Northern Summer 2021 Slot use relief measures - The Worldwide Airport Slot Board recommendation explained - Regulations ...
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Northern Summer 2021 Slot use relief measures The Worldwide Airport Slot Board recommendation explained 1
Worldwide Airport Slot Board recommendation Full series slot returns Use it or Lose it threshold: Force Majeure for alleviated 50/50 operational relief Full slot series returned between Provides flexible planning of Defined list agreed including 31 Jan - 8 Feb will be protected schedules to meet demand as it COVID-19 related impacts that for NS22 recovers prevent sustainable schedules planned being operated. Provides airport and airline Forecasts do not support a return to planning certainty the 80/20 in NS21. For example: Govt restrictions, quarantine, flight/seat limitations Incentivizes early returns of full Too high slot use ratio will prevent the etc. series slots which can be restart of services, or encourage reallocated to other airlines. unsustainable flying Precision & certainty globally for consistent application of force Those who operate ad hoc slots 50/50 provides realistic and majeure reasons for nonuse of can return in S22 with priority, achievable slot use target, providing slots subject to available capacity. flexibility, demand stimulation and the avoidance of empty flights being Can reapply for ad hoc slots flown. should demand warrant additional flying 2 The three elements of the WASB recommended relief package compliment each other. The package must be adopted in full.
Industry objectives for slot use relief NS21 This is not a blanket waiver but a package of relief measures Safeguard airport connectivity and hub Applicable to all L3 airports to ensure structures to restore global networks inline a global solution that is consistent and practical on both ends of the with recovery of demand route. Gradually incentivize slot returns for reallocation on a historic basis Decisions to be made before the end of 2020 to allow the measures Re-establish services in accordance with to have impact and enable the removal of flight restrictions and plans/schedules to be built in recovery of demand advance of slot return deadlines in Jan/Feb 2021. Safeguard access opportunities and continue to enable a competitive industry 3
Why slot relief for NS21 and not a full waiver? Slot relief is necessary due to continuing border closures, travel restrictions and health measures that directly impact consumer confidence and ease of travel. Current slot rules were never designed to cope with a prolonged industry collapse, therefore the WASB has chartered an industry led package of relief measures that gradually return the industry to the normal process as traffic recovers. The recovery in 2021 will be patchy with domestic travel recovering sooner and in larger volume than international, and still at a global level much depressed to previous levels. A balanced solution is essential to address the needs of the different business models of airports and airlines , their markets, and different exposure to the crisis. Providing certainty and flexibility while promoting sustainable recovery of schedules. The agreed components of this package need to be applied consistently, in entirety, at all Level 3 slot coordinated airports globally. The slot relief measures are the result of a consensus reached among airlines, airports and coordinators. 4
Why we need a decision now… Series returns between HBD (31 Jan) and HBD +7 (8 Feb) alleviated. To plan for this airlines need knowledge and certainty of the complete package in mid-Jan latest 8 Feb
What we are asking for…. Decision by end of the year 2020 Certainty of implementation of the entire slot use relief package detailed herein Flexibility to support recovery of demand by agreeing globally aligned slot rules for NS21
How does this benefit the US? Sustainably driven recovery of aviation. Vital international connections safeguarded for the future. Access provided to those able to operate now with ad hoc slots with priority to return in S22 subject to capacity. Consolidation of schedules is temporary - relief now offers breathing space for all business models to return to domestic and international network and point-to-point structures: preserving jobs and investment. Consumer demand better met through the restart phase with flexibility instilled into the process 7
Global connectivity is at risk Unique city pairs USD/RTK (in 2014 USD) Unique city pairs are in 25.000 2,5 decline 20.000 Unique city pairs 2,0 Airlines are flying skeleton schedules 15.000 1,5 Airlines are focused on 10.000 1,0 flying schedules that Real cost of transport match demand 5.000 0,5 0 0,0 Connectivity and 1995 2000 2005 2010 2015 2020 competition need to be 2019 2020 Forecast restored. How? Unique city pairs 22,104 14,765
COVID-19 has robbed the world of a century of progress In shrinking distances and bringing people together through connectivity Before COVID-19 air service connected over 19,000 city pairs Pre-COVID-19 the number of unique city pairs has more than doubled since 2000 While the cost of air transport for passenger and cargo shippers has more than halved, after adjusting for inflation COVID-19 has caused significant loss in air connectivity, less than 7,000 city-pairs remaining Losing 65% of city-pairs will have an impact as we lose the convenience of direct connections Source: IATA Economics; data provided under license by FlightRadar 24. All rights reserved.
Relief from slot use needs to accommodate all Level 3 airports with average traffic -65% in Summer 2020 YoY change in aircraft movements at the world’s Level 3 airports in Northern Summer season (Apr-Oct 2020 vs. Apr-Oct 2019) 0% -7% -20% -40% -60% Ø -65% -80% -100% -100% 11 IATA-120% Economics analysis based on data from FR24 18 December 2020
International traffic will take two years longer to rebound than domestic Forecast recovery of passenger traffic worldwide (IATA/Tourism Economics)
Slot coordinated airports are reliant on international traffic Share of flights by slot coordination level, 2019 Only 28% of domestic Slot-coordinated airports 28% movements globally 61% are flown at slot coordinated airports Non-slot airports 72% 39% Domestic International
2021 traffic forecasts have been downgraded in recent months despite vaccine optimism and only provide a glimpse into the actual reality unfolding In the last two months forecasts have been downgraded due to the slump in recovery with • Eurocontrol (Oct 20 update) the 2021 projected longer term impacts scenario (2) most likely 51% of 2019 traffic by end 2021 Air traffic and economic recovery has plateaued • ACI Europe (Oct 20) 2021 downgraded: 50% Traffic levels in the first half of NS21 will be of 2019 levels by mid 2021 significantly below the mid point forecasts • IATA anticipate 47% recovery of 2019 Traffic is not expected to steadily rise to the mid- point forecast, but instead step up to this number passenger traffic by mid 2021, but only 25% from a much lower base. recovery of international global traffic. Traffic post summer peak period usually plateaus and actually steps down towards the end of NS21 in line with usual trends.
Eurocontrol updated forecast On 4 November, EUROCONTROL published the latest STATFOR Forecast for the period 2020-2024. “In the most optimistic scenario, traffic is forecast to return to 2019 levels by 2024. However, in the second scenario (most likely), 2024 traffic would only be at 92% of the 2019 figure.” Eurocontrol comprehensive assessment, 5 Nov. 2021: 51% 2019 ATMs by end 2021 15 18 December 2020
IATA forecast and impact on L3 airports The IATA 2021 forecast is based on the following assumptions • Vaccine available starting H2 2021 with gradual roll-out first to developed then to emerging economies • Sector length: Domestic recovers first, then short-haul, then long-haul • Purpose of travel: VFR (visiting friends and relatives) recovers first, then leisure, then business • Yields: Demand stimulation by lowering yields The IATA forecast results in the following projections • For the first half of 2021, global pax 47% of first half of 2019 levels • Level 3 airports are highly exposed to international recovery: our analysis and forecast assumes only 25% recovery in international traffic by end June 2021 – half the S21 season. • Only 27% of Domestic flights depart from L3 airports, whereas 73% depart from non-L3. Or put it another way, L3 airports serve 60% of global International flights, and rely on 80% of international ASKs as their full ASK compliment. • There is no direct correlation between an end of 2021 forecast for global recovery and the basis for the slot threshold applicable from April 2021 at L3 airports. 16 18 December 2020
Risks to near-term passenger forecast remain tilted to the downside – IATA outlook 17 18 December 2020
Will a vaccine support recovery by mid-summer? COVID-19 vaccines are not expected have a significant impact on consumer demand, or the ability to fly in Summer 2021. Challenges to relying on the vaccine to aid industry recovery: Production and distribution challenges initially limit availability initially, particularly in emerging markets, except for China Governments are likely to need sufficient proportions of populations to be vaccinated for travel restrictions to be removed. Conditions may be placed on entry related to vaccination further hampering immediate recovery and slowing demand. A stronger recovery in air passenger demand is likely after 2021. In the meantime, a shift towards short-haul travel remains There are signs of pent-up demand as restrictions are lifted but confidence and the easing/removal of mandatory health restrictions is critical 18 18 December 2020
Explanation of the WASB relief package 19 18 December 2020
What is the 80-20 rule? Definition of an airport slot An airport slot is a permission to use the full The 80-20 rule range of airport infrastructure necessary to arrive or depart at a congested (Level 3) airport Airlines can retain slots if on a specific date and time. they use each series >80% Calculated by each individual For example, for a daily service an airline needs: slot series Arrival slot + Departure slot x 7 days of week Under normal circumstances, ~ each slot is a separate series typically see 95% use of ~ each day is a separate series airport capacity ~ summer season 31-32 weeks
Why a lower usage threshold? Force majeure does not replace much needed flexibility in planning • Targeted force majeure is an operational alleviation for unforeseeable impacts to the planned schedule such as borders not reopening when planned, quarantine remaining in place, govt advisories and restrictions implemented at short notice. • The usage threshold is the basis for planning the seasons schedules, requires careful discipline to manage series versus crewing, fleet and consumer demands > airport capacity use and avoid fragmentation in the recovery phase. • Airlines do not plan a schedule taking into account force majeure – this is alleviation within the operating phase. • The usage threshold is a global recommendation by the WASB, to promote a level playing field by suggesting a common threshold that reflects the continued inability to operate full schedules sustainably – all regions continue to see international services operating at less than 20% year on year. • The lower usage threshold supports flexible, agile planning to respond to demand, that is yet unknown. 21 18 December 2020
Setting a slot use threshold that supports rather than hinders recovery Probability of Use/Lose Failure 15% In normal times, the 80/20 rule results in a certain probability of failure when average slot use is high 10% (~95%). The chance of failure is higher for short 5% series lengths (as fewer cancellations are permitted). 0% 5 7 9 11 13 15 17 19 21 23 25 27 29 The charts opposite show how much the 80% Series Length (weeks) usage requirement would need to be reduced to balance a given level of reduced overall slot use. 80/20 (95% ave util) 60/40 (84% ave util) 40/60 (68% ave util) 20/80 (49% ave util) For example, if overall slot use in Summer 2021 was predicted to be close to 95%, the 80% usage rule would be applicable. Use/Lose Rule versus Slot Use Therefore using current forecasts for 2021 and 100% likely recovery scenarios the threshold has been 90% Constant probability of Average slot use set at a maximum level 50% to achieve upwards of use/lose failure 80% 70% use in markets where demand recovers 70% quickly. 60% It should be noted this places risk on the airlines 50% to plan at least 16 week+ operations. 40% The targeted FM clauses are the in-season relief 0% 20% 40% 60% Use/Lose Threshold 80% 100% should markets not open, govt measures not be removed and the high usage cannot be achieved in Source: MM modelling; based on random cancellations following a binomial distribution targeted markets. 22
The usage threshold for S21 needs to support recovery globally and remain consistent YoY change in aircraft movements at the world’s Level 3 airports in Northern Summer season (Apr-Oct 2020 vs. Apr-Oct 2019) 23 IATA Economics analysis based on data from FR24 18 December 2020
Global recovery still very uncertain Epidemiological situation now vastly different across regions Europe Asia-Pacific Middle East 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- Feb Mar Apr May Jun Jul Aug Sep Oct Nov Feb Mar Apr May Jun Jul Aug Sep Oct Nov Feb Mar Apr May Jun Jul Aug Sep Oct Nov North America Latin America Africa 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- 1- Feb Mar Apr May Jun Jul Aug Sep Oct Nov Feb Mar Apr May Jun Jul Aug Sep Oct Nov Feb Mar Apr May Jun Jul Aug Sep Oct Nov 24 IATA Economics using data from ECDC 18 December 2020
Why reduce the 80:20 slot use ratio to 50:50? • 80:20 would in effect require airlines to plan to Typical operational and planning requirements of different operate 90%+ of their schedule which is not slot use ratios realistic given forecasts for 2021. 30:70 means ≥ 10wks operated • Too high ratio restricts airlines from risking the restart of new services: hindering rather than 50:50 means ≥ 16wks operated supporting recovery 80:20 means ≥ 25 wks operated • Globally appropriate given different pace of M Apr May Jun Jul Aug Sep Oct recovery and does not prevent carriers 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 exceeding the usage – while protecting network NS21 is a 31 Week Season structures Pushing capacity to the Q3 period • Focusing on flexibility to support rebuilding schedules to match demand, not slot thresholds Demand in Q2 anticipated to be difficult, with need for Airlines planning a robust Q3 ~ vaccine availability, • 50:50 balances the restart of existing services gradual reestablishment of restrictions removed, demand while facilitating new services. services. recovery & consumer confidence rebuilding
Relief through a reduced threshold is not enough… Recovery is anticipated to be prolonged with mid-2021 only seeing ~25% international traffic Requiring all series to be operated to a threshold in NS21 is not sustainable Routes with more than one frequency can be preserved without inconsistent schedule timings being planned if further alleviation provided.
Early series returns to stabilize planning and provide opportunity for others to use slots Airline and airport planning needs > passenger benefits Reallocating series for new use and Multiple frequency day/week operations require multiple series access this NS21 of slots each day. Without alleviation for full series returns and only a lower threshold, airlines have to operate each series to Early returns in Feb ensure early the threshold. reallocation, not on a rolling basis. For example, twice x daily HKG - SYD, four x daily LHR – JFK, three x Whole series can be reallocated which daily MAD-GRU : all hold multi series for these timings that link hubs gives maximum reuse potential – full through carefully timed connections. Reducing daily operations to season planning 3x week while restoring demand is highly likely. Example: LHR – Loganair, Eastern ~ Gradual recovery of demand / need to preserve hub structure Airways, Spicejet all using ad hoc slots. ~ Gradual rebuild of multi frequency services as demand recovers – New airline entrants want consistent sustainable schedules slot times provided by full series ~ Airline likely to plan one x daily NS21 and retain route allocations ~ Consistent schedules all season from operating one of the schedule times, not operating across multi freq series New entrants awaiting NS22 to gain ~ Consumers have reliable, stable schedules that connect in to access otherwise temp redesigned hub structures. ~ Airports can plan efficient use of infrastructure from consistent schedules
Rebuilding the network will be like starting routes from new Demand needs to be stimulated, schedules built to match passenger profiles post COVID. Break even loads will be far higher, so yield will be a key metric. While demand remains invisible until close to operation flexibility is key. Government restrictions, vaccine availability, travel requirements all influence consumer demand. Return to markets will be a gradual process i.e. 3x week, building back to daily services, 3x day building back to 8 daily services. Without series returns alleviated this is not possible. With too high use-it or lose-it threshold this is not possible. 28 18 December 2020
Returning fleet and crew to service takes time and planning needs to start now Airlines need to be able to plan the structure of the schedule now, taking into account the slot rules and usage threshold. This influences their crewing needs, fleet mix, return to service from long term storage - all take time. • Pilot training, simulator checks and rehiring is a lengthy process taking months to complete. • Maintenance facilities have capacity limits too, returning aircraft to service takes weeks-months. The 50/50 threshold essentially means the focus of the schedule will be placed on peak summer months: June to September. Anything higher would require schedules to be operable from Apr/May time when fleet and crew may not be ready. 29
Force Majeure for operational cancellations Coordinators should accept as valid justification for the non-utilization of series of slots, any government restrictions that prevent or severely restrict travel to specific airports, destinations (including intermediate points) or countries for which the slot was held, such as examples listed hereafter. 1. Government travel restrictions based on nationality, closed borders, government advisories related to COVID-19 that warn against all but essential travel, or complete bans on flights from/to certain countries or geographic areas. 2. Severe government restrictions related to COVID-19 on the maximum number of arriving or departing passengers on a specific flight or through a specific airport. 3. Government restrictions on movement or quarantine/isolation measures within the country or region where the airport or destination (including intermediate points) is. 4. Government-imposed closure of businesses essential to support aviation activities (e.g. closure of hotels). 5. Unforeseeable restrictions on airline crew, including sudden bans on entry or crew stranded in unexpected locations due to quarantine measures. 30
Conditions for relief unique to NS21 1. Alleviation measures shall not apply to a series of slots of an airline that permanently ceases operations at the airport. 2. Exchanges and transfers currently allowed will continue where they are not prohibited by the laws of the relevant country WASG 8.11.5. 3. New slot trade arrangements are not eligible for full season alleviation (this does not include continuation or unwinding of existing slot trade arrangements), but are eligible for other slot relief measures. This does not include continuation or unwinding of existing slot trade arrangements.
For more information: WASB Recommendation www.iata.org/en/policy/slots/covid-19-slots/ Lara Maughan Worldwide Airport Slots maughanl@iata.org 32 18 December 2020
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