Civil Aviation Bill

Memorandum submitted by easyJet (CA 15)

Summary

easyJet recognises that the regulatory framework for airports is dated and needs refreshing. We support the extra flexibility that the Civil Aviation Bill gives to the UK regulatory framework for airports but caution that binding price caps are still needed at the London airports. With this in mind, we are very pleased the Civil Aviation Bill gives airlines the right to appeal decisions made by the Civil Aviation Authority (CAA) about whether airports need a price cap and what price caps are the right ones. We welcome the news that airlines will be given the right to intervene in appeals too.

easyJet

easyJet has a key interest in the Civil Aviation Bill. We are the largest airline at London Gatwick airport and the second largest airline at Stansted airport, which currently have price caps. We are also the UK’s largest airline operating from 18 of the UK’s airports, carrying over 55 million passengers each year. (More than BA, Virgin Atlantic and BMI combined). We began in 1995 at London Luton airport, floated on the London Stock Exchange in 2000. We have successfully grown to a fleet of 204 planes, operating over 580 routes to 130 airports across 30 countries. We fly to 44 of the 50 largest primary airports in Europe, which tend to have their airport charges set through a regulatory framework. Therefore, we are familiar with aviation law across a range of European jurisdictions, and with what works well and what does not.

Background

easyJet has been closely involved with the Civil Aviation Bill, from the review by the Department of Transport (DfT) in 2008 of the current legislation to the DfT drawing up its proposals last year. Last year, we worked closely with the DfT on its impact assessment of the various options with other airlines. We also presented oral evidence to the Transport Select Committee on this Bill. We have focused on the importance of airlines having a right of appeal.

Right of appeal

We believe it is vital that airlines can appeal airport price cap decisions made by the CAA. An airline right of appeal is the best way of ensuring that the passenger interest is fully represented, as in practice airlines have both the interests of their passengers at heart, and are best placed in terms of resource and knowledge to pursue an appeal. We also note that it ensures that there is a symmetric right of appeal, ensuring legal fairness.

If this right is not given to airlines, there is a greater risk of regulatory capture of the CAA by the airport. Regulatory capture is a well known and established concept. This capture might only reflect the greater influence that airports will have over the regulatory process through having a right of appeal that compels the CAA to listen to them more closely to them than other parties. While we have no reason to doubt the CAA, legislation needs to be constructed to capture all possible eventualities, not just the expected ones. We note that previous Competition Commission (CC) reviews of CAA’s price cap decisions have highlighted that the CAA has not paid enough attention to service quality at the London airports. Giving airlines the right of appeal means that another organisation with expert knowledge, resources and direct contact with passengers can challenge the CAA’s decisions if they fall too much in favour of the airport. Therefore, we are very pleased that the DfT has drafted the Civil Aviation Bill to give airlines this right and we urge the Committee to support it. We also welcome the news that airlines will be given the ability to intervene in appeals by other parties. Airlines can play a key, constructive and effective role through participating in an appeal process, not just initiating one.

Additional powers to the CAA

We support the additional powers that will be transferred to the CAA from the CC and DfT. We believe that this is appropriate given the expertise, independence and industry knowledge of the CAA.

Enforcement powers

We agree with the extra civil enforcement powers that will be given to the CAA, including penalties of up to 10% of airport revenue. We believe that this ought to ensure more proportionate and therefore effective discipline upon airport behaviour, in relation to service quality and delivery of investment, which will benefit our passengers.

Licences

We welcome the extra flexibility that licences will give the CAA in setting price caps. For example, it will make it possible for the CAA to set price caps over a longer period, if that suits the airport operator and the airline community. However, we strongly believe that airports that have price caps currently should continue to have binding ones in the future, because of their significant market power.

February 2012

Prepared 2nd March 2012