After a turbulent ride through the pandemic, India’s travel demand is soaring again. If this trend continues, the narrative will shift very soon to the overwhelmed infrastructure across airports. Against the backdrop, the airline market structure has changed with two prominent and well-capitalized players, IndiGo and the Tata group, along with two airlines in startup mode, Akasa and Jet airways. All will compete for a portion of the demand, and the marketplace will witness more flights added. Success in the future will depend on various parameters, but a single operational element is a key to the expansion of incumbent and new airlines, namely: slots. It is likely to get more challenging.
History of slots
A slot is a 5-minute time window during which an aircraft is permitted to land or depart from an airport. These five-minute windows are critical for airline planning and how airlines develop networks. Because travellers choose price and schedule and thus airlines should be in a position to offer suitable times and frequencies for flights. Both are dependent on slots.
Further, the overall aircraft utilisation at an airline, a key metric for financial success, is also significantly curtailed or enhanced with the availability of worthwhile slots. The grant of slots varies. In several countries, such as the United Kingdom, it is carried out by independent coordinators based on historic rights termed ‘grandfather rights’. There are also the “use it or lose it rules”, which state that airlines must use 80 per cent of allocated slots or risk reallocating to other airlines in subsequent schedules. Other countries have various stated and unstated rules. City-states such as Qatar, Singapore and UAE have had their airports work closely with their airlines enabling a large slot pool for their home-based carriers. In India, slots are allocated as per guidelines issued by the Ministry of Civil Aviation, revised in May 2013. These guidelines are as per the International Air Transport Association Worldwide Slot Guidelines, which require that a slot coordinator be appointed at all airports where capacity is constrained due to the lack of infrastructure. In the case of other airports, the airport operator works closely with the airlines to allocate slots. It is important to note that these are just guidelines.
In India, slots have been front and centre for the last five years, primarily due to the surge in demand and the disjointed airport development plans focused on terminal buildings rather than overall capacity enhancements. To put the slot challenge in perspective, India has seen the net addition of just two runways in the last 50 years.
Airlines operating in India must obtain slots from two different airports to whom various rules and regulations may apply to serve a given route. This is easier said than done, with each airport imposing its constraints. Accordingly, the basket of slots offered to airlines can’t reasonably be predicted. The scarcity of slots has also led to a strategy where airlines deploy flights only to retain the slots. This is a common practice globally where airlines operate flights to and from certain airports to maintain historicity over slots-- often referred to as ‘slot sitting’. These flights sometimes strain cash flow, which, in turn, has to be evaluated against the market dynamics of losing the slot to a competing airline.