Collapsed Monarch Airlines' successful appeal on retention of airport slots hinged on a wrangle over the legal definition of 'air carrier', and whether the UK airline could still be considered as such despite its cessation of operations.
Monarch's claim to summer 2018 slots at London Gatwick and Luton had been dismissed by a divisional court in early November.
The airline had sought to retain control of the slots in order for the administrators to realise their asset value for the benefit of creditors – not with an outright sale but rather an exchange for less-valuable slots, through which it would obtain payment covering the difference.
But the divisional court had decided that Monarch – which ceased operations on 2 October – was "no longer an air carrier", within the meaning of European slot regulations, when slots were allocated by UK co-ordinator ACL on 26 October.
European slot regulations define an air carrier as an "air transport undertaking holding a valid operating licence" at 31 January, for the following summer season, or 31 August for the following winter.
"There is no definition of air transport undertaking in the [regulation]," the divisional court had said. "However, in our judgement, the phrase means that the undertaking is engaged in the provision of air transport."
The court said it was "unable to discern any duty" to allocate slots to an undertaking which had ceased to operate air transport services and had no realistic prospect of resuming them, and that its view was subsequently "fortified" by Monarch's operating licence being revoked on 9 November.
Monarch appealed the decision and Court of Appeal judges state, in their 22 November ruling, that the "central question" was whether Monarch had ceased to be an "air carrier".
ACL argued to the appeals court that the definition suggested a current operation, and that relying simply on the validity of a licence would render slot allocation "unacceptably dependent on accidents of timing and nationality".
It also said that treating Monarch as being eligible for slots, purely to enable it to sell them to incumbent airlines, was counter to the liberalisation rationale of the slot regulations, which aim to encourage entrants to the market.
But Monarch countered that the divisional court interpretation of "air carrier" was incorrect because it failed to accord with either the wording or purpose of the slot regulation, and that the reference to "air transport undertaking" was "simply descriptive".
Claiming that Monarch was not an air carrier because it had ceased to be a functioning airline raised "fundamental difficulties", the airline argued, partly because there is nothing in the slot regulation suggesting this is the test.
It added that the question as to whether an undertaking has a realistic prospect of resuming air transport services involves a complex assessment which the slot co-ordinator is not well-placed to conduct.
The appeals court judges were more persuaded by Monarch's line of reasoning.
"It cannot be supposed that an undertaking inevitably ceases to be an 'air carrier'…whenever, and as soon as, it becomes unable to operate air transport services," says the ruling, highlighting the difficulty of distinguishing between Monarch's situation and that of an airline which was temporarily suspending activities.
"Wherever the [distinguishing] line might be, assessing which side of it an undertaking lay could be far from straightforward.
"In the case, say, of an undertaking which has gone into administration, there might be very real scope for argument as to whether there was a 'realistic' chance of its resuming operations."
Even a collapsed airline that has no such chance could "perfectly well" be considered as an "air transport undertaking", it adds. "It may be a failed 'air transport undertaking' but that need not stop it being an 'air transport undertaking'."
The judges also rejected ACL's argument that, even if Monarch was still regarded as an air carrier, a slot allocation to Monarch would be inconsistent with the purpose of the European slot regulation.
"We cannot accept this submission," the judges' ruling says. "We have already referred to the purposes of the slots regulation when considering whether Monarch has ceased to be an 'air carrier'. We do not think that those purposes are important independently of that issue."
Source: Cirium Dashboard