CAA, Economic regulation to protect consumers at Stansted

2012-12-20 — / — The UK Civil Aviation Authority (CAA) has today published for consultation its latest thinking on whether Stansted Airport should be fully de-regulated from 2014. The consultation is about whether the airport should be subject to economic regulation; it does not cover the type of regulation that any licence would contain, which would be consulted on in 2013.

The CAA is minded to rule that Stansted should not be fully de-regulated at this time. Its assessment is that, in terms of services to low cost and charter carriers, the airport at present has a level of market power that may be substantial and it is likely to be become substantial between 2014 and 2019 as airport capacity constraints continue to tighten in the London region. In relation to cargo operations, the CAA’s assessment is that Stansted has at present a substantial degree of market power.

The CAA has provisionally concluded that it would be better to remedy possible abuse of Stansted’s market power both with economic regulation and also general competition law. The CAA has also provisionally concluded that the benefits to consumers of continuing economic regulation at the airport are likely to outweigh the possible adverse impacts of regulation on the airport.

Iain Osborne, CAA Director of Regulatory Policy, said: “Our core focus is protecting consumers and improving their experience. The evidence tends to suggest we cannot be confident competition alone will deliver this. However, this does not mean we would necessarily continue with traditional price controls – we would consult on that next year.

“Whilst we have provisionally found Stansted should be subject to continuing regulation to protect consumers, that view will now be consulted on, and we look forward to engaging with our stakeholders closely throughout the process especially on their views on the most proportionate form of regulation to reflect the circumstances at Stansted.”

The assessment comes about because of new powers granted to the CAA as part of the Civil Aviation Act 2012 (which received Royal Assent on December 19th 2012). The Act gives the CAA the power to be far more flexible in its approach to economic regulation. Instead of the current situation whereby an airport judged to have market power must face a price control, in future the CAA will be able to grant airports economic licences with varying conditions to ensure consumers are protected.

The Act also gives the CAA a duty to put consumers first when designing its economic regulation. The changes bring the CAA in line with other economic regulators.

The CAA’s summary ‘minded to’ assessment can be seen consultation here: Consultation on
Stansted market power assessment

Notes to Editors
1. The Stansted ‘minded to’ summary has been brought forward in order to clarify the CAA’s views on Stansted’s regulatory environment for bidders currently involved in the airport’s sale.
2. Similar consultations relating to Heathrow and Gatwick airports will be published in April 2013. The CAA’s final decisions on market power at each airport will be made later in 2013.
3. The CAA will issue consultations on initial proposals for the future regulatory regimes at each airport in April 2013. It will then issue final proposals later in 2013.
4. The CAA is the UK’s specialist aviation regulator. Its activities include: making sure that the aviation industry meets the highest technical and operational safety standards; preventing holidaymakers from being stranded abroad or losing money because of tour operator insolvency; planning and regulating all UK airspace; and regulating airports, air traffic services and airlines and providing advice on aviation policy from an economic standpoint.