Mr. Ronan Gallagher:

The Minister has asked me to thank the committee for setting aside the time to facilitate pre-legislative scrutiny of the general scheme of the aviation regulation (amendment) Bill 2018. In November 2018, the Government agreed to draft legislation to give effect to the objectives of the national policy statement on airport charges regulation. Under the Aviation Regulation Act 2001, the Commission for Aviation Regulation, CAR, regulates airport passenger charges levied at by the Dublin Airport Authority, DAA, at Dublin Airport. Under the regulatory process set out in the current Act, the CAR establishes the maximum charge per passenger that the DAA can levy at Dublin Airport over the following five-year period. This is effectively a price cap on what the DAA can charge airlines for the various services it provides. Within the limits of this overall price cap, the DAA sets variable annual charges in respect of specific services, such as aircraft landing and parking. In 2015, the Department initiated a review of this regulatory model. This involved an independent economic assessment and report by Indecon international economic consultants and a public and industry consultation process. As a result, the revised regulatory policy, the national policy statement on airport charges regulation, was drafted and approved by Government and was published in September 2017. The general scheme contains the necessary legal amendments required to give full effect to the revised policy as set out in the statement.

The key points of that policy statement, which the general scheme addresses, are as follows. Dublin Airport will continue to be subject to price regulation in recognition of its significant market power. The primary purpose of the regulatory regime will be to protect and advance the best interests of current and future customers who use Dublin Airport. The CAR will no longer be mandated to have specific regard to the financial sustainability and viability of the DAA in making a regulatory determination. There will be a single stage appeals process which will involve taking appeals directly to the High Court. The statutory basis for ministerial directions relating to the price determination process will be replaced with a requirement on the CAR to have regard to current Government aviation and airport policy and other relevant stated policy positions, including national economic development and climate change. While ministerial directions are justified to ensure alignment with Government policy and issues of national significance, ministerial directions on issues already incorporated into or which are potentially at odds with statutory objectives may undermine the independence and authority of the CAR.

It is further proposed in the general scheme to provide the CAR with powers of direction in its relationship with the DAA to ensure there is effective consultation and transparency in setting the individual airport charges within the overall price cap and that charges do not unfairly discriminate between airport users. Currently, the CAR has a similar power of direction in its relationship with Irish-registered airlines under section 45A of the Aviation Regulation Act 2001. That section applies where an airline is failing to comply with EU regulations on passenger compensation and assistance for delayed flights. The general scheme also proposes to transfer the existing ministerial functions relating to transparency of airfares to the CAR. It proposes providing a statutory basis for the periodic review of the regulatory regime. It proposes to require the CAR to produce strategy statements and provide a statutory basis for performance reporting against published objectives and goals by the CAR. Finally, it proposes to provide the CAR with the power to make regulations to allow the DAA and airlines to make some commercial agreements in a fair and transparent manner on a bilateral basis without direct regulatory instruction. Taken together, the proposed amendments represent a strengthening of the CAR's hand in its relationship with the DAA.

While it is fair to say that the DAA would probably prefer a different policy direction, the approach is in keeping with the Government's broader regulatory reform agenda. That agenda, which is set out in the Government policy statement on sectoral economic regulation, represents a meaningful change in the overarching purpose of economic regulation by placing the rights and interests of the consumer formally ahead of those of the regulated industry, which in this instance is the airport company. The focus of the reform proposals is to secure, through price regulation, outcomes that are in the best interests of the people who use the airport rather than necessarily the airport itself.

However, a highly connected, financially stable and service-focused airport with a properly funded medium-term investment plan is in the interests of the users of the airport and of the company.

With the agreement of the committee, I propose to give a brief overview of the main parts of the general scheme of the Bill, which comprises ten heads. Head 1 is a standard provision that provides the Short Title and the commencement. Head 2 is a standard provision that sets out the interpretation. Head 3 amends the Minister's ability to make a direction to the CAR which relates to its decision making around airport charges. In its place, head 6 will expand on the criteria that the CAR will need to use in making a regulatory determination. Head 4 puts the requirement for the CAR to produce and publish a statement of strategy on a statutory footing and requires it to report on the progress being made. Head 5 enables the CAR to provide through regulations for regulatory flexibility.

Head 6 outlines the hierarchy of objectives that the CAR must strive to achieve. It provides that the CAR's primary objective is to protect and advance the best interests of the users of the airport. It sets out that the CAR must have due regard to Government policy on aviation, climate change and the promotion of competition. Head 7 replaces the appeal process, whereby the Minister would appoint a panel of aviation experts to review a determination of the CAR, with an appeal directly to the High Court. Head 8 provides for a review of the airport charges regulatory regime at least every seven years. This is in line with the Government policy statement on sectoral economic regulation.

Head 9 provides the power of direction to the CAR to ensure there is effective consultation and transparency in setting airport charges and to ensure the charges do not discriminate among airport users. Head 10 transfers functions relating to transparency of airfares to the CAR from the Minister. There is an obligation on carriers to make the prices of airfares more transparent. This can involve making available information on the full price to be paid for an airline ticket, including all taxes and charges, at all stages of the booking process and in advertisements. These functions are currently with the Minister. However, the Department considers that the CAR is the appropriate body for these functions, given its existing consumer protection roles relating to air passengers.

The general scheme set outs the proposed changes to the current regulatory regime for setting airport charges at Dublin Airport, as set out in the national policy statement on airport charges regulation. The measures will enhance regulatory performance and oversight and strengthen the authority and independence of the CAR. They will also streamline the appeals process. The overall approach, as with many of the measures proposed in the general scheme, is in keeping with the principles set out in the Government policy statement on sectoral economic regulation, which was published in 2013.

The proposed amendments strengthen the regulator’s hand in its relationship with the DAA. They refocus the overarching purpose of economic regulation by placing the rights and interests of the consumer formally ahead of those of the airport company. It is intended that the general scheme will form the basis of an aviation regulation (amendment) Bill, which is to be drafted with the legal advice of the Office of the Attorney General. To assist the committee with its consideration of the general scheme, I have provided a number of documents which outline the policy context and implications, including the 2017 national policy statement on airport charges, the 2013 Government policy statement on economic regulation, a departmental briefing document and a regulatory impact assessment. My colleagues and I look forward to assisting the committee in its consideration of this general scheme.

As the committee will be aware, last week the CAR published its draft regulatory decision for the period ahead. This draft decision will now be the subject of a statutory consultation phase. As we are now in that phase, my colleague from the CAR and I are restricted in what we can say about the specifics of the draft determination. Nevertheless, we will endeavour to be as helpful as we can around the mechanics of it.