Jet2.com Ltd v Blackpool Airport Ltd

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLord Justice Moore-Bick,Lord Justice Lewison,Lord Justice Longmore
Judgment Date02 Apr 2012
Neutral Citation[2012] EWCA Civ 417
Docket NumberCase No: A3/2011/1807

[2012] EWCA Civ 417

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

His Honour Judge Mackie Q.C.

[2011] EWHC 1529 (Comm)

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Lord Justice Longmore

Lord Justice Moore-Bick

and

Lord Justice Lewison

Case No: A3/2011/1807

Between:
Jet2.com Limited
Claimant/Respondent
and
Blackpool Airport Limited
Defendant/Appellant

Mr. George Leggatt Q.C. and Mr. Michael Bools (instructed by Eversheds LLP) for the appellant

Mr. Philip Shepherd Q.C. and Mr. Adam Cloherty (instructed by Bird & Bird LLP) for the respondent

Hearing dates : 29 th February & 1 st March 2012

Lord Justice Moore-Bick

Background

1

The appellant, Blackpool Airport Ltd ("BAL"), owns and operates a commercial airport on the outskirts of Blackpool. The respondent, Jet2. com Ltd ("Jet2"), is a low-cost airline operating out of a number of domestic airports offering flights to various United Kingdom and European destinations. BAL is currently 95% owned by Balfour Beatty Plc, but until 2008 it was owned by City Hopper Airports Ltd ("City Hopper"), a company which owned a number of smaller airports from which low-cost airlines operated.

2

In September 2005 BAL, City Hopper and Jet2 signed a document described as a Letter Agreement setting out the terms on which Jet2 would operate from Blackpool over the course of the following 15 years. The agreement provided that Jet2 and BAL would co-operate to promote Jet2's low-cost services from Blackpool and set out the terms on which BAL would provide ground services and marketing support for Jet2's business. Jet2 proposed to begin a service between Blackpool and Belfast as soon as practicable, to base an aircraft at Blackpool from March 2006 and to build its fleet at Blackpool in accordance with demand.

3

Under the legislation governing the licensing of airports the licence holder is required to notify the Civil Aviation Authority of the hours between which the airport is open for business to anyone who wishes to use it. In the case of Blackpool these were 7.00 a.m. to 9.00 p.m. local time throughout the year. For convenience I shall refer to these as the "normal opening hours". There is nothing to prevent an airport from opening outside those hours by agreement with airline operators, provided the Civil Aviation Authority is informed of any arrangements made for that purpose.

4

For over four years from March 2006 Jet2 operated flights out of Blackpool in accordance with schedules submitted to and accepted by BAL, under which there were regular arrivals and departures outside normal opening hours. Keeping an airport open outside normal opening hours inevitably causes the operator to incur additional costs in providing support services. Blackpool Airport has apparently never made a profit, at any rate during the years up to and including 2010, and in 2010 BAL became increasingly concerned at the costs that were being incurred as a result of aircraft movements taking place outside normal opening hours. Relations between the parties became increasingly strained until eventually, on 22 nd October 2010, BAL told Jet2 that from midnight on 29 th October it would not accept departures or arrivals scheduled outside normal opening hours. As a result, two of Jet2's flights were diverted from Blackpool to Manchester at short notice causing considerable inconvenience to passengers and expense to Jet2.

5

In response Jet2 brought proceedings against BAL seeking damages for breach of contract and a declaration that under the Letter Agreement it was obliged to accept aircraft movements outside normal opening hours. It also obtained an interim injunction against BAL, the effect of which was to require BAL to handle aircraft movements over the winter season 2010–2011 broadly in accordance with the flight schedules agreed for the winter season the previous year. At the conclusion of the trial the judge held that BAL was in breach of contract in refusing to handle flights outside normal opening hours, but he declined to grant Jet2 the declaration it sought. BAL now appeals against the judge's decision.

The Letter Agreement

6

The Letter Agreement takes the form of a letter dated 23 rd September 2005 from Jet2 to BAL and City Hopper, which was counter-signed by representatives of both addressees to indicate their agreement. The opening paragraph and clauses 1 and 2 are of most relevance to the present appeal. They provide as follows:

"This Letter Agreement sets out the terms of the agreement between Blackpool Airport Limited … and City Hopper Airports Limited … and Channel Express (Air Services) Limited … trading as Jet2. com … in relation to low cost services from and to Blackpool Airport (BA).

1. Jet2. com and BAL will co-operate together and use their best endeavours to promote Jet2. com's low cost services from BA and BAL will use all reasonable endeavours to provide a cost base that will facilitate Jet2. com's low cost pricing.

Jet2. com proposes to commence a service between Belfast International Airport and BA as soon as practicable and to base one B737–300 aircraft, or its equivalent, at BA from the commencement of the Summer operating season, 26 March, 2006, and to operate and build its fleet at BA in accordance with demand for an initial period of 15 years from the date of the first service by Jet2. com from BA and the terms set out in this Letter Agreement will, except as otherwise stated, apply for the 15 year period.

Not later than three months prior to the expiry of such initial period of 15 years, senior representatives of the parties of this letter agreement will meet in good faith to review and agree a new Charging Scheme which will enable Jet2. com to continue to develop its base at BA and increase its low cost services from BA.

2. In consideration of the investment that Jet2. com is making in offering such services from BA, BAL will make available the following pricing and other benefits to Jet2. com in relation to BA:

(a) (i) BAL will levy airport charges on Jet2. com on the basis of the Charging Scheme as set out in Appendix A for the initial period of 15 years commencing on the date of Jet2. com's first flight from BA. These charges include all BAL's aircraft movement, handling and passenger charges to Jet2. com including landing, navigation, marshalling etc., parking, passenger facilities charges, passenger security charges, security, baggage x-ray and security screening, baggage handling, bussing, CUTE and check-in desk charges.

(b) BAL will provide a contribution towards Jet2. com's marketing expenditure to be calculated in accordance with Schedule B, such payment to be paid quarterly in arrears following Jet2. com's first flight of its BA based aircraft.

(c) BAL will arrange for prominent Airport advertising at BA of Jet2. com's low cost product and its destinations, together with frequent promotional facilities at such sites as BA controls and will facilitate editorial and news coverage of Jet2. com's activities in its magazines and with newspapers, all at no cost to Jet2. com.

(d) BAL and Jet2 will mount joint PR promotions with the aim of promoting and enhancing BAL and Jet2. com's operations to the general public."

Paragraphs (e) to (m) set out other obligations undertaken by BAL in the provision of airport services of various kinds.

7

Before the judge Jet2 argued that the obligation imposed on both parties by clause 1 to use their best endeavours to promote Jet2's low-cost services obliged BAL to handle its arrivals and departures between 6.00 a.m. and midnight and to do its best to accommodate occasional movements outside those hours. BAL argued that its obligation was limited to promoting Jet2's services in the sense of advertising and marketing them, that the agreement was silent about the hours during which it would accept aircraft movements and that it was under no obligation to accept movements outside normal opening hours. It also argued that it was entitled to take into account its own commercial interests when deciding what steps to take in the exercise of its best endeavours to promote Jet2's services. It was not obliged to handle aircraft movements outside normal opening hours if the additional revenue it obtained did not cover the cost of doing so.

8

The judge heard a good deal of evidence about the background to the agreement and about the economics of operating a low-cost airline. He made the following findings:

"23. Blackpool is a small regional airport with published opening hours which provide for other hours only by agreement. The cost of opening the airport to service a single flight greatly exceeds the revenue which the operation will generate. The low cost services described in the Agreement would have been seen by the parties in 2005 as requiring flexibility in scheduling early departures and late arrivals. This is so particularly during the peak summer season when maximum utilisation of aircraft is required on flying days. This requirement is obvious and is also supported, for example, by a document produced by the European Low Fares Airlines Association. The need for a low cost and flexible base for Jet2. com was also identified by BAL in presentations made to Jet2 in 2004 and 2005 before the Agreement was entered into. The need for flexibility increases where an airline has aircraft based at the airport because there are significant costs associated with diverting aircraft crews and support services from one airport to another. As both parties knew from, for example, the list of destinations used in BAL's presentations to Jet2 the services would be...

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