Aer Lingus and Ryanair joined to case challenging airline levy cap

High Court reporters

Aer Lingus and Ryanair have been joined to a High Court challenge by Dublin Airport operator DAA against a regulatory decision capping the charges it can levy against airlines.

The semi-state DAA PLC is appealing the Commission of Aviation Regulation’s decision last December setting the maximum level of airport charges Dublin Airport can levy at airlines for the period 2023-2026.

It claims the cap will cost it millions and could have detrimental effects for passengers.

Airport charges, the DAA says, are payable by airlines for use of the airport’s services and facilities, such as runways and airport security, and represent about half of Dublin Airport’s revenue.

The DAA, with a registered office at Dublin Airport, Swords, will not be able to meet certain service quality targets imposed by the commission if the price cap is set too low, it claims.

This year, DAA can impose a maximum airport charge of €7.59 per passenger, it says.

In an affidavit to the court, the DAA’s head of planning and regulation, Simon Fagan, said the review decision, which has been effective since January 1st, has “profound implications” for the DAA as it recovers from Covid's impact on the aviation industry and rebuilds operations in more unpredictable market conditions.

On Monday, the Commercial Court’s Mr Justice Denis McDonald heard Aer Lingus Limited and Ryanair DAC claim they have sufficient interest in the proceedings and wanted to be joined as notice parties. Ryanair previously announced it will support the regulator and argue against further passenger charge increases.

There was no objection to their joinder, so the judge added them to the case. The judge also accepted the case into the fast-track commercial list, as he was satisfied it had a significant commercial aspect.

The application for entry to the list was made by the DAA through its barrister Niall F Buckley.

Senior counsel Margaret Gray, for the commission, said her client was no longer contesting the court’s jurisdiction to consider the appeal under section 39a of the Aviation Regulation Act of 2001.

The case was adjourned for two weeks.

Appeal

The appeal seeks to set aside parts of the decision setting the maximum airport charges on grounds it is allegedly corrupted by a series of “significant errors”.

The DAA says it is concerned the commission abdicated its judgment to consultants who made errors and place heavy reliance on “inappropriate and undisclosed international benchmarks”.

The airport charge cap was calculated by taking into account the DAA’s various commercial expenditures, revenues, inflation and a permitted rate of return on capital.

The DAA claims the commission erred in determining it needed fewer security lane personnel than the DAA calculated. It adds the DAA would have to bear the cost of employing the additional security personnel to avoid lowering safety and security standards which would result in potential penalties of up to €7 million per year.

The decision allegedly “disallows” about €94 million of general operational expenditure the DAA forecast it required over the four years the decision covers. The commission did not adequately account for the exceptional circumstances the DAA faces as a result of the pandemic and did not present reliable evidence to justify dismissing the DAA’s forecast as excessive, the case claims.

The DAA also pleads there was a breach of fair procedures in the decision-making process and deficiencies in the commission’s calculation of Dublin Airport’s cost of capital and inflation adjustment.

Price cap regulation of airport charges is an accepted model for regulating airports, but Dublin has one of the “most onerous regimes” with regulator-led caps, the DAA claims.