easyJet files claim -- easyJet has today formally submitted to the Administrative Court of the High Court its application for a Judicial Review of the UK Civil Aviation Authority’s decision in setting the price cap for charges at London Gatwick from 2008 to 2013. easyJet believes the way the CAA has allowed BAA to raise prices at LGW by 21% (from £5.61 to £6.79) this year, and by 31%+RPI by 2013* (which is likely to be around 51% assuming the current level of RPI) was wrong, on the following grounds:
1. Unlawful departure from the Competition Commission’s (CC) recommendations. The statutory powers under which the CAA sets the price cap at designated airports (including LGW) requires that the CAA must refer its proposals to the CC, and to “have regard to” its recommendations and to state any reasons for not accepting them. It is our contention that the CAA gave insufficient weight to the recommendations of the CC
2. Unlawful treatment of BAA’s late submission of operating expenditure costs. The CAA failed to adopt a fair and lawful approach to handling a £267 million (subsequently reduced to £218 million) “eleventh hour” operating expenditure submission from BAA. This was submitted on 8th November 2007, following more than two years of discussions; after the referral to the CC; and less than two weeks before the CAA was due to publish its firm proposals for airport charges
3. Unlawfully disregarding the Competition Commission’s public interest finding that there was no justification for BAA to receive “bonus” payments for meeting service levels, for which it would already have been paid. The CAA ignored the CC's public interest finding in relation to the Service Quality Rebate (SQR) scheme, in which it saw no justification for bonuses to be paid to BAA for meeting its targets. Yet, the CAA has incorporated a bonus scheme into the price cap
The Administrative Court of the High Court is likely to decide within six to eight weeks whether the CAA has a substantive case to answer. If it decides it has, a final decision is likely by the end of the year.
Andy Harrison, easyJet Chief Executive, said: “This is the first time that the CAA has been subject to Judicial Review for a regulatory price decision. We are taking the action because we believe that the CAA acted unlawfully in agreeing an obscene increase in passenger fees at Gatwick Airport over the coming five years and, specifically, ignored the recommendations of the Competition Commission, which proposed a much tougher regulatory settlement on BAA.
“In due course we hope that the Government’s review of UK airport regulation will bring about much-needed change by allowing genuine and effective inter-airport and inter-terminal competition at the major London airports. In the meantime we will continue to stand up for the consumer by opposing what we see as the CAA’s overly-generous attitude towards BAA.”
* The CAA has allowed BAA to raise the price cap at London Gatwick by 21% (from £5.61 to £6.79) this year and by RPI +2% over the next five years. This represents an increase of 31% in real terms by 2013 and 49% in nominal terms, using the CAA’s assumed RPI. This figure would rise to 51% in nominal terms if today’s RPI rate of 3.0% per annum continues.
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