if they’re looking to raise cash. While they bought them for 70 million USD, I imagine at this point they could sell them for even more.. Otherwise it seems more likely they’d lease them out.

I’m curious to see how this unfolds…

Comments
  1. Etihad only consistently has 3 daily flights to Heathrow. Right now they have a 4th, but it’s seasonal. Most of the time it’s the 9 am departure, the 1pm departure, and the 8/9pm departure.

  2. There is only one slot that works for North America flight timings and is also very similar to the slot Oman Air paid a fortune for. JetBlue is not going to pay $70M for a slot to fly a narrowbody plane to LHR; that is an awful investment for them.

  3. If leasing does the owner of the slots have fees to pay? I’m thinking of like renting, owner has to pay utility bills. Is there a similar maintenance fee for owners of airport slots?

  4. Well Virgin Atlantic have said they’re looking to return to Mumbai so one of those slots would be perfect for them. They also said they wanted to return to Tokyo as well. As for JetBlue, I can’t see them buying a Heathrow slot but maybe getting one on lease as i personally can’t see them settling for anything less than Heathrow.

  5. How many airports in the world have slot restrictions? It seems like the A380 was made for this, but it entered the market at the totally wrong time.

  6. Replying to Garrett

    The A380 is quite ahead of its time. I would say in 10 or 20 years time, its true golden time will come, as passenger volume has risen a lot and some airlines who do not have enough slots will consider to use the jet. Heathrow and many others major airports (I’ll name a few, LAX and JFK) are slots restricted. With these being said, we might even see the A380 production line being restarted!

  7. Etihad should lease them to somebody in the short term. Conveniently Etihad will probably have fallen into financial ruin in the next 18 months and merged with Emirates, and then Emirates can sell them to JetBlue 😉

  8. @fr AFAIK when people talk about Heathrow ‘slots’ they actually mean ‘slot pairs’, so yes you are correct, both a takeoff and landing slot are required. I may be wrong though.

    I know airlines that have LHR slots need to use them or the slots get taken away (which is what led to those weird empty flights to Cardiff a while ago). So theoretically if Etihad can’t find a buyer, could someone buy a slot for the lowest possible price they would accept, hire someone to fly a Cessna in and out every day for the sake of keeping the slot, then flip it when the time is right for a big profit? Or is that a crazy idea?

  9. Maybe one of the oldschool carriers no longer found at Heathrow, such the Argentine Carrier Aerolineas Argentinas will return to London?

    A direct flight from London to Montevideo is also lacking. But as Iberia and BA are so close this is unlikely to be seen as an issue.

  10. A slot is good for one landing or one departure. A slot pair is what an airline needs allowing for a departure and arrival.

  11. They will need to do something PDQ because of the 80/20 use it or lose it rule. Depending on how many cancellations Jet had in the last year they may have to act sooner rather than later and yes flying in an empty plane is an option – though expensive.

    What they could do is shift an existing flight into one of these slots and then swap back to the original one in a couple of months (otherwise the 80/20 rule could apply to that slot).

    When VS got the slot it leased to Cobalt back when they went out of business they fairly rapidly added in an extra LHR-JFK rotation to protect it. That slot is now being used for a Flybe Guernsey-LHR flight for six months before it goes back to VS.

  12. Why not run fifth freedom to JFK/LAX, or even YYZ? Or just let Air Serbia sit on it for a couple months, or even PR.

  13. Ben, did you see that Avianca Brazil is bordering bankruptcy? They’ve been instructed to pay upfront their airport fees or they can’t fly. They paid for flights today out of GRU, no word on flights for tomorrow. Dicey situation down in Brazil. Would make a good article.

  14. Jake – Why would it have to be Heathrow, that makes little sense. That only really matters for onwards connections, of which JetBlue won’t have any anyway. It’s no harder to get to the city from Gatwick than it is Heathrow – will the average JetBlue flyer care?

  15. Maybe EK will buy one or two from EY, since now EY is wanting cash and EK is hungry to expand in London, with their second daily to Stanstead coming up.

  16. Can they give the 6:45 slot to Garuda please? Maybe then they could eliminate the London-Denpasar flight and make the Jakarta-London vv profitable.. one can dream, right?

  17. I think it would be prudent to retain slots till the cricket world cup and deploy more flights to London till end of July. By that time jet airways should have either died or be back on track.
    Jet operates 777 300.er which is also used by Etihad and they should temporarily dry lease it for 2 quarters.

    Cricket world cup is a big travel event and almost all carriers are flying full. They should also try and offer more direct flight from Italy and they own Alitalia as well and try to drive EK out of LHR by even using a small body aircraft.

    Please understand both EK AND QR FLY WIDE BODY OR 380 TO LHR. IT might be worth while to use 320 and drop fares as cost per seat for EK and QR is relatively higher . These slots are priceless time slots and if

  18. It’s three slot pairs that are being transferred from Jet to Etihad, effective Sunday 28th April:

    A 05:45 D 08:30 – BOM
    A 16:55 D 20:20 – BOM
    A 17:20 D 19:45 – DEL

  19. Expect BA to at least try to buy them. Highly desirable slots and you can’t make more of them. My guess is that BA will use them to either open some new destinations, increase frequencies or both. But as they’re a fantastic three slots there will be a lot of competition from almost every carrier that is looking for room at Heathrow.

    Could these be the slots that jetBlue are looking for?

  20. I’d be amazed if BA was allowed to buy them. The regulator will probably want to see more competition at LHR, not less.

  21. Noah

    Eithad needs to offer them for sale before BA (or anyone) can buy them and then as Paul says the regulator will have an opinion on who gets to (a) buy them and (b) what routes they get used for taking into account the slot history of previous ownership (were they previous remedy slots for example with restrictions on ownership or destination)

    And as for them being ‘highly desirable’ that’s debatable because their desirability depends on the destinations an airline wants to use them for. The slot pairs are for times rather than a particular route.

    A 16.55 or 17.20 arrival from say NYC would mean a 5.00AM (roughly) departure for example. Many people wouldn’t call that ‘desirable’ whereas the 0545 arrival might suit Jet Blue because that would be an approx 600pm departure from the US and would likely be one of the first US arrivals in to LHR which could be attractive to some people (business traveller who could have a day of meetings) but not for leisure travellers.

    And Eithad may prefer these slots themselves and sell / lease out their other slots (I say that not knowing their schedule so could be very wrong but it is something they would at least look at)

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