Competition & Markets Authority
CMA review of air traffic control charges
The CMA has released and is consulting on its provisional findings into a dispute between the CAA and NERL regarding air traffic control charges.
The Competition and Markets Authority (CMA) has acted as the independent body charged with looking into a price control dispute between the Civil Aviation Authority (CAA) and NATS (En Route) Ltd (NERL).
NERL is the subsidiary of NATS which holds a licence to provide en-route air traffic control services above the UK and the North Atlantic. NERL is regulated by the CAA.
NERL rejected the CAA’s price control decision for the 5 year period 2020-2024 (known as RP3) and so the CAA referred the matter to the CMA for investigation.
The CAA’s price control decision included NERL’s investment levels, the targets it should achieve (e.g. in respect of delays and the environment), the returns it would be allowed and the maximum level of charges that it would collect from airlines over the next 5 years. NERL is undertaking a significant upgrade to systems and is playing a key role in improving the efficiency of airspace management in the UK, as well as its primary duty of ensuring safety of air traffic.
The CMA took a fresh look at the elements of the price control for RP3, taking into account the importance of maintaining safety standards and ensuring that the planned airspace modernisation takes place. It has provisionally suggested price control mechanisms that are largely in line with those proposed by the CAA. However, it made some adjustments in line with NERL’s submissions.
Its provisional findings on the level of costs that NERL will need to incur in RP3 to deliver these objectives are broadly in line with the CAA decision. However, the CMA has raised the assumed cost of capital for NERL, primarily because it assumed an additional allowance was necessary to cover the risks of operating in the air sector, and has proposed different amendments to the governance processes to support the delivery of investment with significant public benefits.
During the course of the CMA’s investigation, cases of Covid-19 began to appear and quickly became a pandemic. At the time of writing this report, it is clear that there will be a substantial impact on air traffic volumes and NERL operations, at least for 2020, as a result. There remains, however, considerable uncertainty about the extent and duration of this impact. The CMA’s investigation leading to its provisional findings was largely completed before the Covid-19 pandemic was established, and therefore reflects the operating conditions prior to this event.
The CMA is consulting on these provisional findings and invites interested parties to make submissions. It welcomes views from stakeholders on how it should take account of the impact of Covid-19 in its final determination. The CMA will consult with NERL and the CAA on how the reference process should progress, following publication of the provisional findings.
Further information is available on the case page.
Latest News from
Competition & Markets Authority
Merger of retail investment software firms raises competition concerns31/03/2020 09:20:00
FNZ’s purchase of GBST raises competition concerns in the provision of retail investment platform solutions in the UK, a CMA investigation has found.
CMA proposes reforms to Scottish legal services sector25/03/2020 13:38:00
The CMA has completed a research project to examine competition and regulation in the Scottish legal services sector.
Music firms illegally prevented discounts, CMA alleges24/03/2020 15:38:00
The CMA has provisionally found that 2 more suppliers of musical instruments broke competition law by restricting online discounting for their products.
Andrea Coscelli CBE reappointed as CEO of Competition and Markets Authority24/03/2020 12:20:00
Business Secretary Alok Sharma reappoints Andrea Coscelli as the Chief Executive Officer of the Competition and Markets Authority.
Mergers between window blind companies raises competition concerns23/03/2020 10:25:00
Hunter Douglas’s purchase of 247 Home Furnishings Ltd raises competition concerns in the supply of made-to-measure window blinds, the CMA has found.
CMA launches Covid-19 taskforce20/03/2020 13:25:00
The CMA is today launching a taskforce to tackle negative impacts within its remit of the Covid-19 pandemic.
Paymentshield refunds customers over £380K for PPI breaches20/03/2020 09:20:00
Hundreds of customers are being refunded after insurance company Paymentshield failed to send important information about PPI policies.
CMA publishes annual plan19/03/2020 17:11:00
The CMA today publishes its annual plan for 2020/21 which sets out its key priorities for the year ahead.