Select Committee on Environment, Transport and Regional Affairs Appendices to the Minutes of Evidence


Memorandum by Manchester Airport PLC (IT 180)

INTEGRATED TRANSPORT WHITE PAPER

  1. Manchester Airport PLC is aware that the Committee have been considering evidence about the implications of proposals contained in the Integrated Transport White Paper. It wishes to submit these comments for consideration before the Committee concludes its deliberations.

  2. Manchester Airport actively supports many of the proposals in the White Paper and was pleased to see recognition of its own efforts towards achieving an integrated approach to ground transport. In particular, Manchester Airport supports the emphasis being placed by the Government on the role of regional airports in meeting a greater share of total demand for air travel.

  3. The aviation industry is a major contributor to the UK economy both directly and indirectly, through the stimulus which international accessibility brings in terms of the UK's national and regional competitiveness in trade, inward investment and tourism. Given this importance, and the opportunity to maximise the contribution which the industry makes to the UK's competitiveness, the need for a comprehensive integrated aviation policy is urgent indeed.

  4. Manchester Airport supports the Government's initiative in seeking to draw up an airports policy for the long-term. We support, also, Government's determination to ensure that airports' policy is developed in the context of an integrated approach to all forms of transport. We are concerned, however, that at the present time Government may not have adequate tools at its disposal to secure the achievement of its objectives. The previous Government, in two decades of legislation, deregulated and privatised most of the public transport network, in a way which was deliberately designed to discourage an integrated approach to transport planning. Similarly, a narrow focus on competition has been the key driver of such aviation policy as presently exists both within the UK and the EC. One effect of this has been to create a substantial imbalance of power between airports and the airline industry, with the extensive regulation of the former heavily focused on protecting the interests of airlines to the exclusion of wider transport policy considerations.

  5. These considerations pose a particular challenge for the Government in considering how best to give effect to the aspirations contained within the White Paper. In its own deliberations on this issue, the Select Committee will have heard the arguments in support of voluntary change, based upon partnerships between public agencies and private sector transport providers. There is much that is useful in the ground work already undertaken pursuant to this idea, particularly in the quality partnerships being promoted in some of the metropolitan areas. It is important, however, that the limitations of this approach, as well as the opportunities, are clearly appreciated, and that serious thought is given to what the Government can do to promote and hasten the implementation of a more cohesive and efficiency approach to the planning and delivery of transport services.

  6. This submission is focused upon a number of areas where there is scope for Government to take early action which would support airports in furthering the objectives in the White Paper. The freeing up of local authority owned airports to borrow money for much needed investment, is already, of course, an important step in the right direction. We would also support early measures to reintroduce a measure of regulation to the bus and rail industries, and in this regard we welcome the intended establishment of a Strategic Rail Authority.

  7. The following paragraphs address issues which are specific to the airports industry, and which were the subject of fuller analysis in our submission to the DETR during consultation on the Integrated Transport White Paper.

VIRES

  8. The ability of local authority owned airports to work in partnership with other agencies and the ground transport operators to promote and develop an integrated approach to airport access is handicapped by the legal limitations—vires—on the activities which local authority owned airports may participate in. The present limitations within Local Government law limit the activities of such airports to matters directly connected with the operation of a specific airport. These vires constraints would prevent, for example, a local authority owned airport, such as Manchester, developing and operating ground transport services in partnership with other transport operators, or entering into relationships with other regional airports with the objective of maximising the regions' contribution to meeting total air transport demand.

  9. Commercial freedom would also open the door to airports making a greater contribution to levering out the economic benefits of their operation into the wider regional economies by allowing to invest in airport related activity targeted at attracting and retaining additional economic activity. Manchester Airport believes that an early opportunity must be sought for legislation to amend these vires restrictions within Local Government law and has made proposals to the Department of the Environment, Transport and the Regions accordingly.

REGULATION

  10. A key consideration in any integrated transport strategy must be the achievement of the best possible transport system within reasonable limits of sustainable development. Manchester and the BAA London airports operate under a form of economic regulation which increasingly brings their operation into conflict with the basic principle of sustainable development that users should pay the full cost of the infrastructure which they use.

  11. The economic regulation of the designated airports named above by the CAA and MMC is based upon objectives designed to achieve the lowest possible charges to airline users, with the operational charges supported by revenues from commercial activities under the "single till" principle. This has had the effect of reducing income from landing fees and passenger charges to below cost at Heathrow, with the same downward pressures leading to the achievement of the same result at Manchester and the other designated airports in time.

  12. Clearly this is not in line what the basic tenet of sustainable development—that of the polluter pays. It also has two other undesirable effects. Firstly, the extremely low operational charges at Heathrow make the achievement of the Government's objective of seeing greater use of regional airports more difficult. Instead of the normal economic principles applying, whereby charges would be highest at the most congested facility, the low charges at Heathrow have the effect of sucking in additional traffic. other airports cannot compete with these low charges at Heathrow when seeking to attract airlines to commence new regional services.

  13. Secondly, the quest for non-regulated commercial income streams within the "single till" leads to airports seeking to diversify into non-aviation related activity. This in turn leads to increased pressure on the use of scarce land resources within the vicinity of airports, to the probable eventual detriment to airport capacity. This is inconsistent with maximising the capability of the UK's airports to meet air traffic demand.

  14. The Department of the Environment, Transport and the Regions are currently considering the form of airport economic regulation for the future in the context of the Utilities Green Paper. Manchester Airport believes that there is an opportunity for radical reform of the regulatory regime to ensure that it works towards achieving the principles of an integrated transport policy rather than against them.

LIBERALISATION

  15. The White Paper also confirmed the Government's approach towards liberalising access for UK and foreign airlines to operate air services to regional airports. It stated that this should "enable UK and foreign airlines to plan the development of services with confidence that their future growth will not be limited by bilateral restrictions." Regrettably, the terms of the reciprocity clauses have been such that many countries have been reluctant to take up the offer because of effective increases in capacity available to UK airlines out of London. In one case—Air Hong Kong—extra-bilateral freighter services to Manchester were temporarily suspended pending negotiations on the regional deal. This resulted in a reduction of freight capacity to the UK regions, contrary to the basic policy objective.

  16. The liberalisation offer relates only to direct, point to point, third and fourth freedom, services to UK regional points. All the remaining conditions of existing bilateral agreements, including limitations on routing and intermediate stops, remain in place. As a result, many airlines are still prevented from operating viable services to UK regional points as the initiation of such services often requires an intermediate stop at a European point to sustain the operation in the early years.

  17. Manchester Airport believes that fifth freedom rights have also to be made freely available to and from regional points for the liberalisation policy to be fully workable and achieve its aims. This would include the ability of eastern airlines to continue regional services onto points in North America, in line with the already liberal regional transatlantic regime.

SLOTS

  18. Slot allocation is another powerful tool in determining how airport capacity used. At present, the rules are determined almost entirely by the airlines, supplemented by the EC Commission's objective to see an increase in airline competition in Europe through the priority given to new entrants. The White Paper makes reference to the need to secure appropriate access from the UK regions to the Heathrow and Gatwick hubs.

  19. This is not the only issue. Manchester is also a fully co-ordinated airport and finds that the current rules cut across its ability to ensure that it s own capacity is used to best effect to meet regional needs for an increasing range of air services. Manchester cannot effectively prioritise the use of the airport capacity which it has created to meet regional needs. Slot allocation is potentially an important policy tool for Government in ensuring that its overall airport policy objectives are met. Manchester Airport believes that the Government should lobby for the amendment of the existing regulation to acknowledge a greater role for airports and the relevant regional interests in defining the priorities for the allocation of scarce airport resources.

AIRPORT POLICY

  20. Manchester Airport welcomes the decision of Government to look at the role of regional airports, emphasising in particular their role in regional economic development. However, a key to understanding the potential for regional airports will be an understanding of their relationship to airports in the South East.

  21. Manchester Airport is concerned that the current regional air services studies are being carried out in a piecemeal manner which will fail to identify the true potential for regional airports in total to claw back regional demand presently using the London airports. There is an urgent need for a truly national policy which takes all factors into account.

  22. This submission has sought to identify a number of matters which it believes must be taken up as a matter of urgency if the implementation of integrated approach to airport operation and development is to be secured. Manchester Airport would be pleased to answer any queries which the Committee have on the matters raised.

Janaury 1999


 
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