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Decision on proposed designation and de-designation criteria for airports

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Timing

The timing of the consideration of de-designation for Manchester and Stansted Airports has primarily been driven by the statutory timetable for the CAA's review of the price caps for these airports.  Once it became clear that the CAA, OFT, TSC and MAG (for Manchester Airport) considered that there was a case to consider a change of status, the Secretary of State considered it appropriate to review the issue within a timescale that would allow a decision to be made before the CAA had to make price cap proposals to the Competition Commission.

The Secretary of State has not received any specific request from CAA, BAA or other interested parties to consider a possible change of status of Gatwick or Heathrow airports.  In the absence of such representations, he does not at this time intend to consider their status as designated airports.

EU Airport Charging Directive

There are a number of reasons for considering that the draft EU Airport Charging Directive has little bearing on the decision about the criteria for designation or de-designation of UK airports under Section 40 of the Airports Act, and whether Manchester and Stansted airports should be designated or not.  Firstly, the final form of the draft directive is uncertain and its implementation is unlikely to take place in the near future.  The European Commission has adopted the draft Directive and it is currently before the European Parliament.  Consideration by Member States in Council working groups may start in the second half of 2007.  The UK has yet to determine its position on the draft Directive and the DfT is seeking views from interested parties until June 2007.  Even when the Directive is finally agreed, member states have 18 months to implement it in. Secondly, in its current form, the Directive would apply to Stansted and Manchester airports irrespective of whether they were designated or not. 

Decision

After considering the responses to the consultation, the Secretary of State has decided to retain his proposed criteria.  While concerns were expressed about aspects of the criteria, the Secretary of State believes that overall the criteria provide an appropriate framework for assessing issues of designation of airports.

The criteria that the Secretary of State has adopted are set out below.

'Designation of an airport is appropriate if, in the view of the Secretary of State:

the airport, either alone or together with any other airport(s) in common ownership or control, has or is likely to acquire, substantial market power; and

domestic and EC competition law may not be sufficient to address the risk that, absent regulation, the airport would increase and sustain prices profitably above the competitive level or restrict output or quality below the competitive level; and

designation under Section 40 of the Airports Act 1986 would, taking account of the magnitude of the risk identified in (2) and its detrimental effects were it to materialise, deliver additional benefits (i.e. over and above competition law) which exceed the costs and potential adverse effects of such designation (i.e. the incremental benefits are positive).

De-designation is appropriate if, in the view of the Secretary of State any of these factors would cease to apply were the airport to be de-designated.

In reaching any decision to designate or de-designate, the Secretary of State will take into account all other relevant matters, including international obligations.'

Next steps

Following on from the feedback from this consultation, and as foreshadowed in the February 2007 consultation, the Secretary of State intends to consult on whether there should be a change in status for Manchester and Stansted airports.

To prepare for these consultations, the Secretary of State is asking CAA to provide advice on whether to change the status of each of the airports, and in particular, advice on whether the criteria are met for each of the airports.  Given that it has already consulted on market analysis for each airport and sought additional evidence, CAA has indicated that it expects to be able to provide its advice for each airport in about a month.

On the basis of when CAA is expected to provide its advice, DfT expects to issue the consultations on Manchester and Stansted Airports in late July. 

For related documents, pages and internet links, see the column on the right.

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