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Airport Slot Allocation, BTS

Audrey Fan18 min read
aviationoptimizationbts

Some airports are seriously stressed out.

I say stressed out because being busy doesn't necessarily mean chaos. LAX may seem busy (and it is!), but it's not scrambling. As a matter of fact, none of the top 5 busiest airports in the US are.

And then we have JFK, DCA and LGA… Roughly 200 airports worldwide fall under the same group as these three: they're categorized as Level 3 airports, where air traffic demand significantly exceeds their capacity. Aka they're seriously stressed out. These airports need help with scheduling most of the time.

Any familiar faces? If you've ever been to one and thought, "wow I had just enough time to make my connecting flight!", it's probably because of airport slot allocation. In this piece, I talk about what it is, how it came to be, and (spoiler alert) why it's controversial.

To preface, there is no international law requiring airports to follow a certain scheduling procedure. The World Airport Slot Guideline (WASG) written by the International Air Transport Association (IATA), however, is often considered as the industry standard, so I'll be using it in the section below. Understanding the guideline should give you a good idea of how the general process works in most regions. I'll be explaining WASG's presence in the US afterwards as a real life example.

Primary Allocation (WASG)

The slot allocation process described in WASG is a system designed to help airports manage their capacity if they're overwhelmed.

A slot is a time period (actual duration varies by factors such as country and season, but let's just say 20min for our purposes) where a plane can use the airport infrastructure as needed to perform a takeoff or landing operation.

The industry splits the year up into two seasons: winter (Oct-Mar) and summer (Mar-Oct). Slot allocation starts one year before a given season, involving airlines, independent slot coordinators, air navigation service providers (ANSPs, usually the government, e.g. FAA in the US) and airports.

At a high level, the process looks something like this:

  1. An airport's capacity is determined by both the airport (for terminal constraints) and the ANSP (for airfield or airspace constraints). "Let's take a look at what your infrastructure can handle."

  1. ANSP announces forecasted capacities for airports a year in advance of scheduling for airlines and slot coordinators to see. "This is what we think their infrastructure can handle."

  2. Airlines submit slot requests to coordinators. "I want these slots because they fit well with our schedules."

  3. Coordinators put together initial slot allocation lists and send to airlines. "Everything considered, here's what I think you should have."

  4. All three parties (~250 airlines and ~300 airports) then meet at a 3-day IATA slot conference to negotiate.

In a couple of months, for example, people will meet in Lisbon to strategically chat about when they get to fly their planes in the summer of 2026. Slots are mostly finalized at this conference. "Here's what you actually get."

  1. Slot coordinators continue to monitor slot usage after the season starts. "Use them well!"

Let's take a closer look at step 4. According to IATA, during the initial slot allocation, coordinators must follow three main rules:

Of this slot pool, 50% must go to new entrant requests, and 50% must go to non-new entrant requests. The coordinator determines the distribution in a fair and holistic way.

That's how schedules are generally managed at Level 3 coordinated airports. Level 2 facilitated airports (~160 airports worldwide) don't use historics when allocating slots. In fact, they don't have slots at all. Instead, airlines are encouraged to have their schedules approved by the facilitator.

That's slot allocation in a nutshell (IATA's version at least). You can find the full document here.

Secondary Slot Trading: An unofficial way of adjusting among airlines.

In some parts of the world, after the formal primary slot allocation process (what we've discussed so far), airlines can participate in secondary slot trading.

They can either lease out the ones they don't like, trade with someone else or sell it. The change of hands usually has to be confirmed by some sort of regulatory body (e.g. FAA in the US) to ensure market competitiveness and optimal infrastructure use.

Slots weren't always allocated to airlines like this. Let's take a look at the history of slot management in the US as an example.

Why slots were introduced in the United States.

In the summer of 1968, US airports saw a 30% increase in severe delays. Why? Air traffic controllers. But not necessarily in a bad way.

You'd think that with the steady rise of air traffic demand post WWII, so should the importance of air traffic controllers (ATC). But that wasn't the case. As a result, they formed PATCO, an ATC union.

PATCO intentionally caused traffic jams to demonstrate their importance in the process. For example, they passed "Operation Air Safety" in July of that year, requiring controllers to strictly adhere to FAA's separation standards. Before then controllers often ignored separation rules to avoid traffic.

The jump in severe delays caught the FAA's attention. In response, Congress passed the High Density Rule (HDR), limiting the number of operations allowed per hour at five airports (JFK, DCA, LGA, ORD, EWR).

HDR lasted for four decades and worked ok, but faced several criticisms, inefficient slot allocation being one. To encourage competition in the market, Congress passed AIR-21 in 2000 to phase out HDR (in all airports but DCA). As a result of this change, airlines started squeezing in as many flights as they could. Which overwhelmed airports again.

The FAA then passed an order limiting operations at LGA (2006) and JFK (2008), both still in effect today. The most internationally connected airport in the country, JFK generally follows WASG.

LGA less so because it's mostly domestic, and it would be a waste of time for domestic airlines to go through an international process. The FAA acts as the slot coordinator for JFK and LGA. DCA does not follow WASG and is still under HDR.

The four Level 2 airports in the US (ORD, LAX, EWR and SFO) all generally follow WASG as well for voluntary coordination (without slots, and no usage rules/grandfathering).

You now have a good understanding of how things work, generally speaking. Time to dive deeper.

Something is off.

With fewer than 10,000 commercial airports in the world, airport slots are already a scarce resource. This makes them extremely valuable and sought after. In 2016, for example, Oman Air bought a single slot pair from Kenya Airways at Heathrow for a record-setting $75 million.

On top of its inherent scarcity, slots are rarely freed. Freed slot pools often end up being less than 10% of total slots available. New airlines that want to enter the market have access to fewer opportunities of lesser quality.

WASG was built for airlines (initially).

Aviation grew with substantial support from the government. Contract Air Mail in 1925, for example, allowed the US Post Office to pay airlines to deliver mail, encouraging the commercialization of aviation. Several incumbents that we know today (namely 5 in the US: United, American, Delta, Alaska, Hawaiian) started in this government-assisted environment.

Better business means busier schedules. Worldwide, airlines coordinated schedules with each other and/or with state agencies, negotiating who gets to use airport resources at what time. To foster efficient and fair coordination between airlines and the state, IATA published WASG in 1974.

Though there have been many editions since, the basis of WASG remained. The process carried over many components critical for the success of (existing) airlines. (One of which was grandfathering. As a business that requires a lot of future planning, airlines love stability. Grandfathering guarantees that.)

Why is this a problem?

Compared to the 1970s, airports have now become as vital as airlines. But they weren't always included in this process.

Here's how that plays out in the United States, for example:

Most commercial airports in the US are owned by public entities, and therefore so are slots. The FAA decides which private airlines get to use which slots for free. Public ownership of slots remains the same throughout the process. In practice, however, airlines treat slots as their own. The right to use a slot then sort of becomes a valuable property right: airlines can even take out loans by putting slots up as collateral. Put differently, this public resource is given to airlines for free, who can then monetize off of it.

Now let's discuss misaligned incentives between public airports and airlines. The goal for publicly owned infrastructure is to be able to provide transportation services to all. Airports want to be able to serve as many people as possible without bias, and to set fees and rules that encourage competition. But since flying is such a low-margin business, airlines care most about maximizing revenue (sometimes at the cost of booting low-fare passengers).

Things have also been improving, slowly.

Major reforms have taken place to modernize the approach, especially in the last decade or so. When IATA created the first edition of WASG in 1974, airports weren't really part of the equation. In 2016, IATA initiated a 3-year long Strategic Review of WASG to make sure the system kept pace with the fast-moving industry. This was the first time airports were invited to participate in the decision-making process. Afterwards, airports were formally given a seat at the Worldwide Slot Allocation Board (WASB) in 2020.

Researchers are pushing for a couple of approaches to address these issues.

Market representation

Some researchers argue that the biggest missing component in the system so far is market representation. Everything is decided administratively with no economic incentive, at least not initially. Slot values are decided by ANSPs who aren't even in the market.

1. Guided secondary slot trading

Sure, secondary trading does occur between airlines in some countries, but it's relatively rare. Results also sometimes fail to maximize airport infrastructure use as well as passenger welfare.

Some think that an organized secondary trading platform could be a solution. UK's independent slot coordinator, ACL, tested this with slottrade.aero in 2010, a marketplace to facilitate slot trades between airlines and encourage more transparency. The platform has since dissolved with little publicly available information.

2. Auctions in primary slot allocation

Some researchers think that auctions are best at representing the market. The gist is to have airlines themselves determine how much they value a slot and bid for it.

Though auctions were first proposed many years ago, the industry doesn't view them as an appropriate solution. It is important to note that though auctions work in certain applications, their environments are fundamentally different from aviation. Auctions require a central regulator to carry out the process. But because slots are often internationally connected and only make sense when connected to other slots, there is currently no suitable unbiased global regulator. Some worry that auctions might do more harm than good, unable to prevent monopolistic behavior.

Airport representation

Some advocate for increased airport representation in the process. Air travel demand will only continue to rise, and accurate evaluations of airport capacity are necessary to service more passengers by reducing inefficient use of resources. Airports deserve to have a much more significant voice in how their capacity is allocated, especially since they don't receive any monetary compensation from distributing slots.

Airport Council International (ACI) Europe, for example, published a proposal recently that includes several reforms to WASG. The initiative calls to release underused capacity, strengthen airports' strategic influence over the system, increase airline competition, and encourage transparency.

You can read more about it here.

That was a lot. What's the general takeaway?

Airport slot allocation happens at Level 3 airports where demand exceeds capacity. The current process heavily prioritizes historic slot usage, systemically barring smaller airlines from entering the market. Past reforms have changed how decisions are made, but innovation is difficult because slot allocation as a whole was designed with only airlines in mind. And airlines are generally happy with how things are right now. Airports not so much.

Why do I care?

I enjoy optimization topics. I also like anything that flies. But since my background isn't in aviation, I read to learn.

I came across airport slot allocation while in a rabbit hole. Several articles explain the general process well, but none included everything I was confused about (which was a lot!) and the details I needed to visualize things. ChatGPT was often incorrect as well. So I decided to summarize my learnings here for the curious. If something is outdated, please let me know and I will revise accordingly.

I'd like to thank Chris and Tanay for our numerous discussions on this topic. My understanding would have been very flawed without your industry knowledge and expertise.

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