Following on from our previous blog A Fight Over the Runway – Monarch Administrators Lose High Court Battle, the latest development in the saga is the recent Court of Appeal decision in Monarch Airlines Ltd v Airport Coordination Ltd [2017] EWCA Civ 1892. Overturning the decision of the High Court, the Court of Appeal held that Monarch was entitled to be allocated take-off and landing slots (the “Slots”) at Luton and Gatwick airports for the summer of 2018. As a result of this, the administrators have been able to press on with the sale of the Slots, to Wizz Air and British Airways respectively, and realise further value for creditors.

The High Court

The High Court had held that, as there was no more than a theoretical possibility of Monarch emerging as a going concern or resuming the operation of air services, Airport Coordination Limited (“ACL”) was under no duty to assign Monarch any Slots. The foundation for this ruling was based on the court’s interpretation of “air carrier” in Article 8(2) Regulation 95/93 (the “Slots Regulation”). The court’s view was that the definition of “air carrier” had two essential elements: the air carrier had to be an “air transport undertaking” and hold a valid operating licence. The court held that to be an “air transport undertaking”, an undertaking had to be “engaged in the provision of air transport”. As Monarch had ceased to be a functioning airline, the court decided that it was no longer “engaged in the provision of air transport” and consequently, did not fall within the definition of “air carrier” for the purposes of the Slots Regulation. ACL was not therefore under a duty to assign Monarch any Slots and the administrators were accordingly unable to sell them.

The Court of Appeal

The Court of Appeal overturned this ruling, finding that Monarch was still an “air carrier” for the purposes of the Slots Regulation. In their view, the High Court’s interpretation of “air carrier” failed to accord with either the wording or the purpose of the Slots Regulation. “Air transport undertaking” was simply descriptive of the type of undertaking with which the Slots Regulation was concerned and, as a matter of language, even a collapsed airline that had no realistic prospect of resuming its services could be referred to as an “air transport undertaking”. The court also noted that the Slots Regulation did not distinguish between an “air transport undertaking” that had ceased to operate and one temporarily unable to operate. If this distinction were intended, the Slots Regulation could have been expected expressly to draw the distinction. The court suggested that which side of the line an undertaking fell was far from straight forward and arguably, an undertaking in administration had a realistic chance of resuming operations. Monarch therefore fell within the definition of “air carrier” and as a result, was entitled to be allocated Slots (which could then be sold on).

Comment

This case is of interest to insolvency practitioners as it provides clarification that airlines in administration are entitled to be allocated take-off and landing slots. These slots can then be traded on the secondary trading market to realise significant value for creditors. Given the rise in the number of airlines entering insolvency, the decision is a very welcome one for administrators and creditors alike.

Sam O'Neill also contributed to this post.