Part 2: Air traffic Policy Background
En route air traffic services are currently provided in the United Kingdom by NATS (En Route) plc ("NERL"), a wholly owned subsidiary of NATS Holdings Limited ("NATS") by virtue of a licence granted to it by the Secretary of State under Part 1 of the 2000 Act. The 2000 Act confers on the CAA, as the UK’s specialist aviation regulator, the role of economic regulator of NERL.
	The CAA is responsible for monitoring and enforcing NERL’s compliance with the conditions of the licence and with its duties under section 8 of the 2000 Act. It also has powers to modify conditions of the licence, subject to its duties under section 2 of the 2000 Act. Its primary duty, one shared with the Secretary of State, is to maintain a high standard of safety in the provision of air traffic services. The CAA also has a number of duties secondary to this main duty (of which the first three are shared with the Secretary of State):
to further the interests of operators and owners of aircraft, owners and managers of aerodromes, persons travelling in aircraft and persons with rights in property carried in them;
to promote efficiency and economy on the part of licence-holders;
to secure that licence holders will not find it unduly difficult to finance activities authorised by their licences;
to take account of any international obligations of the United Kingdom notified to the CAA by the Secretary of State; and
to take account of any guidance on environmental objectives given to the CAA by the Secretary of State.
						In addition, both the CAA and the Secretary of State are under a duty to exercise their functions in such a way as to impose on licence holders the minimum restrictions which are consistent with the exercise of those functions.
	There have been two serious system failures that have prompted reviews of the regulatory framework for NERL, including the enforcement and penalty regime. The first incident, a Voice Communications Systems (VCS) failure on 7 December 2013, which had a particularly disruptive effect on passengers, prompted a wide-ranging CAA review into the NERL licence and regulatory framework. The second incident involved a computer system failure on 12 December 2014, resulting in the CAA and NATS establishing an independent enquiry into its cause.
	For both failures, the CAA was satisfied that there were no safety issues associated with NATS’s handling of the incident and there was no evidence that NATS was in breach of the service obligations in its licence. The independent enquiry into the 2014 system failure, however, made a number of recommendations to update and modernise the licensing framework. 5
	In September 2016, the Government published a consultation document "Modernising the licensing framework for air traffic services" 6 . The Government’s response was published in February 2017 7 . The consultation related to proposals for:
amending the licence modification process to enable the CAA to make changes to the licence after consultation and conferring a right of appeal to affected parties;
conferring a wider range of enforcement tools on the CAA, and enabling the licence holder to appeal decisions to an appropriate body;
updating the Secretary of State’s powers to be able to amend certain licence provisions, in particular the period the licence continues in force.
	Part 2 of the Act updates the regulatory framework governing the provision of air traffic services by repealing and replacing provision covering licence modification and enforcement in Part 1 of the 2000 Act. The new provision is modelled on the framework in Part 1 of the Civil Aviation Act 2012 relating to the licensing of airports, and contains a more comprehensive suite of regulatory and enforcement tools. The new framework will, amongst other things, enable the Secretary of State to modify a term of a licence as well as strengthen the CAA’s powers to modify a licence condition. There is a new procedure for modifying a licence condition (including new appeal rights conferred on the licence holder and certain other persons), and provision for enforcement in respect of the contravention of a licence condition or statutory duty (including power to impose financial penalties).
	Part 2 also includes provision relating to airport slot allocation. The process of allocation of slots at capacity constrained airports is governed by retained Regulation (EEC) No 95/93, as amended, on common rules for the allocation of slots at Community airports ("Regulation 95/93"). The Regulation allows the Secretary of State to designate an airport as "coordinated" where there is significantly more demand from air carriers to use the airport than there is capacity available. These are often referred to as "level three" airports. In the UK, there are currently eight slot coordinated / level three airports: Birmingham, Bristol (Bristol is coordinated only at certain times of the year), Gatwick, Heathrow, London City, Luton, Manchester and Stansted.
	Articles 8(2) and 10(2) of Regulation 95/93 provide that where an air carrier has operated slots allocated to it for at least 80% of the time during the scheduling period (winter / summer) for which the slots were allocated, the air carrier will be entitled to the same slots in the next equivalent scheduling period.
	In response to the COVID-19 pandemic the European Union amended Regulation 95/93 to waive this 80% usage rule for the Summer 2020 scheduling period. The EU Commission was also given a delegated power to extend the duration of this waiver, which it exercised to include the Winter ‘20/21 scheduling period. The UK has supported this position to protect future connectivity, airline finances, and reduce the risk of empty, or near empty flights being run to retain slots under the 80% usage rule.
	In anticipation of the end of the current waiver and the Transition Period, the Department for Transport laid regulations on 1 December 2020 to transfer the delegated power of the EU Commission to extend the waiver to the Secretary of State for Transport. Those regulations were debated in Committee in the House of Commons on 12 January 2021, and in Grand Committee in the House of Lords on 19 January 2021. A further set of regulations were laid on 26 February 2021 to extend the duration of the waiver for the summer season. As provided for in Regulation 95/93, this delegated power only lasted until 2 April 2021, and the waiver’s duration could only be set at the time of making the regulations. The decision to extend the waiver must be based on available data and there is currently a lack of forward demand data on which to justify an extension to include the Winter ‘21/22 scheduling period. Without primary legislation to give new powers, the 80% usage rule would therefore resume well before passenger demand is expected to recover.
	Because slots at capacity constrained airports are scarce, they hold substantial operational, competitive and often financial value to air carriers. In the current context, where passenger demand has declined significantly due to the COVID-19 outbreak, if the 80% usage rule resumed, it is likely that air carriers could deem it in their commercial interests to continue to operate flights, despite associated costs both financial and environmental, with empty or near-empty aircraft. Having the ability to continue to provide a waiver from the 80% usage rule, or to vary the percentage for future seasons, will allow the adoption of appropriate measures to alleviate these costs and to support recovery of the aviation sector, as passenger demand for flights returns.
	Part 2 gives the Secretary of State temporary power to implement alleviation from airport slots requirements for air carriers, in response to the impact of the COVID-19 pandemic, until such a time as passenger demand recovers (predicted to be 2025).