§ Mr. John SmithTo ask the Secretary of State for the Environment, Transport and the Regions what powers he has to regulate the cost of air travel from regional airports. [136280]
§ Mr. MullinOn routes within the European Economic Area (EEA), air fares are governed by EC Regulation 2409/92, under which there is a presumption that airlines are free to charge the fares they wish. However, the Secretary of State may require the lowest fully flexible fare to be withdrawn if it is excessively high to the disadvantage of users, taking into account airline costs, the whole fare structure for the route, and the competitive market situation.
In addition, EC Regulation 2408/92 allows a member state to impose a public service obligation (PSO) to protect services, which would otherwise not be provided on a purely commercial basis, on routes serving airports in peripheral regions and thin routes to any regional airport which is vital to the economic development of the region. The Regulation allows for PSO routes to be restricted to a single carrier, subject to an open competitive tender, and for the remuneration of operating losses incurred by carriers selected to operate these routes. PSOs may include a tariff obligation limiting fare levels or requiring concessionary fares for certain categories of passenger.
On routes outside the EEA, it is the Civil Aviation Authority (CAA) which has the power to regulate air fares. The CAA's intervention is limited primarily to circumstances where passengers are being substantially overcharged as a result of an airline abusing a position of market power, normally because bilateral government imposed restrictions are preventing free market entry. The CAA's aim is to ensure that flexible on-demand travel is available at a price reasonably related to the cost of its provision, including a return on capital.