The Competition Authority has, in decision no. 25/2013 which is published today, directs Isavia, which is responsible for the operation of Keflavik Airport, to ensure that competitors in flights to and from Iceland have access to competitively important aircraft handling slots at the airport. The current system for allocating slots has resulted in Icelandair, the largest competitor, effectively having priority for almost all of the most important slots at the airport. This also applies to the allocation of new slots resulting from changes that have led to an increase in the number of slots at the airport. Isavia's allocation procedure has therefore severely limited the ability of other airlines to compete with Icelandair, thereby harming competition in an important area: passenger flights to and from the country.
The background to the case is that WOW Air complained to the Competition Authority about the allocation of slots at Keflavik Airport, which the airline considers to be anti-competitive. An airport slot refers to the time allocated to airlines at airports to land, disembark passengers, receive necessary ground handling, board passengers and take off again.
WOW air maintains that the allocation of handling slots prevents it from competing with Icelandair by establishing a route network or connecting flights between Europe and the United States, with Keflavik Airport as the connecting hub. In the case, WOW Air has argued that the prerequisite for being able to establish such a route network in competition with Icelandair is to be allocated handling slots during peak times, i.e. in the mornings (mainly between 7:00 and 8:00) and in the afternoon (mainly between 16:00 and 17:30).
The arrangement for the allocation of handling slots at Keflavik Airport is such that the airport is what is known as a slot-constrained airport. This includes, amongst other things, that airlines which are allocated handling slots and operate a schedule in at least 80% instances within the scheduling period also retain their allocated slots for the following period. On this basis, the vast majority of ground handling slots at Keflavik Airport during peak periods have been allocated to Icelandair.
It is clear that Icelandair has not only enjoyed the aforementioned priority in the allocation of the available handling slots. The Competition Authority's investigation reveals that the company has also enjoyed priority in the allocation of new handling slots during peak periods, which were made available last summer when the capacity of Keflavik Airport was increased and a new airfield was put into use. Competition considerations were not taken into account in that allocation, which is, however, one of the factors that must be considered when allocating handling slots.
Icelandair enjoys a significant advantage in scheduled flights to and from Iceland. This is largely due to the company's very high market share and even a monopoly on some of the main scheduled routes to and from the country. Icelandair's route network, which includes connecting flights between European and North American destinations, also gives the company a significant market advantage, partly due to so-called connecting passengers. The Competition Authority's investigation shows that handling times during the peak periods are crucial for building such a route network, as this achieves maximum utilisation of aircraft, i.e. two flights from Iceland within the same 24-hour period. In the view of the Competition Authority, a key prerequisite for competition in scheduled flights to and from Iceland is that other competitors have the opportunity to build up a flight network between destinations in Europe and North America, using Keflavik Airport as a passenger hub.
The Competition Authority therefore concludes that the current arrangement for the allocation of handling slots at Keflavik Airport has a detrimental effect on competition and prevents new entrants from entering the scheduled flight market from Iceland. The current arrangement is therefore likely to cause detriment to air passengers.
It is planned that the capacity of Keflavik Airport will be increased again next summer when a new apron is put into use. However, it is clear that the demand for slots at the airport during peak times from both Icelandair and WOW Air for next summer is much greater than the supply of slots available. In the view of the Competition Authority, it is therefore necessary in this case to take measures to ensure that WOW Air is allocated slots during the said peak periods. It is unacceptable from a competition perspective that the methodology for allocating slots at Keflavik Airport works against a new competitor being able to establish a route network and provide Icelandair with sustainable, effective competition.
Accordingly, the Competition Authority directs the following instructions, among others, to Isavia:
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