From The Evening Standard:
Flybe owns about 6% of Gatwick’s slots. Selling off some or all of these — to operators which could include easyJet, British Airways or Norwegian — could bring in, according to Liberum Capital’s estimates, as much as £12.5 million.
I have no idea whether Flybe owns the best slot or the worst slots, but assuming a mix of both, that means the total value of the landing/take-off monopoly rights at Gatwick (after taxes etc) is around £200 million.
From the BBC, late 2011:
British Airways owner IAG has agreed a binding deal to buy BMI from Lufthansa for £172.5m, but has warned the deal could lead to job losses. IAG, which also owns Spanish airline Iberia, will gain 56 more slots at Heathrow airport in the deal...
BMI, which is based in Castle Donington in Leicestershire, operates flights to Europe, the Middle East and Africa. It has 8.5% of the landing slots at Heathrow, the UK's busiest airport, which are seen as the main attraction of a purchase.
Again, I don't know what sort of mix BMI had, but dividing £172.5 million by 8.5% gives us a total value of the landing/take-off monopoly rights at Heathrow (after taxes etc) of around £2,000 million (£2 billion).
Heathrow appears to have double the capacity of Gatwick (Wiki) so presumably the extra £1,600 million is explained by where the other ends of all Heathrow's slots are?
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4 comments:
No - slots don't have "other ends" in the sense that you mean here. A Heathrow slot solely means that if you already have the right to fly from the UK to $wherever (either because $whereever is in the EU and hence under open skies, or because you've got rights under the aviation treaty between the UK and $wherever outside the EU), you can do so using Heathrow.
The vast difference in value between LHR and LGW slots is explained partly by network effects (the same reason why the first telephone is useless, the second one isn't much good, but the ten millionth is massively valuable) and partly by prestige.
If BA get an extra slot at LHR, they can use it to fly American businessmen from New York or Chicago to connect into flights to Hyderabad or Bahrain or Bangkok. If they get an extra slot at LGW, they can use it to fly chavs to the Algarve, or at best the Caribbean - the long-haul connections are negligible.
At the same time, non-UK airlines will pay funny money to get LHR access so they can feel like a proper airline - famously, Continental paid $20m for a single pair of LHR slots shortly before the GFC because they felt (with some justification) that flying into Gatwick made them look tinpot.
JB, so the network effects make the LHR slots worth five times as much each? Fascinating. (Let's assume Continental was an outlier and use BMI for these calculations).
Yup, it's generally accepted in the industry that BMI is about the right level to assess LHR slot prices, and the 5x seems plausible.
Remember here that the value of most time slots at most airports is zero: if you want to fly from Belfast to Newcastle on a Tuesday lunchtime all you need to do is pay the landing fees, because there' plenty of capacity.
The fact that LGW's slots are worth anything at all highlights the ridiculous lack of capacity in London.
JB: "Remember here that the value of most time slots at most airports is zero"
Agreed, that appears to be the case.
"The fact that LGW's slots are worth anything at all highlights the ridiculous lack of capacity in London."
Agreed. There's a follow-up post to this, I buggered up the maths at the end. The value of a LGW slot is (say) £600,000, but that's the capitalised value, let's assume annualised value = £120,000, divide by 360 flights = £333 per flight, so the super-profit is only £1 or £2 per passenger per flight.
Of course, if you add APD to this, it gets more interesting.
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