Access to the groundhandling market at UK airports: a review of the CAA's approach

Overview

The purpose of this document is to seek views and relevant factual information from those with an interest in the provision of ground handling services at UK airports, in particular airports, airport users ground handling suppliers, and those representing passengers and shippers of cargo.  This document is not a draft policy statement for consultation but an evidence gathering exercise.  In due course we plan to publish for consultation draft guidance on our role under the Airports (Groundhandling) Regulations 1997 which will draw on the views and information provided in this request for information.  We are looking for facts, examples and information and stakeholders' views on the factors we should take into account, and how we should assess them in different circumstances, when carrying out our functions described in this document.

We are not inviting specific complaints or representations about the supply of ground handling services at individual airports.  Most complaints, in particular those alleging a failure to comply with the requirements of the Regulations on market access, would need to be addressed to airports and thereafter can only be pursued through the courts rather than with us. 

The document also explores the purpose behind the EU ground handling Directive (implemented by the UK Regulations), namely to increase competition and choice in the supply of ground handling services with the aim of "reducing the operating costs of the airlines and improving the quality of service provided to airport users"[1].  An area we are seeking views is around the extent which our functions under these Regulations should be used to limit competition in the interests of safety, security or for any other reasons. We are responsible for enforcing the UK's and EU's safety and security regulations at UK airports.  We are also responsible for monitoring airports’ and airlines’ implementation of aviation security regulation in the UK; and these entities may, in turn, employ ground handling providers.  All ground handling providers (whether self handlers or third-party handlers), and no matter how many operate at an airport, must comply with security regulations through their contractual arrangements with airlines.

In addition to these pages, we have also made a full, detailed consultation document available. The questions and text remain the same, but on this online version of the consultation we have reduced some of the text available in the full document.

Chapters 1, 2 and 3 of the full consultation document introduce and summarise this consultation, summarise what ground handling activities are, set out the origins of the EU directive, and provide details of our functions under the Regulations.  Chapter 4 considers compliance with the Regulations.  Chapter 5 sets out the scope of the Regulations.  Chapters 6 to 12 explain in more detail our functions under the Regulations and ask what evidence, criteria and factors we should consider when exercising these functions. In particular they cover: applications to limit the number of third party or self handlers at an airport, appeals to us about the selection of handlers, allocation of space, access charges and consultation by airports, applications to prohibit a ground handler from operating at an airport, applications to reserve the management of centralised infrastructure, and accounting separation by ground handling suppliers.

Appendix A lists ground handling services covered by the Regulations.  Appendix B lists the airports which currently meet the thresholds in the Regulations.

The rest of this section includes key pieces of information drawn from Chapters 3 and 4 of the full consultation document, which will help you respond to this consultation.

An overview of our functions

There are 11 broad categories of ground handling services. These can be divided into two sets that are treated in different ways under the Regulations.

The first set of handling services includes the following categories:

• Ground administration and supervision;
• Passenger handling;
• Aircraft services;
•  Aircraft maintenance;
• Flight operations and crew administration;
• Surface transport,
  and
• Catering services.

The second set of handling services includes the following categories, which comprise many (but not all) of the services provided in airside areas of the airport:

• Baggage handling;
• Freight and mail handling;
• Ramp handling;
  and
• Fuel and oil handling.

Table 1 below summarises the position under the Regulations in terms of handling freedoms and the ability of airports to limit those freedoms for the supply of third party handling.

Table 1: Third Party Handling freedoms and limitations

Should we approve a limit for the number of third party handlers at an airport with more than 2 million passengers the airport must then conduct a tender process to select the handlers.  The airport will normally make the selection.  However, any person who is "aggrieved" by the airport's selection of handlers may appeal to the CAA.  Where an airport provides ground handling services itself, it is allowed to be one of the handlers (without having to go through the selection procedure), and we select the other handlers up to the limit. Our selection of handlers is subject to appeal to the Secretary of State by an "aggrieved" person,  In all cases, a supplier of ground handling services is to be selected for a period not exceeding seven years.

Self provision of handling services

Table 2 below shows for self-handling the equivalent information as in Table 1 

Table 2: Self-handling freedoms and limitations

The self-handling freedoms described in Table 2 are available to "airport users" who are defined in the Regulations as:

"any person responsible for the carriage of passengers, mail or freight by air from or to the airport in question".

Should we decide to approve an application to limit the number of self-handling airport users we must then in all cases select those able to self-handle on the basis of "relevant, objective, transparent and non-discriminatory" criteria.

There are a number of types of application that airports can make to the CAA under the Regulations. Where these involve requests to restrict access to the ground handling market at the airport, our role is to determine whether the number of third party handlers or self-handling airport users should be limited. It is also possible for a qualifying airport to apply to the CAA for self-handling for any or all services in Set 2 to be banned altogether.

For any application where the final decision lies with the European Commission (i.e. where airports are seeking particularly restrictive handling arrangements) we have to consider the existence or otherwise of  "specific constraints of available space or capacity (at the airport) arising in particular from congestion and  area utilisation rate"[2] that "make it impossible to open up the market for the supply of groundhandling services (or for self-handling) to the degree provided for in the Directive".

For other, less restrictive, types of application, for example, those that would limit the number of third party handlers or self-handling airport users to no fewer than two for services in Set 2, the Regulations give us discretion to decide the factors to be taken into account.

Since the Regulations came into force in 1997 we have considered three applications from airports to limit the number of airside third party handlers, two from Gatwick Airport and one from Heathrow Airport.  In these cases we focussed on evidence supplied by the airport relating to safety, security, capacity and available space constraints as mentioned in the fifth bullet above.  We considered first, whether the case had been made for any limitation in the number of handlers and second, if so, the appropriate maximum number of handlers.  Gatwick's first application proposed an increase in the number of permitted airside handlers but sought from CAA an upper limit to that increase.  Heathrow's application was for a limit lower than the number of handlers then operating at the airport.  Gatwick's second application was to reduce the limit from four to two in the number of suppliers of airside bussing services.  On the basis of the evidence and argument presented by the respective airports in their applications we approved the limitations applied for at Gatwick, but not those at Heathrow.  Subsequently, in 2007, at Gatwick's request we removed the limits at that airport as the capacity constraints that had justified the earlier decision had been overcome in the meantime. Since 2007 we have received no further applications to limit third party handling at any UK airport and there have been no applications to limit self-handling. Consequently, there is no airport in the UK where access to the ground handling market (or the ability to self-handle) has been limited through regulatory action requested of the CAA.

Chapter 6 discusses in more detail our role in relation to market access by third party suppliers and seeks your views while Chapter 7 discusses our role in respect of access by self-handling airport users.

Subject to being able to apply to the CAA for restrictions as described above, the Regulations require the management of an airport to take the necessary measures to ensure that:

• suppliers of ground handling services and airport users wishing to self-handle have access to airport installations to the extent necessary for them to carry out their activities;
   
• any conditions the airport places upon such access (for example, the terms of any authorisation or licence to access those facilities) are relevant, objective, transparent and non-discriminatory;
   
• the space available for ground handling at the airport is divided among the various suppliers of ground handling services and self-handling airport users, including new entrants, to the extent necessary for the exercise of their rights and to allow effective and fair competition on the basis of relevant, objective, transparent and non-discriminatory rules and criteria;
  
  and
   
• any fee charged for such access is determined according to relevant, objective, transparent and non-discriminatory criteria.

Any person who considers that a decision or an individual measure taken by an airport does not comply with these criteria may appeal to the CAA. The right to appeal exists at airports with more than 2 million annual passengers in relation to third party handling and at airports with more than 1 million annual passengers for self-handling airport users for handling services in Set 2.  Chapter 8 invites views on the factors we should take into account when considering appeals.

We can, on application from qualifying airports, decide to prohibit, for such period as we think fit, a third party handler or a self-handling airport user, from providing one or more categories of handling.  To prohibit a handler, we have to be satisfied that it has failed to comply with a rule imposed upon it to ensure the proper functioning of the airport.  To date, we have received no applications from airports to prohibit handlers.  Chapter 9 invites views on how we should treat any future applications to prohibit a handler.

We can consider an application from any airport to reserve to itself the management of centralised infrastructures used for the supply of ground handling services "whose complexity, cost or environmental impact does not allow for division or duplication  such as  baggage sorting, de-icing, water purification and fuel-distribution systems."  Where centralised infrastructures have been reserved in this way ground handlers and self handling airport users may not use alternative infrastructures.  During 1998 we approved applications to reserve centralised infrastructures from Birmingham, Leeds Bradford, London City, Luton, Manchester and Stansted Airports. Details can be found on the CAA website. We published details of each application and received no objections to them.  Chapter10 discusses our proposed approach to future applications from airports to reserve the management of centralised infrastructures. 

Airports with more than 2 million passengers or 50,000 tonnes of freight that supply ground handling services and suppliers of ground handling services at the same sized airports (both airlines and independent third party handlers) must "rigorously separate" the accounts of their ground handling activities from any other commercial activities in which they are engaged.  Airports may not cross-subsidise their ground handling activities from their other activities.  The role of the CAA is to appoint an Independent Examiner (funded by the entity concerned) to check that the required separation has been carried out. Where the handler is an airport, the Independent Examiner also checks that it is not cross-subsidising ground handling from other revenue sources. The CAA can also require accounting information from those who have to separate their accounts.  Chapter 11 explains how we propose to exercise our functions in relation to the separation of accounts.

The Regulations require all airports open to commercial traffic to form an Airport Users Committee (AUC) comprising representatives of airport users or organisations representing airport users.  At least once a year the airport must consult with the AUC and with persons providing ground handling services at the airport on the application of the Regulations. The consultation must include, at least, the organisation of the provision of, and the prices charged for, any monopoly supply of ground handling services.  A failure by an airport to establish and maintain an effective consultation process for ground handling risks an appeal to the CAA under the Regulations.

Compliance with the Regulations

We are aware that some airports, that have not applied to the CAA to limit the number of ground handlers, manage their activity locally through authorisations (or "licences") issued by the airport to ground handling suppliers.  In some cases local byelaws provide a legal underpinning for such an arrangement.

Such authorisations/licences can include conditions, such as minimum performance standards that the ground handler is expected to meet in areas such as baggage delivery times, check-in queue times, airside driver discipline and on-time aircraft departure performance  They also have to comply with airport policies on, for example, health, safety and environmental matters. There can be escalating sanctions for poor performance by the ground handler leading ultimately to the withdrawal of its authorisation/licence.  We are not aware of this final sanction ever being invoked.

Some airports publish regular data on ground handling performance.  This can include, for example, baggage delivery times and on-time aircraft departure performance either on an airline by airline or a handler by handler basis.

We would welcome information and views on airports’ compliance with the Regulations.

Your views are invited

We are particularly keen to receive information and views from airports, airlines, other aircraft operators, ground handling companies and other interested parties on the issues and questions raised in this document.

In the interests of transparency, we intend to publish as much information as possible on our website.  If any of the information you provide or views you express are considered confidential please provide both confidential and non-confidential versions. The non-confidential responses will be published on our website with our report on the results of this Request for Information. In general, we will not publish information if we consider that the disclosure of such information would, or might in our opinion, significantly harm the legitimate business interests of an undertaking to which it relates, or an individual’s interests.

This Request for Information runs until 28 June 2016 during which time we would welcome submissions. These may be either in written form or we are happy to host meetings to discuss issues in detail with industry representatives.  Please provide any written submissions to economicregulation@caa.co.uk by 28 June 2016

Once we have considered the responses we will publish a summary of them and the CAA's initial response.  We then plan to produce a draft guidance document on which we will invite comments.

How to respond to this consultation

Please email economicregulation@caa.co.uk.

We will assume that all responses can be published on our website.

If your submission includes any material that you do not want us to publish, please also send us a redacted version that we can publish.

You should be aware that information sent to and therefore held by the CAA is subject to legislation that may require us to disclose it, even if you have asked us not to (such as the Freedom of Information Act and Environmental Information Regulations). Therefore, if you do decide to send information to the CAA but ask that this be withheld from publication via redacted material, please explain why, as this will help us to consider our obligations to disclose or withhold this information should the need arise.