THE PROPOSED INTRODUCTION OF MARKET-BASED MECHANISMS 315 ways to grant protection in this newmarket, perhaps too many, and it is necessary to summarise and synthetize these methods. Should we implement the sale to the highest bidder? Impose a slot cap? A pre or post-sale transparency (price/ volume)? Should we evaluate exante slot trades? Should we prohibit restrictive terms in contracts? Does an investigation system for the sector make sense? The Report of the ECA (European Competition Authorities) Working Group on Slot Trading addresses these issues comprehensively and illustrates that the EC plans to do things properly; in other words, trying to avoid a change that brings no real benefits for all involved. Table 1: Pros and cons of the slot trading mechanism design Proposal Pros Cons (1.1) Prohibition of restrictive covenants • Clear cut prevention of possible abuse of slot trades and leases • Appears to impose little cost on industry • Limits freedom of action of airlines which may reduce incentives to sell slots altogether (or to important rivals) (1.2) Prohibition on leasing of slots • The threat of withdrawing a lease may be a way of reducing rivalry • Could reduce liquidity. Airlines may prefer to “babysit” slots rather than sell them to others, now that the option of leasing is removed. • May prevent third party slot holders who could facilitate competition (1.3) Requiring pre-trade publication of prices (including a bulletin board) • Makes visible the opportunity cost of slot holdings which may promote trade. • Would facilitate complaints about refusal to trade with specific airlines and generally facilitates a non-discrimination policy • May make it easier for non- -obvious airlines to buy slots • May reveal commercially sensitive information, which may reduce the volume of trades • May facilitate collusion
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