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Request from Dundee City Council

14 September 2023: The SAU has accepted a request for a report from Dundee City Council for its proposed subsidy to Loganair Limited. This request relates to a Subsidy of Particular Interest.

The SAU will prepare a report, which will provide an evaluation of Dundee City Councils assessment of whether the subsidy complies with the subsidy control requirements (Assessment of Compliance). The SAU will complete its report within 30 working days.

Information about the subsidy provided by Dundee City Council

Dundee City Council is seeking to award a subsidy to Loganair Limited to provide a scheduled air service between Dundee Airport (DND) and a London airport. This can be any of the following 6 London Airports, listed in alphabetical order: London Gatwick, London Heathrow, London City, London Luton, London Southend, and London Stansted. A London airport has been defined by the Department for Transport (DfT) as any airport that can access transport zone 1 of London within 60 minutes by rail.

The policy objective of the subsidy is to maintain a commercial air route between Dundee and London in order to provide the economic and social benefits that would arise from it.

This subsidy for an air route from Dundee to London concerns the imposition of a Public Service Obligation (PSO) on the route imposed under regulation (EC) No. 1008/2008 of the European Parliament and of the Council of 24th September on common rules for the operation of air services in the United Kingdom (the retained EU regulation).

Article 16 of the retained EU regulation enables the Secretary of State to impose a PSO in respect of scheduled air services between an airport in the UK or Gibraltar and an airport serving either a peripheral or development region of the United Kingdom or Gibraltar, or on a thin route to any airport in the United Kingdom or Gibraltar, where the route is considered vital for the economic and social development of the region which the airport services.

That obligation is to be imposed only to the extent necessary to ensure on the route the minimum provision of scheduled air services satisfying fixed standards of continuity, regularity, pricing or minimum capacity which air carriers would not assume if they were solely considering their own commercial interest.

Where a PSO has been imposed on a scheduled route then any other air carrier will be allowed to commence scheduled air services on that route where they meet the requirements of the PSO. (This is known as an open PSO.)

However, Article 16(9) of the retained EU regulation provides that if no air carrier has commenced or can demonstrate that it is about to commence sustainable scheduled air services on a route. Then in accordance with the PSO imposed on it the Secretary of State may limit access to the scheduled air services on that route to only one qualifying air carrier for a period of up to 4 years. This is known as an exclusive PSO.

Where an exclusive PSO is imposed then the right to operate the PSO service is to be offered by public tender in accordance with Article 17 of retained EU regulation. Article 17(2) provides that the invitation to tender and the subsequent contract shall cover the following points: (a) the standards required by the PSO; (b) the rules concerning amendment and termination of the contract; (c) the period the validity of the contract; (d) penalties in the event of failure to comply with the contract and (e) objective and transparent parameters on the basis of which compensation, if any for the discharging of the PSO shall be calculated.

This route has been offered through an open public procurement process and is offered as a grant. Under Article 16(9) an exclusive PSO may only be awarded for 4 years. Under the contractual terms for the Dundee PSO the subsidy is only payable for an initial 2 year period after which the PSO may be renewed. The initial period of 2 years can be extended twice for 1 further year, at Dundee City Councils sole discretion, as described in the invitation to tender. The Subsidy referred to the SAU might therefore run for a total of 4 years.

The total subsidy committed for the next 2 years from October 2023 to October 2025 is 6,216,255.

Information for third parties

If you wish to comment on matters relevant to the SAUs evaluation of the Assessment of Compliance concerning Dundee City Councils proposed subsidy to Loganair Limited, please send your comments before 5pm on the date stipulated in the timetable above. For guidance on representations relevant to the Assessment of Compliance, see the section on reporting period and transparency in the Operation of the subsidy control functions of the Subsidy Advice Unit.

Please send your submissions to us at SAUDundeePSODL2023@cma.gov.uk copying the public authority city.development@dundeecity.gov.uk.

Please also provide a contact address and explain in what capacity you are making the submission (for example, as an individual or a representative of a business or organisation).

Notes to third parties wishing to make a submission

• the SAU will only take your submission into account if it can be shared with Dundee City Council. The SAU will send a copy of your submission to Dundee City Council together with its report. This is to allow the public authority to take account of the submission in its decision as to whether to grant or modify the scheme or its assessment. We therefore ask that you provide express consent for your full and unredacted submission to be shared. We also encourage you to share your submission directly with Dundee City Council using the email address provided above
• the SAU may use the information you provide in its published report. Therefore, you should indicate in your submission whether any specified parts of it are commercially confidential. If the SAU wishes to refer in its published report to material identified as confidential, it will contact you in advance
• for further details on confidentiality of third party submissions, see identifying confidential information in the Operation of the subsidy control functions of the Subsidy Advice Unit

Contact

• SAU project team: SAUDundeePSODL2023@cma.gov.uk
• CMA press team: 020 3738 6460 or press@cma.gov.uk