Commentary Part 1 – Airports Schedule 10: Regulation of operators of dominant airports: transitional provision
221.Part 1 of Schedule 10 to the Act contains the key elements for the transition to Part 1 of the Act from the existing regulatory regime set out in Part 4 of the AA 1986 and Part 4 of the 1994 Order. Further transitional provision will be made in secondary legislation.
222.Paragraph 1 of Schedule 10 defines for the purpose of this Schedule an interim period, which will run from the date of commencement of section 3 (“the commencement day”) until 31 March 2014. The remainder of the Schedule makes provision about the operation of the AA 1986, the 1994 Order and the Act during that period.
223.Paragraphs 2 and 3 apply where an airport is designated under the AA 1986 or the 1994 Order at the beginning of the interim period. There are currently three designated airports - Heathrow, Gatwick and Stansted – which are subject to price controls that expire on 31 March 2014. The Government has made a commitment not to disturb the current price control settlements for those airports.
224.Paragraph 2(2) and (3) provide that, on the commencement day”, a designated airport under the AA 1986 will be treated as having met the market power test under section 6 and as if the CAA had published a notice of that determination under section 8.
225.Paragraph 2(4) has the effect that the CAA may not treat this determination as having been previously made for the purposes of section 7(5). Therefore the CAA could not refuse a request from the operator of the airport area and/or other persons whose interests are likely to be materially affected by the determination on the basis that there has been no material change of circumstances since section 3 came into force.
226.Paragraph 2(6) disapplies the right of appeal in relation to the market power determination which is treated as made under paragraph 2(3). But it does not remove the right of appeal under section 13 and Schedule 1 where a market power determination is made in response to a request made after the commencement day”. The CAA is obliged to respond to a request made by the operator of the airport area in question or a person whose interests are likely to be materially affected by the determination (see section 7).
227.Paragraph 3(2) provides an exemption during the interim period from the prohibition under section 3. In brief, section 3 prevents specified persons from requiring others to pay relevant charges for airport operation services provided in an airport area if the operator of the area does not have a licence. The exemption under paragraph 3(2) applies to any person at an airport which is a designated airport on the commencement day”.
228.Paragraph 4(1) provides that if a decision was made to designate an airport, or to confirm or revoke a designation, on or after 10 November 2011, the CAA can refuse to make a market power determination (if it is requested to do so) if it considers that there has not been a material change of circumstances since the previous decision. The Airport Charges Regulations 2011(SI 2011/2491) came into force on 10 November 2011. They amended the AA 1986 and the 1994 Order to provide for mandatory procedures whereby the CAA examines whether airport operators have or are likely to acquire substantial market power.
229.Paragraph 4(2) provides for the handling of requests made before the commencement day” for an order designating an airport or revoking its designation. If the Secretary of State (or the Department of the Environment in Northern Ireland) has not made such an order (or a decision not to make such an order) before the commencement day”, the request will be treated as a request for a market power determination under the Act.
230.Paragraph 5 provides that during the interim period no orders can be made designating an airport under the AA 1986 or the 1994 Order. If, during the interim period, a designated airport ceases to be a dominant airport for the purposes of Part 1 of the Act, an order must be made revoking the designation subject to the specified restrictions set out in paragraph 5(4). The decision on whether an airport is still dominant will be made by the CAA and, if the CAA’s decision is that the airport has ceased to be dominant, the Secretary of State (or the Department of the Environment in Northern Ireland) must then make an order revoking its designation. The Secretary of State (or the Department of the Environment in Northern Ireland) is to have no discretion when making such an order.
231.Paragraph 5(4) provides that the Secretary of State (or the Department of Environment in Northern Ireland) must not revoke such an order in three circumstances: 1) during the sixty day period in which a person may make an appeal to the Competition Appeal Tribunal against the market power determination; 2) at a time when the effect of the market power determination has been suspended by the Competition Appeal Tribunal or when the Secretary of State or the Department of the Environment in Northern Ireland considers it may be suspended; or 3) if all or part of the market power determination has been set aside or quashed.
232.Paragraph 5(5) provides that where a request is made during the interim period for an order revoking an airport’s designation and the Secretary of State (or the Department of the Environment in Northern Ireland) has not made such an order before the end of this period, the request is to be treated as a request for a market power determination.
233.Paragraph 6 makes provision to address the different definitions of an “airport” under the AA 1986 or the 1994 Order and sections 66 and 67 of this Act to ensure that the provisions in this Schedule are properly applied during the interim period.
234.For example, paragraph 6(3) provides that where an airport (as defined in the AA 1986 or the 1994 Order) is designated under that Act or Order, the effect of paragraph 2(2) and (3) of Schedule 10 is that the main operator’s airport area will be treated as having met the market power test. The main operator’s airport area is the area at the airport (as defined in this Act) which is under the overall management of the person who, immediately before the commencement day”, was the operator of the airport for the purposes of the AA 1986 or the 1994 Order.
235.Paragraph 7 restricts the power under section 108 for the Secretary of State to amend Part 1 of Schedule 10 so that the power cannot be used to end the interim period before 31 March 2014. This prohibits any amendments which would in effect remove the exemption from the prohibition for people at designated airports from the prohibition before 31 March 2014. It does so in order to ensure that the current price controls affecting designated airports are not disturbed before 31 March 2014, unless the designations are revoked.
236.Part 2 of Schedule 10 makes transitional provision for airport operators that currently have the status of statutory undertakers by virtue of Part 5 of the AA 1986 or Article 25 of the 1994 Order.
237.Under the AA 1986 an airport operator has statutory undertaker status if a permission to levy charges under Part 4 of that Act has been granted in relation to the airport or it has a pending application for such a permission and the airport is not an excluded airport described in section 57(2) of that Act. Excluded airports include airports owned by certain types of local authority. Under section 37(2) of the AA 1986 permission to levy charges is necessary where the annual turnover of the airport operator exceeds £1million per financial year in at least two of the last three financial years.
238.Under new section 57A of the AA 1986 (to be inserted by Schedule 8), an airport operator will have statutory undertaker status by virtue of Part 5 of the AA 1986 if a certificate has been granted under that section in respect of the airport.
239.Paragraph 9 of Schedule 10 provides that, where a permission to levy charges is in force in respect of an airport immediately before the day on which Schedule 8 to the Act comes into force, the permission is to be treated as if it were a certificate given under section 57A of the AA 1986. So the airport operator’s status as a statutory undertaker will be uninterrupted.
240.Paragraph 10 of Schedule 10 makes similar provision for cases in which an application under section 38 of AA 1986 for permission to levy charges is pending on the commencement day”.
241.Separate arrangements exist in Northern Ireland for conferring statutory undertaker status on airport operators under the 1994 Order. Paragraphs 14 to 18 of Schedule 10 make provision in relation to airports in Northern Ireland that achieves a similar effect to the Great Britain arrangements described above.