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Comment by WalterBright | Hacker News Reader

Instead of forcing the airlines to fly empty, just charge them for maintaining the flight slot. Everybody wins, including the environment.

Of course, the correct way to allocate slots is to auction them off.

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How would the auction work? For example, how often? I guess the airline need stability in their schedules. I don't know what incentivizes airports to take the "use it or lose it" model, it I'd be curious to understand that, because it must be at the center of this.

I agree of course that if a flight is happening only to maintain a slot then it's a ridiculous outcome. But as others have pointed out, there is cargo, plus pilots keeping current, plus keeping the plane in service (I dont believe you can just park a plane for months and then bring it into service again without a lot of work). Lots of procedures have been established under the premise of regular flights and it's not so simple to just rework all of them is my guess.

Airports benefit from having passengers come in, and so part of use it or lose it is ensuring that at very busy airports slots are as full as possible. Upstarts can and will take slots at such airports because they are worth their weight in gold; LHR to JFK makes $1B in annual profit for British Airways alone, for example.

Airports also benefit from stability, though; airlines taking up a large percentage of traffic at a hub drive more traffic than if all those slots were split due to network effects. And to some degree people who transit airports tend to transit the same ones, so there are downsides to hectic, constant auctions of slots.

The main issue is that COVID has made demand totally dry up across the board, and so the inherent assumption, that giving away a slot will bring in passenger traffic where there is none, has fallen apart.

Can you share data source for 1B? This seems like it's 1-2 orders of magnitude off based on gut feel and I'd like to understand how I can be this far off.

https://www.bloomberg.com/news/articles/2021-11-07/u-s-fligh...

To answer GP, revenue, not profit.

"That’s the revenue that British Airways generated each year linking its London Heathrow hub and New York John F. Kennedy International Airport, where a healthy mix of tourist and business customers made it the most lucrative route on the planet"

The Bloomberg article mentions $1 Billion in revenue annually though not profit.

Just off the top of my head, one plane on a transatlantic route could be $250k+ in revenue right?

So 12 flights a day would be $1Bn? A major route could have that kind of frequency. A billions dollars doesn't seem absurd.

GGP said profit, not revenue. GP is likely correct that profit would be an order of magnitude smaller.

Yeah I saw that after I posted (I misread it as revenue because that is what makes sense), I assume that's (revenue is) what the GP meant, and am realizing now that maybe the 1-2 orders magnitude comment was about the disparity between revenue and profit.

The airline business is notoriously unprofitable, so yeah, the amount of revenue required to make a billion dollars profit would be something absurd, possibly more than the entire industry on many years

$1B sounds like a lot, but New York to London is probably the single most profitable plane route.

I misspoke and meant revenue, but alas I can’t edit the post anymore.

Something like 5 or 10 years would work well. If an airline can't make the route work, they could then sell what's left of their slot to someone else - including to a cargo airline like DHL, FedEx, or even Amazon Air.

Under the current system, legacy carriers got their slots for free or very cheap so they do wasteful things to keep their slots. They've been using smaller than optimal planes for years, and since the pandemic started the empty planes thing has gotten more common.

Cargo, fine.

Keeping pilots current and keeping planes in service? At least down to 10% slot use, I'd be surprised if that's a real issue.

The beauty of using supply&demand to sort out all these conflicting priorities using price as the discriminator is it works better than any bureaucratic system ever has.

> it works better than any bureaucratic system ever has.

And there we go! While there's definitely cases where basically supply and demand trumps any other allocation system, in this case it will just kill competition and some will just hyperbole their expectations to win. Look at the UK's defunct rail franchising system where pure money play was used (they somehow always fails because they overbid).

Any outfit going bankrupt buying landing slots will have those slots then sold to the next lowest bidder by the outfit's creditors.

There are many stories of governments trying to half-bake a market system resulting in failure. You have to set that against the absurd result of 18,000 empty flights of a fully regulated system.

While I'm all for taking UK trains back under public control, note that one of the problems with the existing rail franchising system is that the franchise operators have almost no skin in the game. The trains and tracks are owned and operated by other companies. The franchise operators tends to be subsidiaries set up with very few assets, and can just be shut down if they fail. And while narrow margins of errors relative to their projections cause many of them to fail, when they succeed the profit relative to the actual investment made by the parent companies can be huge.

The incentives structure has been all wrong in that there is basically no penalty for the parent companies in taking outsize risks and underfunding the operations and then walking away if they fail.

Align those incentives and the rail franchising will likely still have issues but nowhere near as bad as today. E.g. if Deutsche Bahn faced having Arriva (their subsidiary which owns it's UK train operating companies) or themselves having to actually put up financial guarantees for the full period and facing long term effects on their ability to bid for future franchises, their bids would look very different.

Put another way: When Virgin and Stagecoach were actually held to reasonable standards (being expected to actually properly fund pensions? the horror) which led to Stagecoach being disqualified from several bids they caused a massive stink and Virgin Trains closed.

> I don't know what incentivizes airports to take the "use it or lose it" model

AFAIK airports charge airlines start and landing fees. By threatening airlines to loose their slots they ensure their steady revenue stream.

They do make money off of those, but they also make money off of all the people traveling through and purchasing duty-free or airport food and drinks and what have you.

In 2019, Heathrow’s retail revenues were £722M, out of £3B in total revenue. https://www.moodiedavittreport.com/heathrow-airport-retail-r...

The reason for this regulation existing is that in the past airlines could shut down competition by buying gates. Because many of the big airports have gates assigned to specific carriers, so if there aren’t any gates for a new airline to buy/lease/whatever then that airline can’t land at that airport.

While the airlines are saying we need to do this so that the gates are available when demand returns, what they’re actually doing is making it impossible for any new airlines to start up.

Basically the cost of these empty flights is less than the cost of competition from a new carrier.

You should post this as a top comment.

So, perhaps instead of making the flight, the airlines should be allowed to pay a tax equal to 80% of whatever it costs to actually operate the flight?

1. It would have to be much higher than 80%. Airlines aren't software companies; their margins are horrible ;-)

2. "whatever it costs to actually operate the flight" is... well, good luck negotiating that bill :)

NB: they are not flying empty because no one wants a seat! They would be able to sell some seats! Even at previously-prevailing market rates! And of course could fill the plane if they sold the seats at any price!

They are flying empty because they can't sell enough seats at a high enough price to justify the fixed cost of the number of cabin staff required if there are customers on the flight.

It's about cabin staff regs, not about literally no one wanting to fly.

So... that 20% does matter.

Thank you, this is an interesting insight that I hadn't considered. So planes are flying without cabin staff or catering, and potentially with less fuel (no idea if the weight of passengers is material here).

And in return, they are maintaining a complex system that has no central authority and is not easy to change. It doesn't sound ideal, but I also know that it's not something the single "they should just" solutions that outsiders propose will actually work in. Hopefully things get closer to normal soon and we won't have to worry about it.

Ah yes, let's tax airlines for following rules imposed by overregulation.

If there's something Europe needs, it's more taxes and more regulation.

The airlines are currently paying a "tax" by running the flights empty but that cost is just being burnt as fossil fuel and helps no one.

By switching to a tax for unused gates/ flight slots that is 80% of the cost of flying an empty if plane, the Airline saves money, the airport makes money, and the environment has fewer CO2 solutions. It is a win-win-win on all sides.

It helps everyone involved in fuel delivery, airport operations etc. Don't underestimate the government incentives to maintain the status quo.

If you switched this over to a tax you'd also need government programs to deal with the unemployment, lack of pilots and other ramp-up issues when this situation ends etc.

Thanks for writing this. It did not occur to me at all and it really made me rethink the situation.

Dedicated gates are much less common in Europe than it is in the US; slot-limited airports tend to much more be about runway slots than they are about gate capacity, and increasingly many airports in Europe are limited by runway capacity with little (politically) realistic chance of expansion.

But yes, fundamentally it's a case of the cost of operation being lower than the risk posed by new airlines.

I’m unsure - some of these are triangular routes, A-B, B-C, C-A.

While A-B might empty, you need the plan landed on B to take the other two routes…

I worked a few months for an Airline and IMHO it’s one of the most complex operational model I ever saw. Fuel, weight, different fueling prices per location, dynamic pricing, crew management, climate, route management, maintenance, green laws, …

It’s full of challenges.

No, I am not sure. An airport’s purpose is to fly passengers. I don’t really want a mechanism for airlines to pay just to have empty gates. Isn’t that kind of dystopian? Shuttered gates, paid for by Delta to ensure its monopoly?

I mean it's not like they were flying passengers regardless.

They would gladly have passengers if the demand was there.

It's the airport equivalent of a land tax: making people pay for hogging scarce resources is a strong incentive to either use them or sell them off to somebody else who will.

Exactly. Let Lutfhansa spend all its money to fly the empty planes.

I'm sure this could be worked out using some combination of paying for the slot and requiring a minimum amount of passengers/cargo. Exact numbers would require some tuning by people who know about this but doesn't seem impossible to get right. E.g. have airlines pay a fee for any empty seat below an 80% full plane.

Having planes fly empty to maintain a monopoly is just bad all around

This has been repeatedly proposed for busy airports like Heathrow. Unsurprisingly incumbent airlines who already have slots hate the idea though.

http://travelweekly.co.uk/articles/324401/heathrow-slot-auct...

I came here to write something like that.. The headline outs Lufthansa as doing something wrong, well, their action is idiotic in the greater scheme of things, but it's entirely reasonable within the constraints of the system in which they must operate.

The trouble with auctions — and I admit this may be a trigger response to the specific example of cell phone radio spectrum — is that the participants who have mountains of capital will use it to price out competitors and new upstarts.

But empty flights are different?

Empty flights are an exception, and a big one during an exceptional situation like a pandemic. Before that the system was working just fine.

They are different in that the company is still putting seats that can have passengers into the air. That’s the point of an airport, right? Flying people. If Lufthansa wants to spend money to fly 99% empty flights, the consumer still can hop on and fly places.

> the participants who have mountains of capital will use it to price out competitors and new upstarts.

Lufthansa's interest is piqued. They already price out competitors, they've bought many smaller airlines (even the "national" airlines Swiss and Austria) and operate them at slim to negative margins to keep the workers quiet (the threat of bankruptcy prevents them from rebelling too much)..

I wonder if this also has to do with things like maintaining pilot certifications.

IIRC (and correct me if I'm wrong) if a commercial pilot goes a long time without flying they'd need to spend some time to retrain or something?

Isn't maintaining the slot more about making sure there's a plane in the right place at the right time if somebody wants to buy a ticket on a scheduled flight at the last minute? A bus wouldn't change route because it was empty. There might be somebody at the next stop.

A large airline could probably manage this better but if a smaller airline (city hoppers, especially) sacked off empty flights, they might not have the inventory or pilots to manage future legs.

I'm not arguing against action. The current situation is ludicrous.

> Everybody wins, including the environment

Competition can't possibly enter once a market has been established, thus the customer ultimately loses.

I think one of the reasons why this system exists is to keep airlines from buying slots they will not use, which could both be anti-competitive and bad for the airport (passengers = money, planes = service, support, fuel, etc).

That's all fine in normal times but in a pandemic crisis (or environmental crisis) it's very silly.

There's whole economy around the flight. Ground handling, refuelling, passenger services etc. Charge for an unused flight slot would have to account for all of that too.

> Of course, the correct way to allocate slots is to auction them off.

... on the blockchain.

:sigh:

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