MARKET-BASED ALLOCATION OF AIRPORT SLOTS

Airport capacity is scarce, but the rules used to allocate it remain largely administrative. This note proposes a cautious way to introduce market signals: auction a small share of slots through a progressive combinatorial mechanism that rewards both price and service quality.

Air traffic has rebounded strongly from the pandemic and long-term demand is expected to keep growing. Yet infrastructure cannot expand at the same pace everywhere. IATA identifies hundreds of airports facing capacity restrictions, including more than 200 Level 3 airports where demand for runway and terminal capacity exceeds what can be accommodated. A large share of global passengers therefore travels through airports where an arrival or departure slot is a scarce input.

Slots are indispensable for predictable schedules and safe operations. The question is not whether they should be coordinated, but whether the present allocation system makes the best use of scarce capacity. In Europe and many other jurisdictions, allocation is anchored in historical precedence rather than in an explicit market test. This gives incumbents stability, but it can also make entry and reallocation difficult when another airline could use a slot more productively.

A market mechanism is not a simple substitute for coordination. Airport operations involve complementarities, network effects, public-service obligations and environmental objectives. A carrier typically needs compatible departure and arrival slots; a single isolated slot may have little value. Any reform must therefore go beyond a conventional auction in which the highest monetary bid automatically wins.

We consider an extension of the Progressive Adaptive User Selection Environment (PAUSE): a transparent, multi-stage auction in which airlines can bid for packages, and the coordinator evaluates offers using a score that combines payment with a pre-defined measure of service quality. The proposal is deliberately incremental. It would initially apply only to a small proportion of slots and would coexist with the Worldwide Airport Slot Guidelines (WASG).