Clause 3 - Prohibition

Civil Aviation Bill – in a Public Bill Committee at 4:30 pm on 28th February 2012.

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Question proposed, That the clause stand part of the Bill.

Photo of Theresa Villiers Theresa Villiers The Minister of State, Department for Transport

The clause introduces a general prohibition on an operator levying charges for its airport operation services where an operator of a dominant area at a dominant airport does not have licence. It is subject to limited exceptions both in the clause and in clause 4. This clause would incentivise operators of a dominant area at a dominant airport to apply for a licence and bring themselves under regulatory control. It is the mechanism needed to bring about that result. If this clause were deleted, there would be no means to compel a person who becomes the operator of a dominant area at a dominant airport to submit to economic regulation. This approach is based on the Airports Act 1986, which prohibits operators subject to regulation from levying charges without permission.

The prohibition applies to all charges for airport operation services levied by the relevant operator at the airport, not just those levied in respect of the dominant airport area for which the licence is required. So, for example, if a licence was required for a runway, the operator could not levy charges for services provided by it at the terminal until the operator gets a licence. This is subject to some technical exceptions set out in subsection (8), which relate to charges such as penalties payable by airlines under other legislation. That is set out in subsection (2). The reasons for that subsection are to provide a strong incentive for a person to seek a licence in order for the CAA to regulate them in their provision of airport operation services. The licence must include a provision specifying the area covered by the licence.

Subsection (2) applies if a licensed operator of one dominant area at an airport becomes the operator of another dominant area. Where the new area is not covered in its existing licence, the prohibition on charging would apply to the newly acquired dominant area and any other area within the airport operated by that person, which is not covered by its original licence. For example, if an operator had a licence for a cargo processing area and it acquired a terminal, it could not recover rent in relation to the terminal until it was licensed.

Under subsection (3), “operator” is for these purposes given an extended meaning to include others such as persons connected to the operator, and persons to whom the operator or a person connected to it has assigned to require payment of a charge. This is an anti-avoidance provision. Subsection (4) provides that if a person requires payment of a charge in breach of these provisions, it is not recoverable by that person and if it has been paid, it is recoverable from that person. Subsections (5) to (7) provide a limited exception to the prohibition. It applies where there is an appeal in respect of a market power determination or an operator determination that is invalid. In such circumstances, charges are recoverable despite subsection (4) in the period before the invalidity is finally determined.

The provisions are considered necessary to provide appropriate commercial certainty in the event of such litigation against a determination that a person is not the operator of an area and/or a determination that the  area is not a dominant area at a dominant airport. If litigation on either of these points resulted in the decision being quashed, but for these clauses, the airport operator could be required to repay charges to airlines and others for services that it had provided in good faith. We cannot reasonably expect airports to provide services over significant periods when they are unclear whether they can recover their charges. It would be necessary for airports to seek to price in this risk, which would be likely to raise costs for passengers, and is therefore not something we want to encourage. With that explanation, I hope that hon. Members will consider supporting the clause.

Question put and agreed to.

Clause 3 accordingly ordered to stand part of the Bill.