Commons Gate

The Work of the Civil Aviation Authority (HC 809-ii)

Transport Committee 18 Jan 2006

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Evidence given by Mr Keith Jowett, Chief Executive, Airport Operators Association, Mr Mike Toms, Director of Planning and Regulatory Affairs, BAA plc, Ms Rowena Burns, Director, Group Strategy, Manchester Airports Group and Mr Ian Hall, Director, Operators, National Air Traffic Services, Mr Roger Wilshire, Secretary General, British Air Transport Association, Mr Andrew Cahn, Director, Government and Industry Affairs, British Airways, Mr Michael O'Leary, Chief Executive, Ryanair, Mr Richard Churchill-Coleman, Group Legal Counsel, TUI UK and Mr Barry Humphreys, Director, External Affairs and Route Development, Virgin Atlantic, Mr Martin Robinson, Chief Executive, Aircraft Owners and Pilots Association, Mr Mark Wilson, Chief Executive, British Business and General Aviation Association, Mr Paul Draper, Chairman, PPL/IR Europe, GA Alliance, and Mr Mike Steeden, Director, Civil Air Transport, Society of British Aerospace Companies.

Q255 Mr. Eric Martlew: On that point, and obviously having a constituency in the North, I am very conscious that Manchester does not only own Manchester but they own quite a few northern airports, the reality is that there would be a concern if it was just left to the markets that you could exploit that situation.

Ms Burns: I do not believe so. Our airports in the North include Manchester Airport, obviously, and Humberside Airport to the east.

Q256 Mr. Eric Martlew: Liverpool?

Ms Burns: I regret to say, Madam Chairman, that Liverpool is not in our ownership. The overlap between the catchment areas of our airports is minimal and indeed there are two airports which sit between Humberside and Manchester Airport.

Q257 Mr. Eric Martlew: None of any size in comparison with Manchester. There are four large airports in England, Manchester is one of them, it serves the north of the country.

Ms Burns: It is one of a number of airports that serve the north of the country.

Q258 Mr. Eric Martlew: It is the largest by far, is it not?

Ms Burns: Madam Chairman, it is the largest by far and it is also the case that Liverpool is the fastest growing airport in the North of England.

Mr Jowett: If I may contribute from a more independent position. The present designation of airports was introduced nearly 20 years ago now in a very different historical context. Since then, of course, we have seen radical change in airport ownership and the activity of airports across the country. If you look at the North of England today, where Manchester is located, it is in a very strongly competitive position alongside, as Ms Burns has said, a number of strongly growing competitors. Therefore it is a candidate, one would think, for the regulators to review the position of it, as I think Mr Bush said last week when he was here at this table.


Mr Cahn: May I just come back and have one last go on financial protection for passengers? My Chairman is speaking in New York today and, amongst other things, he is arguing that our industry should be treated as a normal industry and not as a special case. I think this is a very good example where moral hazard is being engaged by proposing that our customers should be treated as customers. In the automobile industry if you buy a car, if you buy double-glazing, if you buy clothes or you buy a house, nobody suggests there should be a government-levied tax. What we would like in British Airways, which is indeed a financially secure airline, is to see our industry treated as a normal industry.

Q318 Mr. Eric Martlew: It would be much easier not to impose this tax, as Mr O'Leary says, if there was an official agreement amongst the major airlines that they would bring people back. Why have we not got such an agreement?

Mr Cahn: We have an unofficial practice amongst scheduled airlines that where a scheduled airline fails we will bring passengers back, and all the experience over the years is that we have done that. We did that when Sabena failed, we did that when Swissair failed and you can be confident that we will do it in the future if a scheduled airline fails. I think that there are divisions within the industry and I do not see that we necessarily have an obligation for all airlines, but we will do it where a fellow IATA airline is in trouble.

Mr O'Leary: I think the simple answer to your question is there is no problem with them. We have no difficulty in reaching an agreement whereby passengers on a failed airline will be repatriated free-of-charge. Ryanair would sign up to that tomorrow.

Chairman: It is nice to be in such an open-spirited industry.


Q368 Mr. Eric Martlew: On the funding and the efficiency of the CAA, do you really believe that you get value for money from the CAA?

Mr Wilson: What we would probably contend is that the CAA is not the organisation it would be if it was just there to regulate general aviation and, therefore, we believe that we are paying a disproportionate sum because the regulation itself and the body itself is not set there to regulate general aviation, it is set there, as is laid down in its remit, to look after the large airlines and particularly to ensure that the airlines are able to be provide services to UK citizens. It is a worthy goal but not one we feel we should be paying for.

Q369 Mr. Eric Martlew: So what is the solution?

Mr Wilson: You can either have regulation which is proportional throughout and we recognise that may place a bureaucratic burden on the CAA itself, but I think just having a one-size-fits-all level of regulation, such as exists for commercial operations today, is not useful. It is not sensible for somebody who wishes to operate pleasure flights round a beach during the summer to have to approach the same document as British Airways has to approach.

Q370 Mr. Eric Martlew: Do you believe that the six per cent return is justified?

Mr Robinson: No.

Mr Draper: It is really a tax on safety in effect.

Q371 Mr. Eric Martlew: If they do not get the return then will there not be a tax on the taxpayer.

Mr Draper: Not necessarily because the CAA is self-funded by the participants and that includes us.

Q372 Mr. Eric Martlew: So you are happy for it to be self-funded and not to pay a return?

Mr Draper: Indeed it should be self-funded. We do not necessarily need to be a part of that regulation in that it needs to be risk based and proportionate. Over the years general aviation in various sectors has been very successfully self-regulated without a problem, such as the gliding community for 60 years, the PFA and various other sectors and we believe that is the way that it should move and there should be more self-regulation providing it is properly safety based.

Mr Steeden: In terms of value for money from the CAA, I think I share views that have been frequently expressed already. As far as our members are concerned the relationship with the CAA is long standing and it is highly professional. I do not believe that our members would see an issue. Our area of concern is primarily the certification of products and services and so in that area I do not think we have an issue. On the six per cent return, again I share some of the views that have been expressed here. I believe the actual number this year in terms of the rate of return on average capital employees is running at something like 18 per cent, which is something of a catch-up exercise following the 'holiday' that followed on from 9/11. I would observe that from the point of view of companies in our community that is a very nice arrangement if you can get it. I do not think that they understand why that sort of facility should be provided. I think they probably would have some measure of difficulty with it. I think they would look at the rates that you can achieve these days on retail savings investments and ask why this particular privilege is being drafted. It is not the biggest issue out there for us as far as the CAA is concerned but I think those would probably be the views.

Mr Draper: My colleague has mentioned an 18 per cent return and that is in an environment where charges from the CAA to the GA community are increasing and I think questions need to be asked.


Q396 Chairman: What you are saying is that these are commercial flights that are re-jigged as being personal flights and, therefore, they escape the sort of controls that a commercial competitor would have to comply with.

Mr Wilson: That is exactly it. Our point in the submission was to say we believe there should be greater funding from DfT to enable the CAA to conduct more of these checks.

Clive Efford: Do any of you have examples of where the CAA avoids using their powers similar to this situation?

Q397 Mr. Eric Martlew: Just on the funding side, are you saying the government should give the CAA money to do these checks or should it come out of self-financing?

Mr Wilson: My understanding is that is the case today.

Q398 Mr. Eric Martlew: So the government do pay?

Mr Wilson: Yes. This is somewhere where the government is seeking that airlines or aircraft coming into the UK are safe. That has the added advantage of ensuring they are abiding by permit restrictions as well.

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.

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On behalf of Eric Martlew, 3 Chatsworth Square Carlisle Cumbria CA1 1HB