Warning: traffic jam ahead at Heathrow

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The Independent Online
One Of the reasons being touted for the delay in a ruling from Ian Lang, the Trade and Industry Secretary, on British Airways' proposed alliance with American Airlines is that his officials are exploring ways in which more take-off and landing slots could be created at Heathrow airport.

If sufficient slots could be manufactured it would allow him to square an impossible circle. Unfortunately they cannot - at least not in the quantities that would fulfil the demands of existing and new transatlantic carriers for space at Heathrow without resorting to grabbing slots currently occupied by BA and American.

The problem is that BAA, which operates Heathrow, is firmly committed to the current system of operating its two runways. Indeed, retaining that system, which involves one runway being used for landings and other for take-offs, is a central plank of BAA's arguments in favour of building the new Terminal 5. It is extremely conscious of the concerns of the local communities and environmentalists who are naturally worried by the extra noise that accompanies each additional take-off and landing slot.

On BAA's calculations, it is capable of adding between two and four slots to its average 78 an hour average over the next four or five years. The additions will be garnered by increased efficiencies rather than any sea-change in operating policy.

This is uncomfortable news for Mr Lang, who may have been victim of the over-enthusiasm of those who believe that Heathrow is still under-utilised. Indeed, one extremely bulky piece of analysis from US consultants Roberts Roach & Associates, commissioned by American Airlines, claims that an additional nine slots an hour can be generated by minor procedural adjustments and a change in runway use.

Unfortunately, Roberts Roach do not have the same concerns for the environment that BAA has. It is all very well dealing in theoretical peak-hour maximums but the reality of airport operations renders such an exercise meaningless. The slots are only part, albeit an important one, of the process of operating a route from Heathrow. The questions of finding somewhere to park the aircraft when it has landed, handling increased passengers at peak times, servicing the aircraft, immigration and even executive arrivals and departure lounges for premium passengers all have to be addressed. It is all very well getting the plane down but getting people on and off in a way that meets their levels of satisfaction is another matter altogether.

Much as BAA would like to assist, it simply cannot offer a quick-fix solution for those seeking additional slots at Heathrow. Physical constraints on the provision of facilities and its concern for the local communities with which it will always have an important relationship militate against a simple solution. Mr Lang will have to be more forthright in making his determination on the BA/American alliance. Indeed, he will have to be extremely forthright if Roberts Roach is right in its prediction that in the fifth year following a new open-skies agreement between Britain and the US there will be 525 additional round trips a week between Heathrow and the US. Mr Lang is faced with a situation where he must arbitrate in a market where demand far outstrips supply. It is hard to see how he can adjudicate without upsetting some or indeed all of the airlines.

Teutonic angst

THE London International Financial Futures and Options Exchange (Liffe) is famous for its system of open outcry. Its German rival, the DTB, meanwhile appears to have declared open warfare. There has been healthy competition between the two exchanges for some time, but there is now a sense that this has developed into something that is perhaps a little more robust.

As it has become clearer that the stakes being played for are extremely high, so the competition has taken on attributes that reflect the value of the ultimate prize.

With monetary union scheduled to arrive in 1999 it has become widely accepted that there will be room for just one dominant European futures exchange. The betting is that Liffe will emerge as the ultimate victor. That would leave the DTB and the French Matif in the embarrassing position of being mere regional exchanges serving domestic markets, leaving the power and the influence of the international markets to Liffe in London.

That would be particularly difficult to swallow, given that Britain has not embraced monetary union with the same enthusiasm as France and Germany.

Conscious of Liffe's European pre-eminence which has seen it grow from a standing start a little over a decade ago to become the third largest futures and options exchange in the world, the DTB is fighting back.

It was notable that, when Liffe announced in September that it was to extend its coverage of Euromark contracts by offering a one-month version of its existing and highly successful short-term instruments, the DTB announced that it was following suit a few days later. The DTB then rushed to begin trading its contract a few days before last week's launch by Liffe of its one-month Euromark contract. The power of Liffe in this field was amply demonstrated by the fact that almost 12,000 contracts changed hands in the first trading session - 60 per cent more than traded in Frankfurt on its first day on the DTB.

It is Liffe's success in these short-term contracts that is causing the DTB the greatest angst. So great is its concern that it is now trying to increase the number of players who participate in the DTB's electronic market. Increased players equate with increased liquidity, which is critical to the success of a contract. Liffe's open outcry system has given it a great advantage in this area.

One suggestion is that the DTB is prepared to offer inducements (the sum of DM600,000 has been mentioned) to encourage new participants, notably some US banks, to bolster trade in Euromark contracts on the DTB. This can only be a scurrilous rumour put about by those attempting to undermine the DTB's integrity. It is a worthy competitor which would never stoop to such depths. The battle for domination of the European futures and options markets will be fought on the quality of the exchange and its products and could never be influenced by misguided gimmicks.

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