British Airports Authority (Hansard, 24 July 1986)

§ Mr. Moore

The MMC's report on its investigation of the commercial activities of the British Airports Authority was published on 10 December 1985. I have now received the authority's response to the commission's report and I have arranged for copies to be placed in the Library.

The commission was asked to report whether in carrying out its commercial activities the authority could improve its efficiency or reduce its costs or improve the service provided. The commission was particularly asked to examine four issues: the scope for increasing competition at the point of sale, the procedure for awarding concession contracts, the control of the standard of service provided by concessionaires, and the administration of leases.

The commission concluded that the authority has operated its commercial activities in a generally satisfactory manner. The Commission also concluded, with one member dissenting, that in relation to its commercial activities the authority was not pursuing a course of conduct which operates against the public interest. But the commission made a number of recommendations which would, in its judgment, improve the authority's efficiency, reduce its costs or improve the service it provides.

I endorse the commission's general conclusions, and I accept its view that the authority should make every effort to increase competition wherever possible. Like the commission, however, I recognise the opportunities for doing so, particularly at the point of sale, are limited because of operational requirements and space constraints.

The Authority's response shows that it has accepted 23 of the Commission's 34 recommendations wholly or in part, and that it has already implemented 20 of these. I welcome the Authority's response, but I am writing to the Chairman to ask him to keep under review those matters which the Commission identified specifically as worthy of continuing consideration and possible future action.

The Commission thought it necessary to consider its findings in the light of the proposed privatisation of the authority. I welcome its conclusion that there was no reason to believe the general sense of the recommendations in its report would be found inapplicable to the new organisation envisaged. However, when drafting the legislation that became the Airports Act 1986, the Government took into account the commission's view that the search by the new enterprise for higher profits for its shareholders might generate additional pressures which could lead to a possible abuse of a monopoly.

The Airports Act 1986 will establish a system of economic regulation for airports. The CAA will, after a reference to the MMC, be empowered to impose conditions on airport operators' permissions to levy airport charges which will, inter alia, prevent such operators adopting trade practices or pricing policies in their core airport activities which unfairly discriminate between users, concessionaires or prospective concessionaires, or which unfairly exploit the operators' monopoly position in respect of, for example, the handling of passengers, baggage or cargo. In addition, at airports designated by the Secretary of State (which will include Heathrow, Gatwick and Stansted), the MMC will conduct 461W a full review of the airport business every five years and will report on any practice they find operating against the public interest.

In reviewing any matter which relates to the granting of concessions, the MMC will be required, amongst other things, to have regard to the furtherance of the reasonable interests of concessionaires. The CAA will be obliged to impose conditions remedying or preventing the adverse effects of any practices which are against the public interest. Operators of designated airports will also be obliged by the CAA to publish accounts which show separately the results of their commercial and traffic operations: the CAA may also require operators of non-designated airports to publish such information. Together, these measures are designed to ensure that any possible abuse of a monopoly position is prevented.

Given the extent to which the authority has already implemented the recommendations of the Commission, the impending privatisation of the authority, and the framework of economic regulation which will apply to the authority's airport companies, I do not consider a further statement reporting progress is necessary.