THE PROPOSED INTRODUCTION OF MARKET-BASED MECHANISMS 317 Proposal Pros Cons (1.8) Reallocation of grandfather rights if trades fall below a threshold • In principle, this could go some way to addressing the issue of slot hoarding but will depend on how significant a threat removal of slots is seen to be • Could erode the barrier to entry represented by grandfathered rights • Significant legal issues and ownership rights issues would ensure lengthy delay and may in the end prove impossible • Easy to artificially raise the volume of trades to a threshold without addressing the core issue of slot hoarding • Volume of trade may be low without any competition issues arising that would require such a reallocation • Would not prevent a hub airline subsequently repurchasing any lost slots through secondary trading; prohibiting their ability to do this in practice will be difficult and could be counter- -productive (1.9) Cap on slot holdings for specific hub airlines at capacity constrained airports. • Would prevent a hub airline increasing market power through secondary trading • Does not address the issue of slot hoarding • Where an airport is expanding, this does not prevent acquisition of slots to maintain market power • Unclear how to judge where the cap should bite. A detailed study would be needed to judge the appropriate level at a particular airport. This would also need to be reviewed on a regular basis. Source: Adapted from Progress Report of the ECA (European Competition Authorities) Working Group on Slot Trading (2005).
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