EXPLANATORY MEMORANDUM

1.CONTEXT OF THE PROPOSAL

•Reasons for and objectives of the proposal

Regulation (EEC) No 95/93 (the ‘Slot Regulation’) lays down the rules on the allocation of slots at EU airports. Its Article 10 sets out the ‘use-it-or-lose-it’ rule, according to which air carriers must use at least 80% of their allocated slots within a given scheduling period (summer or winter) in order to retain precedence in respect of the same series of slots for the next equivalent scheduling period (‘grandfather’ or ‘historic’ rights).

Due to the decline in passenger demand caused by the COVID-19 pandemic, air carriers have made major changes to their schedules since 1 March 2020, which have resulted in a slot utilisation rate at coordinated airports falling far below the 80% threshold imposed by the Slot Regulation.

To address this, on 30 March 2020 the European Union adopted an amendment to the Slot Regulation to waive the ‘use-it-or-lose-it’ rule for the entire summer 2020 scheduling period, ending on 24 October 2020. That amendment also empowered the Commission to extend the period covered by the waiver, by adopting one or more delegated acts. On 14 October 2020, the Commission adopted a delegated act extending the period waiving the ‘use-it-or-lose-it’ rule until the end of the winter 2020/2021 scheduling season on 27 March 2021.

As expected, the drop in passenger demand has persisted throughout the summer 2020 scheduling period. Eurocontrol data sets the start of the downturn in traffic in the European Economic Area (EEA) in week 11 with a drop of 17% compared to the same week in 2019. Traffic continued to drop sharply to a 59% and 82% decrease compared to 2019 in weeks 12 and 13 respectively. The lowest points were recorded in weeks 15 and 16 (89% decrease). Average load factors among a sample of 10 European air carriers dropped from 80% in week 9 to 26% in week 15. Not only were air carriers flying less frequently, but the remaining flights were underbooked compared to 2019. By week 23, when intra-EU air travel had been reopened to a large extent, the average load factor recovered to 44%. During the same week in 2019, the average load factor of the same air carriers ranged from 75% (week 4) to 86% (week 16). By mid-November 2020, air traffic was down 65% compared to the same week in 2019.

Latest Eurocontrol forecasts indicate that air traffic in February 2021 is expected to be only half the level of February 2020. What will happen beyond that is uncertain, but there are no indications that demand will return, in the summer 2021 season, anywhere close to the level of recent years.

At the same time, it should be recalled that the objective of the ‘use-it-or-lose-it’ rule is to ensure the most efficient use of airport capacity to maximise the benefit to the greatest number of users and allow passengers to reap the benefits of a competitive aviation market and connectivity. The waiver to the ‘use-it-or-lose-it’ rule has indeed provided relief to air carriers during the current unprecedented lack of demand and restrictions on air travel while also avoiding the negative environmental impact of empty or largely-empty flights operated only for the purpose of maintaining underlying airport slots. However, the negative impact of further extending the waiver should also be taken into account. The effect of the current waiver is to freeze competition at 2019 levels without there being any requirement that capacity is actually used efficiently, because the provisions of that waiver have turned out insufficient to ensure that other air carriers able to operate can obtain the necessary slots. For the period starting after more than a year of waiving the ‘use-it-or-lose-it’ rule (from 1 February 2020 to 27 March 2021), which preserves air carriers’ 2019 grandfathered slots until the end of the winter 2021/2022 scheduling season, it is time to establish a pathway to return to a normal application of the ‘use-it-or-lose-it’ rule. The return to normal should not be sudden to avoid destabilising the aviation market to the detriment of air carriers, connectivity, EU consumers, and the environment. The return to normal should take place in line with future increases in traffic levels toward 2019 levels or by a stabilisation of air traffic to a new market situation.

It is therefore proposed that from the start of the summer 2021 scheduling period, the normal application of the slot utilisation requirements under the Slot Regulation should reapply, but that the rate should be set at 40/60 instead of 80/20. That is to say that air carriers would be required to operate 40% of a given series of slots, in order for them to retain priority for a given operated series of slots for the following equivalent scheduling period. This adjustment would proportionately protect historic rights during the sharp drop in demand for air travel caused by the COVID-19 pandemic and would contribute to avoiding the environmental impact of empty or largely-empty flights operated only for the purpose of maintaining underlying airport slots. It would also contribute to a more efficient use of airport capacity for the benefit of passengers and connectivity.

In light of experience, this slot relief proposal includes conditions to ensure that the period of relief remains compatible with the optimal use of scarce airport capacity and also contributes to the preservation of competition, in the interest of passengers. Relief should be targeted at air carriers whose intention is to operate their grandfathered slots as soon as demand sufficiently recovers and flights are once again economically viable. Therefore, slot series newly allocated to an air carrier for the first time, i.e. slot series to which the air carrier is not entitled as a result of having obtained grandfather rights, should not be covered by the relief as those air carriers would have applied for such additional slots knowing that demand for air travel was low due to COVID-19 pandemic and the underlying slot series are exempted from the normal application from the use-it-or-lose-it rule. Therefore, air carriers obtaining such slot series for the first time will have to use at least 80% of such newly allocated slot series to obtain priority for the next equivalent scheduling period. This approach corresponds to the voluntary agreement between airports, air carriers and slot coordinators on the operation of the current slot waiver for the winter 2020/2021 scheduling season and beyond.

The use-it-or-lose-it rule (i.e. the requirement to use at least 80% of the slot series) should also continue to apply in the event of slot exchanges under paragraph 1 (c) of Article 8a, where the exchange is accompanied by any financial or other compensation. The intention is to prevent the payment of remuneration for the value inherent in the relief. By contrast, exchanges without financial or other compensation, carried out to improve timings, for example, would not stand in the way of the relief being applied to the slots concerned. The same would apply for example to slots transferred as a result of decisions by public authorities under national or EU competition law (cf. Article 8b of the Slot Regulation).

The proposal includes a deadline for air carriers to return unwanted slots to the coordinator if they are to benefit from the relief. A deadline of three weeks before the scheduled date of operations for that slot will allow airports and other airport service providers to have visibility over how much capacity is required and the volume of operations expected to ensure that they make adequate infrastructure, facilities and staff available. It also allows other air carriers to estimate which airport capacity is available, should they wish to use it to operate flights. The earlier the slots are made available for reallocation, the more likely it is that other air carriers will be able to use them. The rules proposed herewith cover both reallocation on a temporary basis for the season in question (without the carrier to which these slots have been re-allocated gaining grandfather rights) or on a permanent basis, namely where the air carrier which returned the slots to the pool, does not envisage using them in the next equivalent scheduling period. In that case, air carriers that used at least five of such slots should be given priority, over other applicant carriers and new entrants, to the entire original slot series of the carriers that released them to the pool.

It is also necessary to clarify under which circumstances the coordinators could withdraw slots from air carriers. When a coordinator determines, on the basis of information at its disposal, that an air carrier has ceased its operations at an airport and is no longer able to operate the slots which it has been allocated, the slots in question should be immediately returned to the pool and made available for reallocation to other air carriers, entailing the loss of historic rights over those slots for the airline leaving the airport.

On the basis of the information currently available from Eurocontrol, it is reasonable to assume that the current situation, characterised by an exceptional fall in demand, will continue until at least the start of the summer 2021 scheduling period. Given the uncertainty, it is also possible that the period of exceptionally low demand could last at least up to and including the winter 2024/2025 scheduling period according to predictions from air carrier and airport associations, such as ACI-Europe and IATA.

Therefore, under these circumstances, the Slot Regulation should be amended to further protect air carriers’ grandfather rights in those slot series that have not been used at the normal 80% rate during the period when the aviation market has been adversely affected by the COVID-19 pandemic. Slot relief would be extended for a further season, beyond the extension provided for in Commission Delegated Regulation (EU) 2020/1477, and would thus cover the period from 28 March 2021 until 30 October 2021. This relief would reduce the slot utilisation rate from 80% to 40%. In addition, the amendment would give the Commission delegated powers to further extend the slot relief beyond the summer 2021 scheduling season and also to further adjust the rate of slot utilisation based on a number of indicators such as actual and forecast air traffic data, load factors and fleet utilisation. The Commission would adopt delegated acts, where required, to adjust the slot utilisation rate, for any scheduling period from winter 2021/2022 up to and including winter 2024/2025.

The slot allocation process takes place well in advance of the respective scheduling period. Air carriers, airports and other service providers would thus need to know in due time about the rules applicable to a given scheduling period. By the same token, early knowledge of those rules also encourages them to return slots they do not intend to use to the coordinator at an early stage. Therefore, the Commission should adopt the relevant delegated acts before the slot allocation process is finalised.