Monarch and the monopoly value of landing slots.

From City AM:

Shares in some of Monarch's airline rivals jumped this morning after the news that Britain's fifth biggest carrier had ceased trading.

Easyjet, which was reported to be one of a number of parties in talks with Monarch to save the airline, led the way and was this morning's biggest FTSE 100 gainer. Shares were up almost five per cent by lunchtime. Wizz Air was up almost four per cent and was quick to offer Monarch customers so-called "Rescue Fares" to help people stranded in Tel Aviv get back to the UK. Ryanair shares rose 2.64 per cent while Flybe was up 2.2 per cent and British Airways owner IAG was up over two per cent.

According to another article, the increase in value of shares in the other airlines was £500 million (ironically, a similar amount to what Monarch's last owners lost).

Why would this happen? Woolworth's, MFI and HMV went *pop* ten years ago, because retail generally was doing badly (credit crunch and internet competition) and they were doing worst. Did shares in other retailers jump? No. They all had the wolf at the door.

The answer is simple. From The Birmingham Mail:

Rivals have begun circling the carcass of collapsed airline Monarch in the hope of bagging its landing slots as the firm's administrator prepares to carve up its assets.

The likes of easyJet, Wizz Air, Norwegian Air Shuttle and British Airways owner IAG are understood to be mulling moves for the carrier's slots, which span Manchester, Gatwick, Birmingham, Luton and Leeds-Bradford airports, according to people familiar with the matter.

Robin Byde, transport analyst at Cantor Fitzgerald, said that Monarch's assets would be attractive to easyJet in particular. "Monarch assets may enable easyJet to increase frequencies on common routes, gain more attractive year-round and seasonal slots, and generally take market share. On fleets, synergies could be attractive as Monarch currently operates 34 Airbus A320-family aircraft which are compatible with easyJet's fleet."

The allocation of landing slots is murky, historically, airlines got them "for free" on a use-it or lose-it basis.

You can sell them on provided you've actually used them 80% of the time over the past X months, so the liquidators of Monarch only have a short period to sell them before the slots all forfeited. So there's half a billion quids' worth of mini-monopoly slots now to be sold cheap in a fire sale or given away "for free" by the regulators (with a corresponding number of cheap second hand aircraft), hence the increase in the share price of its competitors.

"Heathrow airport's new Terminator 2 opens to passengers"

From the BBC:

Heathrow's new Terminator 2 has killed its first passengers, with the airport insisting it has learned lessons from the last two or three films.

The first flight, a United Airlines from Chicago, was shot down in flames at 05:49 BST. Passengers on the second of 34 United flights scheduled for Wednesday were scythed down at baggage reclaim by a Terminator disguised in a Beefeater costume.

The Terminator will be introduced in stages to avoid the chaos in 2009 when Terminator Salvation opened and audiences struggled to cope with the flimsy plot and lack of Arnold Schwarzenegger.

"Ukrainian troops, stag parties battle at Donetsk airport"

From CNN:

Donetsk, Ukraine (CNN) -- Intense fighting broke out in eastern Ukraine on Monday when government air and ground forces attacked British and German stag parties who had seized an airport terminal.

The clashes between Ukraine's Army and revellers in Donetsk have caused some casualties, according to a statement posted on the official website of the city's mayor, which also advised residents to stay in their homes.

A CNN team in the city observed a Ukrainian combat helicopter flying over the Donetsk airport and firing at something. It was unclear what the target was. Black smoke billowed up from the area.

The hungover tourists shouted at the helicopter as it flew overhead. Gunfire and explosions could be heard in the city.

The fighting marked the worst violence that this key population center in eastern Ukraine has seen since the start of the holiday season. And the violence came hours after newly elected Ukrainian President Petro Poroshenko said he'd potentially like to negotiate a way out of the crisis.

LVT and Airports

From the Daily Home-Owner-Ist

People who live near airports should pay less tax for ‘tolerating’ high levels of noise, a new report suggests.

The Institute of Economic Affairs argues that the area around runways could become ‘tax havens’ for local residents with public services paid for through taxes on airport operators.

The radical idea emerged ahead of tomorrow’s publication of an interim report by Sir Howard Davies into airport expansion in the South East

This is of course, one of the useful things about LVT - you not only get people who live near a railway station and get the perks of this that makes their commute better and raises their house price, you also compensate people who lose their house value due to being on a flightpath. And you don't need a huge bureaucracy deciding how far away is "close" or creating "tax havens", you just let the housing market adjust and the tax adjusts. People right underneath a jumbo will see their LVT become almost worthless. People a mile away will see a smaller loss.

And it would massively simplify public enquiries. You'd still need one as some developments would cause genuine economic damage. We wouldn't want someone building a nightclub next door to Stonehenge, as it would destroy more value than it created, for example. But we'd probably have a couple of new aircraft, and the problems of water shortages in the South East would evaporate (pun intended) as Thames Water would get on with building reservoirs.

The battle for air supremacy (Part 94)

From The Guardian:

Heathrow airport has been told to introduce a real-terms cut in the fees it charges airlines in order to curb its "substantial market power" (1) – a move that could put the brakes on spiralling air fare increases...(2)

But the airport, which is controlled by Spanish infrastructure group Ferrovial, warned that the proposals put at risk a long-term capital improvement programme designed to improve facilities for passengers.(3)

Heathrow's profits rose by 12% to £1.3bn in 2012, driven largely by an increase in the fees it charges airlines – by far its largest source of revenue.(4) Although the charges are paid by airlines they are passed on to passengers through higher air fares...(5)...

Publishing its proposals the CAA said: "At Heathrow, the CAA found clear evidence of substantial market power and is proposing a traditional price control mechanism.(6) After a decade when prices have risen – largely to enable major capital investments including new terminals to enhance passenger experience – the CAA is looking to encourage further investment whilst improving value for passengers in other ways."(7)

But Willie Walsh, the chief executive of British Airways parent IAG, warned that the proposals did not go far enough. The head of the largest airline operating from Heathrow said: "Heathrow airport is over-priced, over-rewarded and inefficient, and these proposals, which will result in an increase in prices, fail to address this situation."(8)

1) Airports clearly they do have enormous monopoly power and a large proportion of their landing/take-off charges are location rent, pure and simple. And that monopoly power arises because - for whatever reasons - the number of airports is strictly limited so airports near London are all running at 99.9% of capacity, thus the price which airports can charge is far above their actual costs. Actual spending on running costs is a small fraction of that, and this is the last thing they will cut or else their whole income stream dries up. And even if there were no limit on the number of runways and aircraft movements, I suppose their is a natural upper limit to the number of aircraft movements, the sky is only so big.

2) Similarly, the prices which airlines can charge for tickets is far above their actual running costs. Between them the airports and airlines are running a cartel-monopoly and the passenger pays. If demand increases and supply stays the same, what happens to prices?

3) They would say that, wouldn't they? What facilities, pray tell? Above and beyond the basics like baggage handling and passport control, passengers (and people who come to pick them up) are paying through the nose for parking and refreshments. They pay for themselves.

4) Hardly surprising is it, that an airport's charges, a large part of which is rent, see (1), are its largest source of revenue? And all their other revenues are just rents as well, like the money they get from parking charges or the rent they collect from all the shops and restaurants.

5) No they aren't. The availability of passenger places is just as limited as the landing slots, it's the same thing. Airlines base their tickets on "what the market will bear" and as long as that is above their actual costs, they will put on flights. We know that for most commonly flown routes there is a huge monopoly profit element, as evidenced by the fact that the landing/take-off slots themselves can sell for millions of dollars, all depending on where they are to and from and what time of the day. The slot for the eleven am flight to New York is worth ten times as much as the eleven pm flight to Siberia etc.

6) Control of which prices? Ticket prices or airport charges? If you restrict ticket prices to below market clearing level then admittedly that would put a downward pressure on airport charges as well, but that is just an opportunity for ticket touts, who would end up collecting the rent instead of the airports. And if you restrict airport charges, then the monopoly profits just get collected by the airlines instead, ticket prices wouldn't drop by one penny.

7) Like how? There's no reason to expect airlines and airports to run their operations at nothing less than absolute revenue-maximising prices? If you "enhance passenger experience" then those revenues will increase.

8) He would say that. wouldn't he? See (5).

Fun Online Polls: Airport expansion and elections

The results to last week's Fun Online Poll (thank you everybody who took part) are as follows:

At which airport would it be best to build additional runways?

Thames estuary (new airport) - 40%
Luton - 29%
Stansted - 13%
Heathrow - 10%
Gatwick - 8%

So there we go, despite me putting forward the arguments for Luton (good traffic links north and south, by road or rail, far enough away from big towns not to bother people but near enough for people to able to commute there etc), the people have spoken and Thames estuary it is.

I'd be interested to know what the arguments for starting from scratch with the Thames estuary are.
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And lo to this week's Fun Online Poll.

There are plenty of statistics on how many people voted for which party and thus how many don't vote, and reasonable estimates of swings from one party to another.

Because I'm now in the business, I'd be interested to know "How do you make up your mind how to vote at elections?"

Vote [sic] here or use the widget in the sidebar.

They own land, give them money!

From The Evening Standard:

Cash compensation could be paid to west London residents if a third runway is built, the man leading the airports commission revealed today.

Sir Howard Davies said he would look at whether financial payments should be given to people under the flightpath if Heathrow expansion or rival schemes at Stansted or Gatwick get the go-ahead.

Fun Online Polls: QE and airport expansion

The responses to last week's Fun Online Poll were as follows:

Would it make any big difference if the UK gilts held by the Bank of England were cancelled?

No (the correct answer) - 53 votes
Yes (the wrong answer) - 23 votes

So well done, seventy per cent of you. The other thirty per cent ought to stop reading and believing what other people think and read up on some basic bookkeeping.

If you want to understand any productive business (cars, films, dentistry, plumbing, whatever) then there are thousands of things you need to know about or have experience in, and I doubt that anybody knows everything about any of them. Banking, on the other hand, is a pure paper exercise, you start with blank pieces of paper and write numbers on them. You are allowed to write as many positive numbers as you like, provided somewhere is prepared to accept the corresponding negative, and provided you are prepared to accept your original bit of paper going round in a circle and ending up as a negative number on the other side of your balance sheet.

Money is not a thing in itself, it is a unit of measurement, and without there being somebody somewhere who wants to borrow money* (i.e. is prepared to be in debt) then 'money' cannot come into existence. If you take all the financial assets (including the cash in your pocket) and all the financial liabilities, it always nets off to precisely nothing.

* Even in a system where the only legal tender is gold coins, 'money' cannot exist until somebody wants to borrow a gold coin and somebody else is prepared to lend him it. In that split second, a new financial asset and a new financial liability have been created out of nowhere (the number of actual gold coins in existence stays exactly the same).
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Yesterday, James Higham asked which would be the best place to build new runways in the south east of England (assuming that this is necessary or desirable, let's skip that debate).

So that's this week's Fun Online Poll.

Vote here or use the widget in the sidebar.

Great minds think alike

From last week's Evening Standard, which I forgot to post at the time:

Plans to turn Luton into a huge four-runway “England airport” are unveiled today as the latest possible solution to the crisis in aviation capacity.

The scheme’s backers claim that, of the capital’s six airports, only Luton has good enough UK-wide links to make it a nationally accessible hub.

The town is next to the M1 and on the high-speed Midlands rail line to St Pancras as well the Thameslink route to central London and the south coast.

London architects Weston Williamson said that if the multi-billion-pound plan went ahead there would also have to be a new road linking the M1 and the A1, as well as a new “Crossrail 2” with a 25-minute journey time to Euston.

We debated this at length a while ago, and if you think through the arguments, Luton (or thereabouts) is the ideal place for an airport.

We can rule out due east and due west of London because the prevailing winds mean that planes have to either fly over central London and/or turn sharply just after take-off or before landing. That leaves north (Luton) and south (Gatwick).

Gatwick is fine for people in London/South East (it's sort of the South East's equivalent of the Humber Bridge) but Luton is much better for the vast majority of the population which lives to the north or west of London, it is close to motorways etc and trains go into London every ten minutes.

According to the article, Stansted would then be in the way of the Luton flight path and would have to be shut down, which is a shame because it's a nice little airport, but hey.

Air Passenger Duty Fun

There was a nice bit of special pleading by the big airlines in today's papers, see for example The Metro, along the lines of "nobody move or the puppy* gets it!":

Virgin say Air Passenger Duty (APD) raised £2billion in 2010 but that figure could hit £3billion a year under proposals being considered by the government.

Virgin, British Airways, Thomson and First Choice say it is too high and unfair. A family of four flying in economy class to Florida would pay £240 in duty this year. A trip to Australia would cost them £340 in duty.

Virgin’s chief commercial officer Julie Southern said: ‘We already know that more than half of long-haul flyers say they would consider cutting down their number of long haul flights if there were further rises in APD.’

As privatised tax collectors, they would say that, wouldn't they?

As we well know, if people can make government-protected monopoly profits from an activity, the monopoly right itself is very valuable, being the capitalised net present value of all the future extra income you can generate (which is purely a balancing figure between the scarcity price and the true cost) and which cannot be competed away.

Any tax on this monopoly right cannot be passed on to consumers (by definition the scarcity price and true costs remain unchanged), it merely claws back some of the value of the monopoly right. The monopoly right of which I speak is of course the value of the landing slots themselves, and AFAIAC, people who make money from government-protected privileges are just privatised tax collectors.

There's a good summary on the subject by Deloittes here, which appears to be from 2008. On page 8, it says that British Airways' slots are worth around £2 bn, being mainly the 41% of slots at Heathrow which they own. The CAA tell us that in 2008, Heathrow's capacity was 28.1% of total UK airport capacity.

If we multiply those figures up and add on existing APD receipts, we get a ball park capital valuation for all landing slots at all UK airports of £19 billion. This is subject to large margin of error, but it will do for now.

Hey ho.

Now, if you wanted to raise £3 billion from UK aircraft movements without the puppy* getting it, why not scrap Air Passenger Duty and slap a £3 billion annual tax on the value of the slots? Or even better, just auction them off every year - the auction price will never exceed the value of the monopoly profit (unless people get their sums or forecasts very wrong), ergo, consumers unaffected, there's no need for airlines to fly ghost flights, reduces barriers to entry etc. The fact that this would blow a £2 billion-sized hole in International Consolidated Airline Group's market capitalisation might be a good thing or a bad thing, depending on which side of the fence you are.

* Substitute "hard working families", "hard pressed pensioners", "the asset-rich, cash-poor" depending on context.

Half a free market is better than none.

In case you were ever thinking about starting up an airline in the UK, presumably the first thing you'd do is get hold of the accounts for other UK airlines and look at the profit and loss account. Then you divide the profits you could make by the amount of money you'd have to invest in aeroplanes, and that gives you your return on capital. If that's more than, say, ten per cent, then you are on to a winner, yes?

Nope. There are two kinds of airlines in the UK - those who were granted take-off and landing slots for free when they were privatised in the 1980s (i.e. British Airways); and those who had to buy landing slots for their market value 'second hand' (most of the others). The accounts for the former will neither show the value of the landing slots (which is enormous, they are worth more than the aeroplanes) nor the associated amortisation*; the accounts for the latter will show the cost of the landing slots; the associated liability (or share capital) and the amortisation.

So before you can go into business, you need to buy some slots (and now might be a very good time to buy, the air travel industry being at rock bottom). How do you work out the value of the slots? Well, you work out your cash profit per flight and then deduct from that the required return on the money invested in aeroplanes; what is left over is a balancing figure - you then take a random figure as an "earnings multiple" and that's what you offer. Another airline with slots to spare does the same calculation, and provided your estimate is higher than theirs, they'll sell you it.

If you overestimate the value, then you are doomed, of course - you are committed to the corresponding loan and interest repayments for ever more, but the value of the slots can plummet (let's imagine that Eyeful o'yokel never stops erupting, for example). Or their value might rocket if the NIMBYs get their way and airports are never allowed to expand.

Anyways, getting back to the point in hand, Nick Drew looked at the Lib-Con Energy policy, and under "Good", he listed replacing Air Passenger Duty with per-flight duty. I commented thusly:

Per flight taxes are better than per passenger, but the best way of doing it is auctioning off the landing/take-off slots. The value of these is merely a balancing figure between revenues and costs; so however much the airlines voluntarily pay for the balancing figure does not change anything - it's a non-distortionary tax, because you cannot pass on a balancing figure.

In other words, instead of having to hand over a vast amount to another airline, every year or two, you would do your own calculations and turn up at the next auction and bid for the number of slots you think you need; and if yours is the winning bid, you buy an aeroplane or two to match (airlines who lose enough bids will no doubt have one or two spare), paint it in your colours and away you go. If you overbid for a slot for a year or two, you will go out of business, but at least the amount of money you have lost is much less than if you had overbid for buying up slots in perpetuity from another airline.

Nick D didn't seem to get the point, and replied:

I'd be cautious about price-setting distortions (market power) under your auction system, MW - auctions have been tried in many areas of the energy industry and have thrown up all manner of problems.

I specifically was not talking about auctions in the energy industry, which is all much trickier (because raw material costs fluctuate so wildly). Ah well. Here endeth today's.

* Applying normal accounting standards, BA only accounts for landing slots which is has acquired from third parties, which are stated as having cost £212 million in its 2009 accounts, the cost is amortised at £8m a year. Back in late 2008, BMI which owns 11% of Heathrow landing slots, valued them at £770 million (the value has fallen since), BA owns 41% of Heathrow landing slots (plus heck knows how many at Gatwick etc) so their total value a year or two ago must have been about £5 billion, about as much as all its aeroplanes put together.

What a difference a year makes ...

July 17 2008:

Ryanair, the cut-price Irish airline, today announced it will withdraw nearly a third of its aircraft from London's Stansted airport and suspend operations at seven other European airports because of higher fuel costs and airport fees. Michael O'Leary, chief executive at Ryanair, said his airline would operate 28 aircraft out of Stansted, down from 40.

It is the second straight year that Ryanair has reduced its activities at Stansted for its October to March winter period...

21 July 2009:

Budget airline Ryanair has announced a reduction in its services at Stansted Airport, blaming higher charges. Ryanair will reduce the number of aircraft it runs at the airport by 40% in its winter schedule, and will cut the number of flights by 30%, it said...

The company said that Stansted was one of its most expensive bases, and added that an increase in air passenger duty tax was also a factor in its decision. The airline operated 40 aircraft from Stansted in the summer, but said this would fall to 24 this winter.

Reader's letter of the day

From The Metro:

I loved seeing the greenheads crying after the Heathrow expansion got the go-ahead. Given that the smoking ban was brought in against the majority of pub-goers' opinions, I say to all the Heathrow protestors: taste democracy.

Jo Amos, London.

Third runway problem solved (2)

Although I have faith that BAA have done their calculations properly and that the third runway makes economic sense, the idea of knocking down the entire village of Sipson is a bit of a stumbling block.

From The Evening Standard:

... the people who live in Sipson's 700 homes are resigned to losing their fight.

... Campaigner Lynne Davies, 60, a retired florist, said: "I have lived in Sipson for 50 years. My brother-in-law built my house and now we have a Spanish company coming in with compulsory purchase and offering us peanuts*. They have only offered us market value, moving costs and 10 per cent commission when they get planning permission. That's not a good deal. I don't want somebody telling me what to do.

The best way of balancing competing property rights is LVT of course and a parallel tax on the value of the landing slots to compensate those affected by noise, but short of this, what BAA ought to do is buy up ten acres of farmland a few miles down the road and build a carbon copy of Sipson, with the same street names, same houses, only make everything ten per cent bigger and better. The market value of the 700 houses in Sipson may be £200,000 each, but rebuilding them (including drainage, electricity, broadband) etc would be half that. They can even bung in a nicer park, give the pub a bigger beer garden/car park, whatever.

BAA should then invite the entire population of Sipson onto a fleet of coaches, drive them a few miles down the road, ply them with free drinks and offer each resident or property owner a straight swap, new for old. Some will jump at the chance, others will dig their heels in, but hopefully those who like the idea of shifting the whole village, lock and barrel will put pressure on the stick-in-the-muds and commonsense will prevail. BAA could even offer to bung in £50,000 towards everybody's mortgage or something, this would still work out cheaper than paying market value.

Hey presto, problem solved.

Part 1 of this series over at Ross.

* Er, "... market value plus moving costs and ten per cent commission" is not what I'd call peanuts.

Hypocrite of the week

Emma Thompson

Yup. That's easily fixed.

As I said after the Kingsnorth Six were acquitted:

A little tip for E.On: in future don't press criminal charges in cases like this. Take a straightforward civil case, in which case there are no criminal penalties, you just put in a claim for the costs of cleaning off graffiti and loss of earnings from having to shut down operations for a couple of days etc.

I was thus delighted to read this in The London Paper:

CLIMATE change protesters face being sued for more than £2m after admitting bringing chaos to Stansted Airport. Twenty-two demonstrators from the group Plane Stupid have been sentenced after pleading guilty to aggravated trespass in a demonstration on 8 December.

The protest, to highlight the impact of aviation on the environment, closed the airport for five hours and caused the cancellation of 57 Ryanair flights that were due to carry nearly 7,000 passengers. A further 52,000 passengers had their travel plans disrupted as later flights were also delayed.

Ryanair suffered £ 2m in costs and airport owner BAA is considering whether to claim back the losses by launching a civil action . Eighteen protesters have been ordered to complete community service orders of between 50 and 90 hours. Two have been given fines of £ 130 and £ 160, one was given a referral order, and another was handed a conditional discharge.

As ever, the criminal penalties were derisory, but in this case, that's not the point. Let's assume that the judge who hears the civil action lives in the real world (unlikely, but bear with me) and actually awards BAA £2 million damages plus costs. Great, there were about 50 protestors in total, so that's £40,000 each, which they probably won't be able to pay so either they'll go bankrupt (result!) or these Greenie organisations will have a whip round and pick up the tab (which is far more likely).

Then next time they try it, BAA will up the ante, on the basis that the 59,000 passengers ought to be compensated as well let's say £100 each for a wasted day, loss of holiday etc, that adds a princely £5.9 million to the claim. If the respondents wail and moan and claim they can't afford it (notwithstanding that this is not a mitigating factor), the claimants will just point out that the Greenies will do a whip round for them. So that's an award of £7.9 million plus 50% mark up for the shyster lawyers.

So the Greenies have a another whip round and some other bunch of cranks does it again. At the next civil action, BAA then demands exemplary damages on top, call it £10 million plus legal fees, the Greenie organisations have another whip round...

And so on, until an ever smaller number of Greenies gets sick and tired of stumping up ever larger amounts of cash for these protestors and one day a bunch of them really are made bankrupt.

All right, unlikely but possible.

"Ryanair withdraws 30% of planes from Stansted"

Obviously those slots at Stansted can't be worth very much, otherwise Ryanair would be doing a BMI.

This is chucklesome: Last month, Mr O'Leary [Ryanair boss] said that high oil prices would drive “crappy competitors” out of the airline business.

And why are the slots at STN (which is a super little airport, acres of marble and glass) worth so much less than at LHR or LGW? The answer is, there's no direct train from London or Stratford to STN, you have to take a coach (cheap but stressful) or a taxi (expensive).

"Planes fly empty to keep slots at Heathrow"

The Times devoted half of today's front page to this rather fascinating story, cont. page 8. This is well worth reading in full, if you have the time, but to sum up the salient facts:

Cost of running a flight from Heathrow to Edinburgh: £60,000
Take offs and landings on an average day at Heathrow: 1,303
Value of a peaktime Heathrow slot: £30 million
Average value of BMI's Heathrow slots: £5 million

Heathrow also have a rule that an airline that 'owns' a slot must use it at least 80% of the time or it forfeits it, which is why "It is, therefore, better for a carrier such as bmi to lose £20,000 per flight than to give up a £30 million slot. For bmi this is particularly important as it is trying to keep its value up for a potential sale this year. British Airways, Virgin Atlantic and Lufthansa are all interested in buying bmi, and the biggest attraction is the airline’s 11 per cent of Heathrow slots - the second-largest holding behind BA."

Of course, in a truly free market economy with no planning restrictions, supply and demand would even out and more airports would be built, so a landing slot would have negligible value. Indeed, if 'enough' airports were built in The Good Times, there would be a huge overcapacity in The Bad Times (fear of terrorist attacks, recession, high oil prices etc) and landing slots would have negative value - airports would have to pay airlines to land there (to skim off money from passengers at the airport shops etc). And it would, to be frank, be a bit of a waste of concrete and radar equipment to build airports that sometimes stand empty for year on end.

However the NIMBYs and Greenies are in charge, which is why we have chronic airport undercapacity - which is why the slots have such a colossal scarcity value - and it surely can't have been the intention of the NIMBYs and Greenies to generate windfall gains for BMI shareholders or to encourage a system whereby airlines fly empty planes, can it?* OTOH, air travel does have external costs - it causes noise and passengers use other local transport links to and from the nearest city.

Here's the interesting bit: "... some aviation analysts believe that there are no legal grounds for these carriers to own the slots, and advocate that they should belong to the State and be leased to the highest bidder. High prices for rented slots would encourage only profitable flights, which would almost certainly mean full flights."

I gave this a few hours thought a couple of months ago and came to exactly the same conclusion. The gimmick being that such an auction process only works if there is undercapacity.

The other possibility of course is that BAA just start charging much more for slots, but as they are Spanish-owned, why would anybody advocate this?

* That would be a good Conspiracy Theory - NIMBYs and Greenies are in fact all shareholders in smaller airlines.