Commission draft determination opposes delay to competition in air traffic control
Published04 Feb 1997
The Commerce Commission today released a draft determination stating that, on the information currently available to it, it would not authorise arrangements which would allow Airways Corporation of New Zealand Limited to delay the introduction of competition for air traffic control services.
Commission Deputy Chairman Peter Allport said Airways currently uses a pricing system which allows cross subsidising with profits from services in which it has a monopoly, to services which are contestable.
Airways intends to change to pricing which would reflect the cost of providing each service, but it has asked for authorisation to delay this change until March 1, 1998.
It also wants to prevent airports and aircraft operators using competitors' services until that date.
Mr Allport said that the Commission has been asked to look at the proposed delay, and is not authorising or investigating the new pricing structure.
The State Owned Enterprises Act requires Airways Corporation to act in a similar way to any other business. It must comply with the Commerce Act.
If a potential competitor, or anyone else, thought it was behaving anti-competitively and had breached the Commerce Act, then they could take court action against it.
An authorisation would give Airways legal protection against any person taking court action if they thought the delay in changing air traffic control pricing breached the Commerce Act.
To grant an authorisation, the Commission must be satisfied that public benefits from the delay outweigh detriments to competition. If it is not satisfied it cannot grant an authorisation.
Mr Allport said the Commission's preliminary view is that the delay would lessen competition, and exclude competitors. He said that the public benefits appear small, and that on the basis of the information currently available to it, the Commission is not satisfied that they outweigh the detriments.
The draft determination is not the Commission's final decision. Airways and interested parties now have a clear indication of how the Commission views the delay, and have time to make written submissions and provide further information at a conference. The Commission expects to make its final decision by the end of March.
When considering an authorisation, the Commission must identify the relevant markets, in order to assess the effect of the proposal on competition in those markets. In this case the markets are:
· aerodrome control services markets (aircraft on or near the ground);
· aerodrome flight information services markets (a less sophisticated service for airports with less traffic); and
· approach control services markets.
Competition is not yet possible in the approach control services markets as Airways has a statutory monopoly over these services. There appear to be potential competitors in the aerodrome control services markets and aerodrome flight information services markets, although there are no actual competitors in those markets at present.
Airways Corporation has asked for authorisation of two specific arrangements:
· with airports and potential competitors, that they will not enter into contracts with each other to provide aerodrome control services or aerodrome flight information services before July 1, 1997, and that any such contract entered into after that date will not become effective until March 1, 1998; and
· with airports and aircraft operators, that Airway's current system of network pricing will continue until March 1, 1998, at which date location specific pricing will be instituted at all locations where Airways continues to provide aerodrome control services or aerodrome flight information services.
Copies of the draft determination are available from reception at the Commission's Wellington office, 7th floor, Landcorp House, 101 Lambton Quay.
Timetable of Commission process:
by February 18 Airways and interested parties to make submissions on draft determination
by February 25 experts employed by Airways and interested parties to make submissions on draft determination
March 11-13 conference (in Wellington) to give Airways and interested parties opportunity to provide further information and the Commission to ask questions
by the end of March Commission to release final decision
Media contact: Chief Investigator Commerce Act Geoff Thorn
