The Competition Authority has in its decision No. 4/2011 The decision, published today, concluded that the handling of flight licences by the Icelandic Civil Aviation Authority distorts competition in scheduled flights to and from the country. The conditions of a recent decision by the Civil Aviation Authority to grant a licence to Astraeus, the airline operator of Iceland Express, would, had they remained unchanged, have prevented the company from being able to offer scheduled flights between Keflavik and Winnipeg, Canada, next summer. The Competition Authority has therefore issued binding instructions to the Civil Aviation Authority to change its procedure for granting flight rights, with the aim of increasing competition in flights to and from Iceland.
The background to the matter is that Iceland Express intends to offer scheduled flights this summer between London and Winnipeg, Canada, with a stopover in Keflavík. As Astraeus is a British airline, it is licensed to fly to Canada under an air transport agreement between Canada and the European Union. However, a comparable air transport agreement has not been made between Canada and Iceland, which means that Astraeus requires permission from the country's aviation authorities to fly the part of the flight between Keflavik and Winnipeg.
Last November, Astraeus applied for a licence to operate the scheduled flight in question. However, the Civil Aviation Authority's decision on the licence was conditional on Iceland Express and Astraeus securing comparable flight rights for Icelandic operators in Canada from the local aviation authorities. The Civil Aviation Authority has maintained that this is in accordance with the authority's procedures and in the interests of Icelandic airlines. Iceland Express/Astraeus have, however, pointed out that it is neither the role nor the capability of a private company to negotiate air transport agreements with foreign governments, and that it is unlawful for the Civil Aviation Authority to require the companies to act as such lobbyists for their competitors. Iceland Express/Astraeus believe that this condition amounts to a refusal to allow them to operate the flights in question.
The Competition Authority's decision concludes that the conditions are not supported by legal authority and have a detrimental effect on competition. This is particularly the case in this matter, as the Civil Aviation Administration's decision prevents Iceland Express, the main competitor to Icelandair on scheduled flights to and from Iceland, from expanding its operations and increasing its destinations. It is therefore necessary for the Civil Aviation Authority to change its procedures with the aim of promoting effective competition, so that new or smaller competitors can begin flights to and from Iceland with as few restrictions as possible, and thereby increase competition for the benefit of consumers.
The Civil Aviation Authority tied Iceland Express's permission to fly the same route last summer to comparable conditions, but the Ministry of Transport then intervened and authorised the flight without conditions. When processing Iceland Express's application, the Civil Aviation Authority sent it for comment to Icelandic aviation authorities, including Icelandair. In doing so, the Civil Aviation Authority informed Iceland Express's main competitor of the company's competitive plans. The Civil Aviation Authority intended to follow the same procedure in handling the application, but abandoned this following comments from the Competition Authority.
Accordingly, the Competition Authority issues the following binding instructions to the Civil Aviation Authority:
See the decision of the Competition Authority for further details, No. 4/2011.
Background information:
The Civil Aviation Authority's procedure for granting landing authorisations to foreign operators was discussed in the watchdog's report. No. 2/2008, Robust development – Opening up markets and strengthening economic activity. The report recommended that the aviation authorities review their procedures for granting licences to foreign airlines from outside the EEA. The supervisory authority also directed the aviation authorities to enter into air transport agreements with as many states as possible to foster effective competition, so that foreign airlines from as many countries as possible could begin flying to and from Iceland with minimal restrictions and increase competition for the benefit of consumers. and society as a whole.
It is clear that the Civil Aviation Authority has not complied with these recommendations from the Competition Authority since 2008. On the contrary, the authority has now, on at least two occasions, i.e. on 30 November 2009 (flights June-August 2010) and on 15 December 2010 (flights June-August 2011), denied a foreign air carrier (Astraeus) a permit to fly to and from Iceland, as the foreign air carrier has not secured comparable reciprocal rights for Icelandic air carriers in Canada.
In accordance with b-item of the first paragraph of Article 16 of the Competition Act No. 44/2005 the Competition Authority may take action against the actions of public authorities to the extent that they may have an adverse effect on competition, provided that specific legislation does not contain special rules on the authorisation or obligation for such actions. This provision thus authorises the Competition Authority to take binding intervention against the actions of public authorities, provided that two conditions are met. On the one hand, it must be demonstrated that the measure in question distorts competition, and on the other, that it is not based on a sufficient legal basis.
"*" indicates required fields
