The Competition Commission of Pakistan (CCP) Thursday issued an opinion to the Civil Aviation Authority that the CAA must ensure that the single flight kitchen at New Islamabad International Airport would never at any point abuse its monopoly position.
The Competition Commission of Pakistan (CCP) has issued an opinion under Section 29 of the Competition Act, 2010 setting out its recommendations in the matter of establishment of a single flight kitchen by the Civil Aviation Authority (CAA) on a joint venture basis at the New Islamabad International Airport.
The Commission received a letter from Tahir Razzaque Khan, an Islamabad-based chartered accountant/tax expert concerning establishment of a flight kitchen on joint venture basis at the new Islamabad airport. The Opinion follows an open hearing held on 22 September 2016 in which CAA, domestic and international airlines, and catering companies participated.
The CCP has noted in the opinion that the establishment of a single flight kitchen at the new Islamabad International Airport raises certain competition concerns in its current form and has given its recommendations to remove the same. The CCP has noted that the entry barriers created as a result of the single flight kitchen must be balanced by technical or economic progress, a fair share of which is passed on to the end consumers. However, it recommended that if an adverse impact on competition is outweighed by any resulting benefits then any party winning the contract of the single flight kitchen at the new Islamabad Airport must seek exemption from CCP under Section 9 of the Competition Act on a pre-emptive basis for the exclusivity.
The establishment of a single flight kitchen at the NIIAP would only be justified if there is a realistic plan to show that the entry barriers created as a result of its exclusivity are balanced by technical or economic progress, a fair share of which is passed on to the end consumers, or that any adverse impact on competition is outweighed by any resulting benefits, the CCP said.
The CCP further stated in its opinion that CAA must ensure that the single flight kitchen would never at any point abuse its monopoly position. In this regard, it was noted that as a commercial partner in the single flight kitchen, CAA may face a conflict of interest in terms of regulating the same. The CCP, therefore, recommended that CAA must consider other business models so that its commercial interest does not conflict with its regulatory role.
Moreover, the CCP viewed if the CAA chooses to adopt an airport fee or royalty-based business model, the tariffs must not be so as to discourage airlines from uplifting meals from the new Islamabad International Airport. Lastly, the CCP recommended that at no point should any of the airlines be barred by CAA to uplift meals from any feasible off-premises options available to them.
The purpose of the recommendations provided for in the opinion is to serve as guidelines for CAA and any party that is successful in obtaining the tender to run the single flight kitchen at the new Islamabad International Airport so that a situation that results in restriction or distortion of competition in the in-flight catering to the detriment of general consumers can be avoided.
The CCP said that while there is no denying that ensuring the quality of in-flight meals and inspection of catering facilities is a high priority for the CAA, a fundamental question that needs to be addressed is whether the same objective can only be achieved through operation of a single facility or by CAA itself entering the business. If CAA's prime consideration for a single kitchen is ensuring quality, the most obvious way of achieving it is by strictly enforcing the relevant quality and food safety standards on catering facilities.
It is up to CAA to make its quality standards as stringent as those applicable internationally, irrespective of whether there is one flight kitchen facility in an airport or more. The existence of more than one flight kitchen facility in an airport does not bar the CAA to apply high benchmarks for quality, as long as it entertains only those entities who conform to the same.
In that regard, the Commission is also of the view if the alternative CAA chooses to shift to involve an airport fee or royalty levied on caterers for meals they provide in international flights, it must not be so high so as to serve as a barrier to the CAA's own stated objective of achieving high volumes in terms of uplift of meals by international carriers flying in and out of NIIAP. The detailed opinion was issued by a bench comprising Chairperson Vadiyya Khalil and Members Mueen Batlay and Dr Shahzad Ansar.
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