Market Overview

EasyJet Buys Thomas Cook Slots At Gatwick And Bristol

EasyJet Buys Thomas Cook Slots At Gatwick And Bristol

U.K.-based low-cost carrier EasyJet has staved off competition from rivals to acquire lucrative takeoff and landing slots at two U.K. airports. Suitors for the slots included International Consolidated Airlines Group (IAG), parent of British Airways and several other carriers, as well as Budapest-based low-cost carrier Wizz Air and Virgin Atlantic. 

The slots became available following the collapse of 178-year-old U.K.-based tour operator Thomas Cook Group in September. The slots were one of the most valuable assets coming from the group's liquidation.

EasyJet reported on Nov. 8 the acquisition of Thomas Cook slots at capacity-constrained London Gatwick Airport and Bristol Airport for an aggregate £36 million ($46 million). The slots include 12 summer slot pairs and eight winter slot pairs at Gatwick, as well as six summer slot pairs and one winter slot pair at Bristol. EasyJet plans to provide specifics on use of the newly acquired slots when reporting full-year results on Nov. 19.

At the same time, leisure carrier Jet2, the U.K.'s third-largest airline, announced the purchase of Thomas Cook's U.K. slots at Birmingham, London Stansted and Manchester airports for an undisclosed amount.

Takeoff and landing slots are highly coveted assets as airlines seek to expand their passenger and cargo networks. When U.K.-based low-cost carrier Monarch Airlines collapsed in 2017, its administrators generated £54 million by selling takeoff and landing slots at Gatwick and London Luton airports to British Airways and Wizz Air. Reports at the time speculated that the Gatwick slots accounted for as much as £50 million of the deal. When it went bust, Monarch was Gatwick's fifth-largest operator, with 18 daily takeoff and landing slots.

In February 2016, flag carrier Oman Air set a record by paying $75 million for a pair of takeoff and landing slots at London Heathrow. The Gulf carrier is understood to have bought the pair — which includes a coveted early morning arrival — from Air France-KLM. Prices that airlines are willing to pay for slots depends on timings. Early morning and afternoon slots at major U.K. airports, such as Gatwick and London Heathrow, are attractive to U.S. airlines. The $75 million price paid by Oman Air beats the previous record of $60 million paid to Scandinavian carrier SAS by American Airlines for a slot in 2015.

Virgin Atlantic in December 2015 closed a landmark £220 million bond deal secured by takeoff and landing slots at Heathrow, arranged by Australia's Macquarie Group. The deal involved placing slot pairs at the airport into a new subsidiary, Virgin Atlantic International, and effectively mortgaging them by paying a dividend to outside investors.

The opportunity to invest in the new entity in which the Virgin Atlantic slots would be held is said to have proved attractive because of the generous yield it offered to the new backers. Proceeds were used by Virgin Atlantic to upgrade its fleet.

Investors in the bond deal included Pension Insurance Corp., which invested the largest stake in the deal, at £75 million, as well as Edmond de Rothschild Asset Management, two anonymous Standard Life Investments clients and an anonymous Hastings Funds Management client.

Virgin Atlantic thus became the first European carrier to monetize its Heathrow slots, although American Airlines did the same in 2012 when the struggling airline was mortgaging ground facilities and equipment in an effort to stay afloat.

Image by Free-Photos from Pixabay


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