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Civil Aviation Bill

moved Amendment No. 43:"After Clause 10, insert the following new clause—" ““ENCOURAGING AIRPORT COMPETITIVENESS (1)   Section 39 of the Airports Act 1986 (c. 31) (imposition of conditions by CAA) is amended as follows. (2)   In subsection (2)(b) after ““promote”” insert ““free and fair competition amongst airports in the United Kingdom and””. (3)   In subsection (2)(c) after ““airports”” insert ““, subject to such investment being commercially viable in its own right,””. The noble Lord said: Amendment No. 43 is designed to encourage airport competitiveness. As this obviously has implications for airports in south-east England, I must again declare an interest as Leader of Essex County Council. The proposed new clause reflects the concerns expressed by my honourable friend the Shadow Secretary of State for Transport in another place. I do not know whether he has been promoted yet, but he is likely to be. He highlighted the dangerous implications of an imbalanced regime of charges which could,"““deliberately skew the economic benefits or appeal of Stansted compared with Heathrow and Gatwick””." During the Report stage in another place he also observed that:"““There is deep concern in the aviation world that within the Bill are provisions from which will emerge decisions and a regime that will create an artificial case for the expansion of Stansted””.—[Official Report, Commons, 10/10/05; col. 64.]" This is an important concern. Due to BAA’s dominant market position, the CAA regulates airport charges at Heathrow, Gatwick and Stansted. This regulation is administered in the form of five-year reviews, which set price caps for each of these airports for the following five years. The price caps are set at a level designed to provide BAA with a fair return on invested capital. Prior to 2003, the CAA regulated the three airports on a system basis by aggregating the invested capital at all three airports and allowing prices to be set in such a way that BAA was permitted to over-recover on its invested capital at Heathrow when the market was strong, and under-recover at Stansted when the market was weak. Not surprisingly, the system approach was always fiercely opposed by the Heathrow-based airlines as it meant that they were helping to pay for investment at Stansted. In effect, British Airways was being forced to subsidise Ryanair. Independent airports such as Luton, Birmingham and East Midlands were also fiercely opposed to the system approach because it created unfair competition, enabling BAA to operate Stansted as a loss-leader while making up the difference at Heathrow, where the market was so strong that BAA could apply higher charges without risking loss of business. The new clause is designed to address these serious concerns and to ensure fair and effective competition between all airports. It will accomplish this by amending the statutory duties of the CAA, the organisation responsible for the economic regulation of the aviation industry. Currently, the CAA has four statutory duties with regard to economic regulation. These are set down in Section 39(2) of the Airports Act 1986 as follows:"““(a) to further the reasonable interests of users of airports within the United Kingdom;""(b) to promote the efficient, economic and profitable operation of such airports;""(c) to encourage investment in new facilities at airports in time to satisfy anticipated demands by the users of such airports; and""(d) to impose the minimum restrictions that are consistent with the performance by the CAA of its functions under those sections””." The amendment would amend the second and third of the CAA’s statutory duties to read as follows:"““(b) to promote free and fair competition amongst airports in the United Kingdom and the efficient, economic and profitable operation of such airports;""(c) to encourage investment in new facilities at airports, subject to such investment being commercially viable in its own right, in time to satisfy anticipated demands by the users of such airports””." The effect of the amendment would be to encourage fair airport competitiveness. By enshrining,"““free and fair competition amongst airports in the United Kingdom””," the amendment will address the legitimate concerns of the aviation industry and ensure that we encourage free and fair competition in the United Kingdom aviation industry. I beg to move.