Supplementary memorandum by the Civil
Aviation Authority (EU 15A)
EUROPEAN COUNCIL'S
GROUND HANDLING
DIRECTIVE: EVIDENCE
OF ENHANCED
COMPETITION
During the CAA's recent appearance before the
Committee on 5 May, we promised to write in response to the Chair's
request for examples of where the European Council's Ground Handling
Directive has had a positive effect in opening up the European
market for the provision of airport services. I hope the following
information meets the Committee's needs. I have set out some of
the background in the attachment.
One of the main purposes of the Directive was
to open up access to the ground handling market to help reduce
the operating costs of airlines and to improve the quality of
service they receive. Evidence of the extent to which it has been
effective in achieving these aims can be found in the study conducted
by Simat Helliessen & Eichner (SH&E) International Air
Transport Consultancy, on behalf of the European Commission. The
study, published in October 2002, involved site visits to the
top 33 European airports by turnover and a postal survey covering
a further 48.
The report illustrated that the effect of the
Directive has not been very marked in the UK, largely because
the market was already quite diverse before the Directive, with
a wide choice of service providers available at the larger airports.
For example, Heathrow had exactly the same number of self- and
third-party handlers after the introduction of the Directive (18
and 12 respectively—the highest levels in Europe) as it
did before.
In contrast, at the time of the phased introduction
of the Directive between 1996 and 2001, European airports were
characterised by monopolistic or heavily restricted ground handling
service provision. The consequent effect of the Directive's introduction
at airports in the rest of Europe has been quite marked, as the
table below shows:
NUMBER OF THIRD PARTY HANDLERS AT EUROPEAN
AIRPORTS
| Number of handlers
| Passenger Handling
Before DirectiveAfter Directive
| Baggage Handling
Before DirectiveAfter Directive
| Ramp Handling
Before DirectiveAfter Directive
|
| 1 | 8 | 1 |
15 | 4 | 14 |
0 |
| 2 | 9 | 3 |
13 | 15 | 11
| 18 |
| 3 | 7 | 4 |
3 | 5 | 4 |
6 |
| 4+ | 7 | 25
| 2 | 9 | 4
| 9 |
| | |
| | | |
Source: SH&E International Air Transport Consultancy
(2002)
These statistics tend to suggest that the Directive has had
a significant positive impact in terms of widening the choice
of handler at airports across the EU, with the number of monopoly
handlers for the three ground handling services featured dropping
from 37 to 5, although it is always difficult to establish quite
how much this is a direct effect of the new regulation and how
much is down to "natural" market developments. As the
SH&E report states "It is generally viewed that it is
not just the Directive which has brought about changes to the
ground handling market. Changes in the industry and the market
itself, such as continuous cost cutting of airlines and consolidation
among handlers, have also had a significant impact on quality
and price. Indeed, a number of parties believe it is not possible
to differentiate between the causes of the improvement."
(p 50, SH&E (2002))
Examples of enhanced competition in ground handling at EU
airports include an increase from either one or two third-party
handling companies to eight at each of Vienna, Barcelona, Lisbon
and Paris Charles de Gaulle—to the benefit of UK airlines
operating to those destinations.
So far as the effect on airline costs and service quality
are concerned the SH&E study does not reach any hard and fast
conclusions although it found some evidence that prices to airlines
for handling have fallen, in particular at those airports which
previously enjoyed a handling monopoly. As far as service quality
is concerned there was also some evidence of improvements, a view
supported by our discussions with the industry on this issue.
We are also aware of instances where the Directive has been
used by the Commission and Member States to enable them to challenge
the handling restrictions at a number of airports, for example
in Germany, France and Portugal The Directive has therefore in
some cases been a useful mechanism for allowing a detailed review
of those airports that wish to continue restricting the ground
handling market. Nevertheless, there remain a few stubborn exceptions
such as Greece, which has been slow in removing Olympic Airways'
stranglehold over ground handling services. The Commission's priority
should be to concentrate on such "stragglers" to ensure
that consumers benefit from greater competition across Europe.
The CAA stands ready to provide further assistance where
and when it can be of help.
ATTACHMENT
THE GROUND
HANDLING DIRECTIVE
The introduction of Council Directive (96/67/EC) of 15 October
1996 was phased in over a number of years. By January 2001, at
which point all provisions were in force, the Directive required
a minimum level of competition for the following services:
— Freight and mail handling.
Competition was encouraged by setting in place two key principles
of access to ground handling services:
Freedom of self-handling (article 7), applied to all
airports, regardless of size or volume of traffic. At airports
with more than 1 million passenger movements or 25,000 tonnes
of freight per annum, where complexity of self handling may lead
to operational difficulties, no fewer than two airport users should
be allowed to self-handle, with those chosen on the basis of relevant,
objective, transparent and non-discriminatory criteria. Exemptions
to the general rule are also allowed where specific constraints
make it impossible to open up the market.
Freedom of third-party handling (article 6), for all
ground handling services at airports with more than 2 million
passengers or 50,000 tonnes of freight per annum. Member States
may limit the number of suppliers to no fewer than two for each
category of service, but at least one of these service providers
in each category must be independent of the airport managing body
or any airport user with more than 25% of passenger or freight
share.
Exemptions from these general principles can be made, but
notification must be made to the Commission and published in the
Official Journal, so that interested parties can submit comments.
The Commission may approve or disapprove the application on the
basis of the available evidence and justification for action.
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