The Future of BAA (HC 119-i)
Transport Committee 21 Nov 2007
Evidence given by: 2.45 p.m. Competition Commission Martin Stanley, Chief Executive John Banfield, Inquiry Director Civil Aviation Authority Harry Bush, Group Director Economic Regulation Daniel Storey, Head, Airport Price Controls 3.30 p.m. Air Transport Users' Council Simon Evans, Chief Executive 4.00 p.m. Unite - the Union Roger Sealey, Transport Researcher Brendan Gold, National Officer Public and Commercial Services Union Paul Smith, Aviation Group secretary Dennis Burke, President, BAA section of the Aviation Group.
Q45 Mr. David Clelland: Just on this question of competition. Would a greater use of regional airports for long haul flights promote greater competition and offer a better range of services to passengers?
Dr Bush: I think over time that is what is happening. As regional airports have grown and have acquired critical mass then airlines like Continental Airlines, like Emirates, American Airlines have actually moved into these airports now offering long haul services. That helps relieve the pressure on Heathrow to some extent, but also it actually provides people in those regions with choice because they can either interline via some of these other hubs or they can fly direct or they can go to Heathrow. So there is a variety of choices there and that is something we are very keen to encourage.
Q83 Mr. David Clelland: What feedback do you receive from passengers on the subject of competition?
Mr Evans: Again none, specifically, because it is not the sort of thing that people pick up the phone or write to an organisation - perhaps not to any organisation but not to organisations like ours. Very occasionally we will have a letter from somebody who has found that when they had logged on to a website to book a fare from their regional airport, for example, they only had one airline to choose from and they thought it was expensive. But we do not get enough of those to be able to build a thesis around what they say, and of course we answer them that this is a liberalised market and if another airline saw an opportunity to compete on the route they probably would be there offering competition.
Q84 Mr. David Clelland: Nevertheless, your organisation does have opinions on competition. You stated that the idea of competition within airports should not be discounted entirely. Do you think that is an idea worth pursuing?
Mr Evans: Yes it is, but the suggestion arose in the context of regulated airport charges and behind the suggestion was also an analysis of the practical problems that you may have if you do go down the route of competition within airports. So we were simply saying that we can see the theoretical attraction but I suppose behind what we were saying was, "Please do not do it until you have looked at the practical issues and do not create any new problems just by trying to create more competition."
Q85 Mr. David Clelland: What sorts or models of competition within airports did you have in mind when you made that comment?
Mr Evans: We were following the lead within the documents, which was principally competition between the terminals, I believe, and our comments and predicators on the knowledge that there is competition between terminals at airports around the world and people saying that that worked. But we did not feel that we were sufficiently competent to come out and say that yes, that should happen or that should not happen at BAA airports.
Q86 Mr. David Clelland: What feedback do you receive from passengers on the subject of airport charges?
Mr Evans: The feedback we get from passengers on the subject of airport charges is when they want a refund of their charges because they have not travelled. That pretty much is it. We do not get many calls from people saying that they do not want to pay them. Strangely enough people do accept that there are taxes and charges when they fly, and I suppose a lot of that is because the base fare can be very cheap these days. But principally the complaints we get are when they are trying to get their money back and airlines are putting hurdles in their way to prevent them having a refund.
Q87 Mr. David Clelland: Do you think that passengers ever make a link between their experiences and the bigger questions of competition and regulation?
Mr Evans: Inevitably some do but that may be because they have a professional interest or just a more general interest in those sorts of issues. But I would think that for the most part no. Passengers shop around for the fare they want, for the holiday or the journey they want and they take the airport experience more or less as it comes.
Q88 Mr. David Clelland: How do you think passengers will react to the level of charges proposed by the Competition Commission?
Mr Evans: They probably will not even know because we will still see the deep discount fares on airlines' websites and advertising, so the perception will not be that fares are going up particularly. Members of the Committee know how complicated it is setting fares, so there will be perhaps fewer cheaper fares or some of the extra money will be loaded on the higher end, business class fares that are being paid by companies, so I do not think they will react unless it becomes very apparent that fares have gone up significantly as a result, and I do not think they will.
Q120 Mr. David Clelland: In the written evidence from Unite at section 2.20 you make it clear that you do not think that increased competition would be achieved between the London airports by divesting the group of one of its airports. Do you think increased competition is possible at all?
Mr Sealey: I think there are problems given that in a sense you are dealing in a market which is not contestable. If you are going to have competition you want something new coming in and the possibility of building a new London airport is fairly remote, to say the least, so you have to deal with what you have got and expand that. The other thing goes back to the earlier question from the Chairman. At the moment airports gain in scale because they are catering for different markets. If you sell off one of the BAA airports, say, Gatwick, Gatwick would then be competing with the other two markets, so you would lose scale within Gatwick but you would increase scope, and the question is, would the balance between what you lose in scale and what you gain from scope be equal? We think it would be less equal, so there would be a negative benefit, if you like, because you would lose on scale more than you would gain on scope.
Q121 Mr. David Clelland: I understand why the union might not like the idea of competition but you do not think it is possible to have competition anyway, whether you like it or do not like it?
Mr Sealey: It is possible. The question is, would there be a positive gain from competition, and their view is that there would not be a positive gain because of their argument for scale and scope.
Q122 Mr. David Clelland: Why do you think that breaking up the airports would demoralise workers? Is there something particular in the whole question of breaking up the airports that is demoralising or is it founded on the fact that it would lead to a loss of jobs?
Mr Sealey: Can I ask Mr Gold to answer that?
Mr Gold: It is very clear from where we are standing as a trade union that we have a clear interest to protect our members' terms and conditions of employment and job security. That is our function, that is our responsibility. We would be failing if we did not address that and make sure that that position was made very clear. We were also drawing from experience when we made those sorts of comments, experience of working and being involved in the aviation sector with the membership that we have. We have seen that competition between, for example, ground handlers, has not in our view served the airports and the infrastructure well.
Q123 Chairman: Why, Mr Gold?
Mr Gold: Let me draw a position for Gatwick if I may. There are a number of handling agents dealing in Gatwick and we have seen the addition of another company called Menzies, with whom we have a relationship and we work well together, but we were not keen to see another handling agent come in to Gatwick which not only reduces our members' terms and conditions because of the competition that exists driving down prices and contract prices with airlines, but also has a direct result of more kit and equipment on the ramp in a congested area anyway, and therefore has a potential safety implication. There would be more competition driving our members' terms and conditions of employment, which we have directly seen in those sectors, so we draw that parallel with where we would be within the BAA airports should one or more of them be sold off. We would undoubtedly see increased competition, increased threats to our members' terms and conditions of employment, pensions being one of them, which we are very keen, as the trade union movement always is, to protect and where we have existing difficulties with BAA on that particular issue. We have a very clear position on trying to protect people's terms and conditions of employment, that is our job, and we see without question that if an airport were to be sold off that would be an additional threat to those terms and conditions of employment and job security.
Q124 Mr. David Clelland: Would there not perhaps be potential for improved morale if the airport was not part of such a large group?
Mr Gold: That is not what we are picking up. That is not the way that we view it and that is born from direct experience of our shop stewards in all the different areas and all the different committees that we get involved in, bringing in the different occupational groups from across the seven BAA airports. They have had an incredibly difficult summer because of all the security regime that has been in place and the other complexities of the operation and the overload, particularly in passenger numbers at Heathrow, so they are having a very difficult time at the moment, their morale is not great, and certainly the prospect of an individual airport being sold off is seen by our membership to be very threatening indeed.
This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee. Neither witnesses nor Members have had the opportunity to correct the record. The transcript is not yet an approved formal record of these proceedings.
The full transcript may be read at http://www.publications.parliament.uk/pa/cm200708/cmselect/cmtran/uc119-i/uc11902.htm
|Promoted by Ken Childs on behalf of David Clelland, both of 19 Ravensworth Road, Dunston, Gateshead. NE11 9AB|