Examination of Witnesses (Questions 80
- 99)
WEDNESDAY 24 MAY 2000
MR PHILIP
MEESON AND
MR STEVE
GUYNAN
Mr O'Brien
80. There is the question of developing air
services to regions and the Government are now looking at regional
development. Do new air services provide an economic catalyst
to a region, do you think and disregards both the State or the
registry of the carrier? Do you think any operation out of a region
will benefit the region?
(Mr Meeson) I am sure they do.
81. Can you give us some examples?
(Mr Meeson) My own airline operates, since the liberalisation
of Europe, of being able to fly throughout Europe and since 1997,
has increased its capacity threefold and we now operate to many
airports in Europe, but we operate from East Midlands, from Edinburgh,
from Liverpool, Exeter—at Stansted we have seven, eight
services a night going through Stansted—all services which
we did not operate before liberalisation and I am sure the employment
we have at each of those airports has helped.
82. Did you consider Prestwick?
(Mr Meeson) We do not operate at Prestwick but we
do operate, as I say, to Edinburgh and the other regional airports
I mentioned.
83. Between Edinburgh and the Midlands or Liverpool
there is a wide area there. Have you ever considered any of the
other regional airports?
(Mr Meeson) The nearest we operate there is we operate
to Liverpool and we operate to Stansted as we do to the East Midlands
airport.
84. What about Carlisle, Leeds?
(Mr Meeson) We do not at this present moment in time,
but we are always keen to expand our services. We are keen to
take the opportunity that these negotiations will present us,
we believe, to increase the size of our company, to enter into
new markets and I am sure that they will have an effect. Mr Guynan,
do you have anything to add?
(Mr Guynan) Just that our members are largely into
chartering aircraft rather than operating scheduled services.
If any freight forwarder or airline wants to operate from any
of those airports, our members would stand ready to provide them.
If there is a market opportunity and the market is open, we step
in.
Mr Bennett
85. I think you heard the earlier evidence.
How much of that do you disagree with?
(Mr Guynan) A couple of key points. Mr Smith suggested
that the US Government had in fact offered wet-leasing as part
of a mini-deal late last year. I am afraid that is not correct;
the United States has tried to redefine wet-leasing by turning
it upside down and inside out, but the fundamentals are unchanged.
The US is not prepared to offer us the ability to wet-lease aircraft
into a US airline, neither is it prepared to allow us to operate
our aircraft for airlines of third countries to and from the States.
What they have said is that if we sign an `Open Skies' deal, giving
away all the rights that we do not believe should be given away,
we would accumulate Fifth freedom rights which would allow us
to operate on a charter basis for US carriers, which is not the
same thing at all.
Mr Stevenson
86. I seek your help to clarify and understand
this a little bit because we are getting the big players in these
operations—FedEx, UPS, yourselves—saying diametrically
opposed things and if we are to make any sense of it we really
do need your help, because Mr Smith particularly said that fifth
and Seventh freedoms are on the table. It is the UK that is effectively
dragging its feet and not reciprocating to these things. In other
words the ball is in the court of the UK in particular. Now you
are saying just the opposite, both here and in your evidence.
Could you help the Committee a little bit? You cannot both be
right, that is the point I am getting at.
(Mr Guynan) Mr Smith is correct in stating that the
US has offered a deal that includes open Fifth freedoms. As part
of the US demand, however, they are insisting on access from the
UK into other European countries which form, in our view, and
in fact, part of domestic market. In return for that they are
not prepared to offer any access to their domestic market and
that is where the dispute is.
87. May I just follow that up, because that
is very helpful; certainly very helpful to me. The other members
of the Committee will make their own minds up about it. So are
you saying or implying therefore that the real problem here is
that the negotiations are bilateral, i.e. between the UK and the
US in the Bermuda 2, whereas they ought to be EU and US led because
the domestic market is Europe? And my second question to that
is this, is not the reality that Bermuda 2 only covers the UK
and does not cover Europe?
(Mr Guynan) If I may try the first bit first. Europe
already handles a large range of aviation issues in negotiations
with the States and it controls slot allocation regulations, it
controls ground handling regulations, it writes competition law.
The question of whether they handle traffic rights as well is
one that still has to be resolved. The Commission thinks it should
be, Member States have not made that decision yet. There is an
argument for saying that traffic rights within the European Union
in so far as they affect the single market should perhaps be handled
by Brussels, but the scope of the remit is the crucial issue.
If they could trade cargo for cargo, fine. If they wish to trade
cargo for passenger rights or cargo for bananas, then it is not
an issue that we are exactly comfortable with.
88. This is my last contribution because I think
personally this is a crucial point. Is it not a fact that other
EU countries are entering into bilaterals with the United States?
Does that not weaken the argument for an EU wide deal? Is it the
pressure, as far as we are concerned, as far as the UK Government
is concerned, here in the UK, and how therefore, Mr Guynan, can
you argue that this is a Bermuda 2 issue in the negotiations but
does not include the European Union, and yet the United States
put these things on the table and you say: "Ah, but it should
include the European Union"? Is there not a contradiction
there in your position? Would you accept that?
(Mr Guynan) I would accept that there are legal difficulties
in aligning Europe with the US, but the fact remains that Europe
is our domestic market. Since 1997, 15 countries' airlines within
Europe have competed freely within that market.
(Mr Meeson) Perhaps if I could add to that for a second,
Madam Chairman. As our domestic market, if I want to start a service
tomorrow between Madrid and Barcelona or Barcelona or Manchester
or Lyon and Barcelona I can do so, freely, without having to ask
anyone. It is our domestic market.
Chairman
89. If someone does not blow you up at the airport,
yes.
(Mr Meeson) Exactly. Could I also just comment on
the operation of aircraft. Currently, if an American cargo airline,
such as Federal Express or UPS, wants to operate a flight service
between the UK and another point in the European single market,
it has to charter the flight from an airline registered in the
European Union. Sometimes this will be from a BCAA member. They
charter many flights at the moment from BCAA members and other
European airlines and this situation is absolutely identical with
that which is faced by British and European airlines wishing to
operate within the US domestic market. The US will not permit
overseas airlines in its domestic market and forces them to charter
from US airlines. So all these services which UPS and Federal
Express talk about and are currently flying are being flown via
European cargo airlines. They are not inhibited from operating;
they just use European registered cargo aircraft.
Mr Donohoe
90. Why would it necessarily worry us whether
it is an American, British or another European nation's aircraft
or airline that is doing this flying? As a nation, I mean. If
we develop the world we should not really worry about the airlines,
should we?
(Mr Meeson) I can understand what you are saying,
but I think I have to stress that the huge potential for the air
cargo business. World air freight, as Frederick Smith said, is
growing fast. It is growing at over 7 percent per annum and Boeing
and Airbus estimate that in the period to 2017 there will be room
for an additional 1,000 wide bodied freighter aircraft to accommodate
this extra demand. Now I am sure you understand with global sourcing
following the .com revolution when we expect to be able to buy
things from around the world and have them delivered to our doorstep
tomorrow or the next day, air freight is a fast growing business.
91. Not only .com, I think, but ordinary business?
(Mr Meeson) Exactly, but the principle is there, I
am sure you agree. And this is what the BCAA is looking for. We
want truly `Open Skies'. BCAA members will be able to secure a
proportion of this additional work and have additional fleets,
so creating new UK jobs. We can invest in additional aircraft—we
are a British public company—and will earn more overseas
revenue for the UK.
92. But to the wealth of the nation, to the
wealth of the UK, it does not matter if the airline that is shifting
that stuff around is UK based or based in Paris or based in Schipol.
It is still going to move the goods around, is it not?
(Mr Meeson) Sure, but we want British cargo airlines—I
have 1,400 people in our group and we want British cargo airlines
to prosper and to grow and to continue to provide British employment
for British aircrews.
Chairman
93. Do you want US airlines to have cabotage
rights in the UK?
(Mr Guynan) We have absolutely no objection to US
airlines having all the rights that are on offer provided we get
reciprocal rights in the US. It is simply a question of a level
playing field and it is not level at the moment; they already
have significant rights that we do not have over there.
Mr Donohoe
94. How much business have you lost since the
agreements have been reached with our European neighbours as far
as the `Open Skies' arrangement with the US is concerned?
(Mr Meeson) We have not lost business because the
countries which have signed `Open Skies' agreements recently—Italy,
which has a restricted agreement I believe and France which also
has a restricted agreement—we are not flying from those
airfields on behalf of new members.
95. Not just your airline, your association
members?
(Mr Meeson) We have not gained business there.
96. It is whether you have lost business, which
is more important?
(Mr Guynan) Most of our flying is, in fact, for other
airlines and for European parcel carriers and it is true to say
that if an `Open Skies' deal results in US carriers coming in
and operating in the European market effectively on the back of
a protected US market, then those European carriers can challenge
the market share of our existing European companies. DHL and TNT,
who take up a lot of British cargo airline capacity, will lose
market share if they are threatened by American competition on
an unreciprocated basis or non-level basis.
97. So what has been the impact in real terms
of the agreements that have been reached as far as you can see?
(Mr Meeson) The key impact is that it reduces the
leverage that is available to open up the American market. It
is more frustrated opportunity than actual loss of business on
this side of the Atlantic. If the Americans slice off the European
market as a salami slice by picking off individual countries through
`Open Skies' agreements, they will effectively have access to
the full European domestic market without having conceded an ounce
of traffic on the other side of the Atlantic. That is our primary
concern.
98. My final point is that in answer to another
point you said your company did not operate at Prestwick. Do any
of your members operate out of Prestwick?
(Mr Guynan) Not at the moment. One of our supporters,
Air Freight Express, has been exploring the Prestwick market.
It currently operates out of Heathrow and is exploring the opportunities
to operate out of Prestwick.
Miss McIntosh
99. Lord MacDonald did say in the House of Lords
that liberalisation does not mean liberally conferring a competitive
advantage to the carriers of any other state. Are you not concerned
that US carriers can wet-lease in Europe, but UK carriers cannot
wet-lease in the US and the US carriers effectively have access
to the European domestic market and that the `Fly America' rule
obviously deprives you of business? Does that concern you?
(Mr Guynan) It is very concerning.
(Mr Meeson) It is concerning. If I may? We have wet-leased
aeroplanes from America to support our services during the peak
periods and we have received many requests from American airlines
to wet-lease our aeroplanes during domestic peaks in America.
We are not allowed to provide service in the USA and I have here
a letter from a company called Zantop International Airlines with
whom we have done business for a long time, wet-leasing their
aeroplanes into Europe; they request that we operate an Airbus
A300 aeroplane which carries 45 tonnes of freight to operate within
the USA, in which they say: "In several recent conversations
we have had with our Department of Transportation, I have been
unable to convince them that Zantop should be allowed to wet-lease
a foreign owned aircraft within the USA".
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