Sale of Monarch Slots ‘Could Damage Airline Competition’

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by Bradley Gerrard, The Telegraph, December 5, 2017

The decision by the Court of Appeal to allow defunct airline Monarch to sell its take-off and landing slots could hamper competition in the airline industry, critics have claimed.

The collapsed carrier filed for administration last month and its air operator certificate – the licence needed to act as an airline – was provisionally suspended by the Civil Aviation Authority. The High Court ruled that without an active licence or any pilots, the administrators for the airline, KPMG, could not claim ownership of the slots and subsequently sell them.

Being able to sell the slots at airports including Gatwick and Luton is essential to KPMG realising any cash for the folded carrier’s creditors, including former owners Greybull Capital.

The Court of Appeal overturned the High Court’s decision, paving the way for a bidding war by rivals to augment their positions at the two airports. Airport Coordination Limited, which is responsible for the allocation of airport berths to airlines, had fought the lawyers acting for Monarch in the High Court. It wanted to be able to put Monarch’s slots in the industry pool, which reserves half of newly available slots for new entrants at an airport.

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“The concern is the ability of rich airlines to frustrate new competition by being able to buy slots from a defunct airline,” ACL said. “One of the issues highlighted in this case is when exactly an entity stops being an airline is not defined in law.” The High Court deemed this to be when an airline had disposed of all its aircraft and made all its staff redundant, like Monarch.

But the appeal court said it remained an airline until its operating licence was removed completely by the CAA.

Henry Kikoyo, partner at law firm Brown Rudnick, says he agrees with the Court of Appeal ruling in relation to insolvency law because it fits with the anti-deprivation principle. This is designed to prevent the removal of assets from an insolvent entity. But Mr Kikoyo added: “We hope the fallout from this decision does not turn out to be that an entity that is not a carrier can hold slots on a commercial basis.”

 

This article was written by Bradley Gerrard from The Telegraph and was legally licensed through the NewsCredpublisher network. Please direct all licensing questions to [email protected].

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