OREANDA-NEWS. November 05, 2014. The Centre of the Federal Antimonopoly Service (FAS Russia) for Training and Methodics organized a workshop on competition on the market of air transport services in airports.

Attendees included representatives of the Organization for Economic Cooperation and Development (OECD), the Regional Centre for Competition in Budapest (OECD-GVH, Hungary), competition authorities of Hungary, Armenia, Belarus, Kyrgyzstan, Kazakhstan, Tajikistan, the Russian Federation, Moldova, and top-level industry and academic experts.

The welcoming address was made by Deputy Head of the FAS Russia, Anatoly Golomolzin, and OECD senior expert on competition, Sabine Zigelski.

At the workshop, experts exchanged government regulation experience in the field of airport services and discussed various aspects of competition on the market of airport services.

Opening the workshop, Anatoly Golomolzin pointed out: “The workshop topic is very important for the antimonopoly body and such issues are always important in analysis of air transportation markets. After the 1990s crisis, it took a long time for the aviation sector in Russia and the CIS to restore and create conditions for sustainable development. In 1995 Russia adopted the Federal Law “On Natural Monopolies”. In previous years normative-legal acts were adopted in other CIS countries. The Law also classified airport services as natural monopolies and provided for applying state regulatory measures in the fields where competition is difficult. In the course of time it became clear that the airport sector has conditions for developing competition in each particular airport between operators rendering services in aviation as well as non-aviation activities. There is also competition between airports in more or less pronounced forms”.

Adam Remetei - Filep, a case handler of Hungary’s Competition Authority, focused his presentation in general issues of competition in airports. According to him, the level of transportation development leads to the key role of airport hubs in servicing transit and connecting flights. Competition between large hubs is intensifying. Mr. Remetei - Filep emphasized the emerging risks of discriminatory airport behavior in the interest of base airlines (for the airports) – creating preferential conditions for access to the airport infrastructure, services in airports (possibility to obtain large slot packages and book more slots), concluding agreements on strategic cooperation. Such actions by airports infringe the interests of other airlines that use services of these airports.

Then, Cathal Guiomard (a lecturer at the Business School of the University of Dublin) who in the past ten years was the aviation regulator in Ireland, reviewed EC normative legal acts regulating airports operations – the Regulations on Aircraft Traffic Control in Airports (2004), the Directive on Aircraft Ground Handling (1996) and the Directive Airport Charges (2009). He pointed out that fair charges for ground handling is a pressing issue affecting airport development. Mr. Giomar emphasized that to protect competition on the market of airport services the main problem is discrimination of market participants (sellers and consumers of services). Not only access to the services is of principal importance but on what conditions the access must be provided. EU normative legal acts regulating airport services provide for competition protection measures.

Sabine Zigelski, OECD senior expert on competition, made a presentation on the “Overview: The Essential Facilities Concept and Airports”. She highlighted the main issues in the part of applying antimonopoly standards to airports. First of all, it concerns the grounds for classifying market airport position as dominant. To a considerable extent, such position is determined by a possibility of airport to possess essential facilities (infrastructure facilities) that typically are irreplaceable (which is different from “essential”).

Sabine Zigelski gave examples of several areas operating using such assets. “The list absorbs a list that in the CIS typically is classified as natural monopolies (ports, airports, railway networks, gas pipelines, postal services networks), and in the part supplementing these natural monopolies it matches the list of areas that also register facts of abusing dominance on the markets of the Russian Federation (oil depots, channel decoders (cable TV), systems of air tickets booking, access to connecting flights, international payment systems, TV premium content, intellectual property rights / information on protecting property rights, spare parts, refrigerators)”, commented Anatoly Golomolzin.

Ms. Zigelski described typical violations of the antimonopoly law related to unreasonable refusals to conclude contracts and create discriminatory conditions. She gave examples of cases from the practice of European Commission on suppressing violations of the antimonopoly law in airports in Belgium, Germany, Portugal, France and the UK.

Summing up the first day of the workshop, the Head of FAS Russia Department for Control over Transport and Communications, Dmitry Rutenberg, made a report on “Stimulating Competition Development through Improving Regulatory Acts. Analysis of Competition on the Markets of Ground and Airport Handling”. Among measures towards developing competition on air transport in Russia, he mentioned liberalization of air carriage markets, and the rules for access to airport services. “Creating the rules for non-discriminatory access allowed eliminating unreasonable refusals to provide access to airport service and support equal conditions for rendering services to consumers. These rules, however, stimulate development of competition in airports”, emphasized Dmitry Rutenberg.

On 15th October, the workshop started with a report by a professor of Berlin School of Economics and Law, Dr. Jurgen Muller, who discussed a survey of economic market power on the relevant market(s) of aviation services and services related to aviation, drawing on the example of Amsterdam Schiphol airport. The survey answered a question whether the modern market conditions at Schiphol airport conform to a special system of tariff regulation and the conditions of doing business in the field of air carriage.

The analysis of market services in Schiphol airport showed that the operator of Schiphol airport possesses market power on the markets of providing access to infrastructure facilities of the airlines that service transfer passengers, render freight services and services for local and instruction flights. Schiphol airport has the monopolistic position on the market of providing access for companies involved in aircraft ground handling, and possesses market power in leasing airport free premises to airlines, operators, and government agencies for their current operations.

Dr. Jurgen Muller pointed out that in spite of strengthening competition on the market of airport services the operator of Schiphol airport still possesses market power on the markets in question. He emphasized that evaluating market power is a fundamental issue in assessing competition in the field of airport services; however, it is often not taken into consideration because traditionally airports are considered natural monopolies so special attention is paid to regulating their activities.

Deputy Head of FAS Russia Department for Control over Transport and Communications, Alexey Gorlinsky, talked about competition between airports in the Russian Federation. “For a long time probability of competition between airports in Russia was doubted. The main argument: airport is a natural monopoly so it operates on the market where competition is inexpedient”, pointed out the speaker. “However, the Law “On Natural Monopolies” does not allow restricting an economically justified transition of the areas of natural monopolies from the state of a natural monopoly to the state of competition”.

The FAS Russia set a goal to study the state of competition between airports on the market of airport handling of air transportation. The Guidelines were devised, the market boundaries as well as suppliers and consumers of services determined. A far-reaching survey of airports and passengers was conducted.

The findings of the airport survey about competitor airports showed that 30 out of 44 airports with federal status have competitors (28 airports have 2 or more competitors on various types of transportation). 75 airports that do not have the federal status also stated that they have competitors. The passenger survey revealed that they use services of various airports for the same types of flights. Aleksei Gorlinsky shared some survey findings: “Competition between airports is exercised within the established geographic boundaries, each comprising 2 - 4 airports”.

At the end of the second day of the workshop, Cathal Guiomard (a lecturer at the Business School of the University of Dublin) made a report on “Competition and Airports”, where he described various aspects of competition between airports and inside airports, and on improving the EU policy in this field. The case of developing competition in Dublin airport showed development of preconditions for competition emerging with intervention of regulators in the field of airport operations. This example illustrates the risk that airport rates can be classified as discriminatory and indicate abusing market dominance.

In conclusion, Guiomard said that competition in airports is beneficial for passengers and airlines and gives considerable advantages to airports. However, competition in airports is restricted by market entry barriers due to limited territory, sometimes – scale effect. “Developing air transportation intensifies competition between EU airports; the policy in this field is more liberal, and competition is strengthened by the low-cost carriers. Thus, one may conclude that the policy in this area must encourage competition development to a higher extent than, in general, it used to be. It seems that the International Airport Council, and the International Air Transport Association agree that the issue of airport regulation should be decided on a case-by-case basis”, stated the speaker.

On 16th October, the work started with a presentation by a professor of Berlin School of Economics and Law, Dr. Jurgen Muller, where he shared the methods of analyzing competition in an airport illustrated with an example of a competition survey at Schiphol airport, to be applied in other airports.

Next presentation was given by Acting Deputy Head of St Petersburg Regional office of the FAS Russia, Olga Kozlova, and the Head of the Economic Concentration Control Unit, Moscow Regional of the OFAS Russia, Denis Stukanov. They shared examples of violating the antimonopoly law and the practice of suppressing them.

Adam Remetei - Filep, a case handler of Hungary’s Competition Authority, shared experience of antimonopoly investigations when an airport uses several terminals exemplified by cases investigated by the antimonopoly authority against operators of Dublin and Copenhagen airports.

Denis Stukanov discussed a case investigated by Moscow Regional OFAS on violating the antimonopoly law by “Sheremetyevo” International Airport” OJSC and “Aeroflot-RA” OJSC in the part of concluding an Agreement on Strategic Cooperation for using the airport infrastructure. According to Moscow Regional OFAS, the Agreement created unequal conditions for airlines in use of the infrastructure. As a result of investigating the case, the parties suspended the Agreement and introduced changes to support competition in Sheremetyevo airport. The parties to the Agreement were imposed administrative fines over 8,200,000 RUB.

Olga Kozlova reported about St Petersburg OFAS analyzing competition on the market of aviation fuel supplies in Pulkovo airport. She stated that “analysis of local markets of aviation fuel supply in airports shows that to develop competition on these markets there should be non-discriminatory access of market participants (airlines and independent aviation fuel suppliers) to the services of storage and refueling aircrafts in airports and / or creating alternative refueling complexes in those airports where it is economically expedient”.

In the concluding remarks, Anatoly Golomolzin thanked the Regional OECD Competition Centre (Budapest, Hungary), FAS Centre for Education and Methodics in Kazan for the perfectly organized workshop. In the common opinion of OECD experts, representatives of the antimonopoly bodies and regulators of countries – workshop participants, the event was efficient. “The work was organized in such a way that enabled a multi-faceted discussion of the complex issues of airport competition. We looked at the methodological basis and the findings of analyzing the market of services in airports and between airports, methodological and practical pricing issues with regard to airport services, analyzed a vast practice of antimonopoly enforcement in the EU, the Russian Federation and the CIS. The workshop allowed reaching the arrangements to make the reported materials publically accessible and pursue a joint project to summarize them in a leaflet both in Russian and English. In view of the successful experience of joint workshops on the basis of the OECD and FAS training centres, a similar event should be organized next year. To this purpose, in the near future, a list of possible important issues for discussion will be drafted”, summed up Anatoly Golomolzin.