Airlines have been particularly hard hit by Covid-19. UK regional carrier FlyBe collapsed into administration in March 2020, and other airlines operating in and out of the UK may follow suit in the coming months. If they do, company administrators will seek to realise the value of the airline's UK take-off and landing slots, which may be among its most valuable assets, for the benefit of unsecured creditors. They can do so by exchanging the slots for other, less valuable, UK slots held by other airlines, plus a cash payment.

This limited secondary market in slots is, controversially, permitted by the EU Slots Regulation: Council Regulation (EEC) No. 95/98 on Common Rules for the Allocation of Slots at Community Airports, as amended, which governs the allocation of slots in the EU. Timing is key, as slots are allocated twice yearly, in March (for the following winter season) and in October (for the following summer season).

It is essential that the airline remains an 'air carrier' within the meaning of Article 2(f)(i) of the Slots Regulation when the allocation occurs. If it does, then it will generally be entitled to the same allocation of slots as the previous year, under the 'grandfather' provisions in the Regulation (normally those provisions require the carrier to have utilised its existing slots sufficiently (80%+) in the previous season, but that rule has been relaxed for summer 2020 in light of the current pandemic). The question is: what is an 'air carrier'? In particular, can an airline which has collapsed into insolvency before the slots are allocated still call itself an air carrier, and insist on its allocation of slots which it will never be able use, simply in order to exchange them for some other slots which it will also never use?

In Monarch Airlines Ltd (in administration) v Airport Coordination Limited [2017] EWCA Civ 1892 the Court of Appeal held that it could. In that case, Monarch entered administration shortly before the allocation of slots for the summer 2018 season. The body responsible for coordinating slot allocations in the UK, ACL, declined to allocate it any slots while the body which licenses airlines in the UK, the Civil Aviation Authority, decided whether to revoke or suspend Monarch's Operating License under the domestic Operation of Air Services in the Community Regs, SI 2009/41.

Monarch's administrators sought judicial review of ACL's refusal, arguing that the EU Slots Regulation defined an air carrier as 'an air transport undertaking holding a valid operating license or equivalent at the latest on 31 January for the following summer season', which Monarch still did. ACL argued that that was unrealistic and that Monarch was no longer in any real sense an air carrier.

At first instance the Divisional Court agreed with ACL. The Court of Appeal unanimously reversed that decision, holding that it was beyond the ACL's remit to resolve such matters or to conduct the investigations which that would entail, and that these were matters for the CAA as the licensing body. Monarch was duly allocated its slots, which it exchanged with IAG and Wiz Air for substantial cash payments.

This decision seems to run counter to the stated objectives of the EU Slots Regulation, of promoting competition and removing barriers to entry, by ensuring that the richest players can hoover up the best slots of failed carriers.

The EU has long discussed curtailing the current slot trading system (which it originally introduced at the insistence of the UK), and Brexit may open the way to reform. But for now, get ready for plenty of slotswapping in October.

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