Don’t let a slot scarcity distort aviation rivalry

Photo: Mint
Photo: Mint

Summary

Jet Airways’ revival plan has revived a debate over the way we award airlines the right to use runways. The current system is flawed. But sadly, the options proposed so far would be worse

Jet Airways, which went out of business in April 2019, could soon be ready to fly again under new ownership. On Tuesday, the National Company Law Tribunal (NCLT) approved a bankruptcy resolution plan submitted by a consortium of London-based financial advisory Kalrock Capital and Dubai-based businessman Murari Lal Jalan. Jet’s new owners are to get almost 90% of the airline’s equity, pay off some of its debt and obtain a fresh set of government clearances within 90 days to restart operations. These had lapsed after it shut down. The Kalrock-Jalan combine had hoped to reclaim its prized landing slots at Indian airports, but the NCLT rejected its argument that Jet’s “historicity" of runway usage entitled its aircraft to land and take off by their former schedule. In other words, it will now have to re-apply for specific time permits. Back in its heyday, Jet had over 700 slots, and its dominance of peak-traffic hours at Mumbai and Delhi gave it a competitive edge over its rivals. Slots are not just valuable, they are also perishable. So, under a loose use-or-lose policy, they were re-allotted to other air carriers. While Jet’s claim to their restoration is weak, it has revived a pre-covid debate over slot allocation.

Globally, landing rights have mostly been awarded on a first-come-first-serve basis, with convention assuring existing holders of slot retention. However, as the aviation market grew and flights got added on, demand for slots began to outstrip supply, even as airlines often needed to shuffle their services. The pre-pandemic pressure on slots at India’s major airports was particularly high. Carriers would submit their flight schedules to airports before the summer and winter seasons for aviation authorities to award slots by availability. If an airline used at least 80% of a season’s rights, it could keep its share for the next, even if a few of them went unused. This is a global norm, but not all operators found it satisfactory. Some years ago, calls arose for the Centre to revise our allotment policy. Critics argued that the legacy method was unfair. It hobbled the ability of new entrants to attract flyers by flight timings and thus favoured incumbents, thus depriving flyers of a fair set of choices. Today, while Jet is counting on its brand salience to sell air tickets, as a new player in regulatory eyes, it can argue along the same lines. Before its 2019 exit from our airspace, policymakers had toyed with the idea of a slot cap for each airline. This proposal was binned, thankfully, and the status quo prevailed. But should it? The answer would depend on whether we can identify a better way to allot runway slots.

One suggestion is to hold periodic auctions for the privilege, but as we saw with telecom spectrum, this could lump operators with the ‘winner’s curse’, upsetting cost calculations and straining their finances. A random scatter would be worse. Aviation, after all, is a business of coordination involving multiple touch-points. The fact that each disturbance can have a ripple effect places a premium on schedule stability across any dense web of routes. The heavier the air traffic, the thicker this web lock. The benefits of dynamic re-allotment might easily be outweighed by the disruptive potential of such an experiment. Yet, while infrastructure expansion offers an obvious way out, long-term, and covid has given us a reprieve on this, we should not give up our search for a superior mechanism. It’s a vital sector. And we mustn’t let a slot scarcity distort rivalry.

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