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Commission Clears Joint Control of UK Air Traffic Control Provider NATS

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Commission Clears Joint Control of UK Air Traffic Control Provider NATS ,3 Brussels, 14 May 2001 &RPPLVVLRQ FOHDUV MRLQW FRQWURO RI 8. DLU WUDIILF FRQWUROSURYLGHU1$76 7KH(XURSHDQ&RPPLVVLRQKDVFOHDUHGWKHDFTXLVLWLRQRIMRLQWFRQWURORYHU WKH8.DLUWUDIILFFRQWUROSURYLGHU1$76E\DJURXSRIVHYHQDLUOLQHVDQGWKH 8. *RYHUQPHQW ,Q WKH DEVHQFH RI RYHUODSV WKH &RPPLVVLRQ H[DPLQHG FDUHIXOO\WKHH[WHQWWRZKLFKWKHLQYROYHPHQWRI%ULWLVK$LUZD\VDQGWKHRWKHU VL[ DLUOLQHV LQ WKH PDQDJHPHQW RI 1$76 FRXOG FUHDWH RU VWUHQJWKHQ DQ\ GRPLQDQWSRVLWLRQVEXWLWVLQYHVWLJDWLRQOHGWRWKHFRQFOXVLRQWKDWWKLVZRXOG QRWEHWKHUHVXOW NATS has two main activities. It provides “en route” air traffic services in UK airspace and over the Atlantic ocean and, as is usual in this sector, NATS has a statutory monopoly for that activity. NATS also provides “airport” air traffic services at UK airports. NATS is the UK’s main provider of such services. After a bidding process which began in July 1997, the UK Government announced on 27 March 2001 that a group of airlines -- The Airline Group -- had been chosen to be the Government’s strategic partner in NATS. The airlines are: Britannia Airways, British Airways, British Midland, Easyjet, Monarch Airlines, Virgin Atlantic and Airtours International Airways. They will jointly hold 46% stake in NATS. The UK Government will retain a 49% shareholding and the remaining 5% will be held by employees. The UK Government describes this arrangement as a public/private partnership (PPP) with the Airline Group being the strategic partner. One of the UK Government’s objectives for the NATS public private partnership is to “ensure the strategic partner takes responsibility for managing strategy, investment programme and new business development”. 1RKRUL]RQWDORYHUODSV The operation will not lead to any horizontal overlap between the activities of the parent companies of the Airline Group and NATS. The Commission’s investigation has therefore focused exclusively on whether the involvement of the seven airlines with NATS could raise serious competition concerns on the downstream markets for air transport services, on the markets for airport and HQURXWH air traffic services. - With regard to “en route” services, NATS is a natural monopoly and the transaction will not result in the creation or strengthening of a dominant position. - With regard to "airport" air traffic services, NATS is the leading service provider in the UK, and provides these services at Heathrow, Gatwick, Manchester, Stansted, Birmingham, Glasgow, Edinburgh, Aberdeen, Luton, Belfast International, London City, Southampton and Cardiff Airports. The Commission’s investigation has shown that, although some airport operators consult airline users in the process of developing new contracts for airport air traffic services, they choose their air traffic service providers on the basis of safety, service and cost criteria. The fact that the seven airlines will be shareholders of NATS will not enable them to have any impact upon the airport operators’ future choices and will therefore not strengthen NATS’ position. - In relation to the various markets for airline services (which the Commission has in previous cases defined on a point-to-point basis), the Commission has examined whether the involvement of the seven airlines in the provision of what are essential air traffic control services could give the airlines a gatekeeper role which would enable them to influence adversely the prices that their rivals pay or the quality of service that they receive. For such discrimination to raise concerns about the creation or strengthening of dominant positions on the markets for airline services, it would have to contribute significantly to such dominance. The investigation has shown that a number of factors combine to limit the incentives and the ability of the Airline Group to discriminate in the markets in which dominance could exist. In particular, as a result of the diversity of interests amongst the members of the Airline Group, there is a lack of common interest and, therefore, it would be difficult for NATS to discriminate either in terms of prices, or in non-price terms, for example by favouring the members of the Airline Group during either the landing or departure procedures. Furthermore, in terms of prices for overflying traffic, these are controlled by the National Authorities in accordance with certain agreed charging principles which include non-discrimination. The ensuing tariffs are therefore fixed at the same level for all aircraft flying through the NATS area and the airlines’ payments are collected by Eurocontrol. In relation to airport air traffic services, as regards BAA airports other than Southampton (Heathrow, Gatwick, Stansted, Aberdeen, Edinburgh and Glasgow), NATS charges aircraft operators directly for its provision of air traffic services. The level of charges are transparent and based on landed tonnage. In the rest of the airports NATS charges the airport operators (and not the airlines) for the provision of air traffic control services at the airports. The airport operator recovers the fixed cost of the service through a single airport charge to airlines for air traffic control and airport landing, consequently, it is not for NATS to fix these charges and there is no scope for discriminatory prices to be charged. In relation to non-price discrimination, the investigation has shown that while there may be the potential for NATS to discriminate, there is insufficient scope for NATS to discriminate to such an extent that dominance concerns would be raised on the downstream markets. For example, the time at which aircraft take off is centrally determined by the Initial Flight Plan System operated by Eurocontrol. Even when these initial time slots are missed, either NATS or the airline concerned would have to consult with Eurocontrol to ensure a time can be found for safe passage from departure to destination. NATS’ ability to exercise discretion and to favour its shareholders’ operations is therefore limited. 2 Even though these concerns about discrimination cannot be apprehended under the merger control regulation, the Commission will consider the need to develop adequate safeguards and to avoid conflicts of interest between the providers of air control traffic services and the users of those services, in the preparation of legislation as part of its “Single European Sky” initiative on the reform of air traffic management. The Commission has not relied upon the existence of the UK’s sectoral regulator and the H[SRVW regulation that will take place to reach its conclusion that the operation will not raise concerns about dominance. 3.
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