Mexican Supreme Court to decide constitutional controversy on allocation of slots at congested airports.

On November 22, 2017 the Mexican Federal Competition Commission (the “Commission”) announced that it brought to the Mexican Supreme Court of Justice (the “Court”) a constitutional controversy challenging the Amendment Decree to the Regulations of the Airports Act (the “Amendment Decree”) and the General Basis for the Allocation of Slots at Congested Airports (the “General Basis”) issued by the Mexican president and the general director of civil aeronautics respectively, and published on September 29, 2017 at the official journal.

Under Mexican law, a constitutional controversy is a trial filed with, and heard by, the highest court in Mexico, that is, the Court, to resolve constitutional disputes arose between: (a) the federal government and any state, (b) the federal government and any municipality, (c) the president and the congress, (d) any two states, (e) any  two municipalities of different states, (f) two powers of the same state, (h) any state and one of its municipalities, (i) any state and the municipality of another state, and (j) two autonomous constitutional bodies, between one of them and the executive power or the congress on the constitutionality of their actions, laws or regulations (article 105 of the Mexican Constitution).

In accordance with article 28 of the Mexican Constitution, the Commission is an autonomous constitutional body that as per constitutional reform of June 11, 2013, is in charge of guaranteeing free trade as well as preventing, investigating and combating monopolies, monopolistic practices, cartels and restriction of the efficient functioning of markets.

Pursuant to such article 28, the Commission has the authority necessary to order measures to eliminate competition barriers, regulate the access to essential inputs and order the divestment of assets, rights, partnership interests, shares of stock of economic actors, at the necessary proportions to eliminate anticompetitive effects. Hence, the Commission as an autonomous constitutional body is entitled to initiate constitutional controversies against the executive power challenging its actions, laws and regulations, such as the Amendment Decree and the General Basis.

On June 26, 2017, the Commission determined that the slots operated by air carriers at the congested airport of Mexico City are an essential input, defined as an indispensable and irreplaceable resource or infrastructure in the production process of  goods or services.

The Commission argued that the airstrip infrastructure, taxiways, visual aid and airport platforms are necessary for air carriers to operate the slots allocated to them by the airport administrator.

The Commission also concluded that then current rules of slot allocation led to flight delays and cancellations, high concentration of slots in a few carriers hindering the entry to new competitors, high fares and expansion restrictions on the offer of scheduled air transport services. The Commission issued a set of corrective measures to regulate the slot allocation system at the Mexico City international airport (the Corrective Measures”) such as:

(i) the airport operator should post on the Mexico City airport’s website information that guarantees transparency and information access to slot allocation.

(ii) the airport operator should allocate slots through slot series.

(iii) grandfather rights should be acknowledged only when an air carrier has used its allocated slot in a proportion equal to or more than 85% of the times in the precedent season and did not have delays of more or less 15 minutes in more than 15% of the times.

(iv) air carriers should be released from liability of flight delays and cancellations when they prove that such delays and cancellations were due to unforeseen and unavoidable circumstances beyond their control, or due to actions intended to affect the operation of air transport services, such as strikes.

In addition to such corrective measures, the Commission recommended the congress, the president and the secretary of communications and transports to update the current legal framework of slot allocation to put it in line with international standard practices and sanction air carriers that operate air services at times different from the allocated slots.

However, according to the Commission, the General Basis contravene the Corrective Measures. The General Basis are similar to a proposal of actions submitted by the Mexico City international airport that the Commission reviewed, and determined through a resolution dated as of March 16, 2017, that those actions are not sustainable to eliminate anticompetitive effects at the Mexico City international airport.

Final remarks

The purpose of the constitutional controversy filed by the Commission is that the Court (i) reviews the scope of the authority granted by the article 28 of the Mexican Constitution to the Commission to regulate the access to essential inputs, such as slot allocation at congested airports, and (ii) determines whether or not the executive power has rendered invalid the Commission’s constitutional authority to both regulate the access to essential inputs and issue the Corrective Measures, by publishing the Amendment Decree and the General Basis.

The Court has a historical opportunity to decide whether the Commission, has the authority to regard slots as an essential input and regulate their access.

In addition, the Court’s final decision will determine the scope of the Commission’s authority to make its decisions enforceable against the executive power regarding slot allocation at congested airports.

 

 

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