Examination of Witnesses (Questions 340
- 359)
WEDNESDAY 7 JUNE 2000
MR VIJENDRAN
ALFREDS AND
MR GERRY
STEVENS
340. Having regard to the fact that things are
moving on and we now have a regional development agency in the
North West, would negotiations or discussions with them influence
the question of perhaps more business people using Manchester
because that is one of the aims of the agency?
(Mr Stevens) If I may repeat, we would very much like
to develop a service out of Manchester. As we have only just reached
a daily frequency from there to Singapore, we still think it is
premature to embark upon an entirely new service in a different
direction from Manchester. If we get up and running from Heathrow
we would like to consider Manchester in due time.
Mr Donohoe
341. What has the response to your idea of making
an application for this Fifth Freedom been of your Star Alliance
partners?
(Mr Alfreds) I am sorry?
342. What do your Star Alliance partners think
of your plans to have services put on from Heathrow to the United
States?
(Mr Alfreds) It does not really much concern them.
Within the Star Alliance there would be opportunities for us to
co-operate where there are benefits to the consumer and also areas
where we will strongly compete to benefit the consumer also. In
Singapore, for example, there is a One World alliance quite strongly
entrenched in Changi Airport with Qantas, British Airways and
then Star and both alliances compete very strongly for the consumer.
Within Star there are areas where we compete, for example with
United from Singapore to the West Coast of the United States of
America, so there will be similar competition between Heathrow
and New York.
343. Is it your intention to use your 49 per
cent of the shares within Virgin to convince them that perhaps
they should join that particular alliance?
(Mr Alfreds) As we said, our investment in Virgin
is equity investment.
344. But would you be encouraging them to join
that particular alliance?
(Mr Alfreds) It would be up to them to decide and
I think Sir Richard is on record as saying that he does not think
air alliances are good for the consumer.
345. But you do?
(Mr Alfreds) We do, yes.
Chairman
346. I have flown Singapore many, many times
and you are an excellent airline, you know how to deal with children,
you know how to deal with passengers. Are you really saying to
us that your only interest in Virgin is in the quality of its
services and the fact that it has got a special name? Is that
what you are saying to us. The only reason you want to take equity
in it is because it has got this British stamp? I would not say
that sounds unbelievable because I would not want to be discourteous,
but I find that mildly unlikely.
(Mr Alfreds) Madam Chairman, Virgin is an airline
which is growing. It has got a good brand name, it has got a good
reputation for service.
347. Not better than your own, surely?
(Mr Alfreds) Thank you for that, but there are some
surveys that rate Virgin higher than us. I think the way many
of us look at it is for every quid Sir Richard makes, 49 pence
will be ours.
Chairman: Now I am with you, yes. Miss McIntosh?
Miss McIntosh
348. In their written memorandum Singapore Airlines
concentrate quite heavily in their third section on the need to
liberalise trans-Atlantic services from the UK with the view to
opening up the Fifth Freedom market. I would have thought now
you have 49 per cent ownership of Virgin that you basically have
achieved what you set out to achieve.
(Mr Stevens) I think Sir Richard made it quite clear
that we had a minority interest and he was at great pains to point
that out.
Chairman
349. Even this Committee can work out what 49
per cent is.
(Mr Stevens) Thank you. The question of Fifth Freedom
rights from the UK using Virgin, firstly we have no traffic rights
across the Atlantic at all and my understanding of the case is
that even Virgin would require the approval of the US authorities
to grant us traffic rights from the US to the UK. So that at the
moment does not arise. If at some time in the future the situation
changed and we received approval and we did embark upon code sharing
using Virgin aircraft that still detracts from the basic concept
that we would prefer (as indeed most carriers would) which is
to operate our own aircraft on a route enabling us to give the
public our own distinctive brand of service, and that is broadly
our position.
Miss McIntosh
350. In a former life, Chairman, I was MEP for
Stansted Airport. What is wrong with Stansted Airport? Why have
Singapore Airlines not applied to fly from Stansted Airport?
(Mr Stevens) We have evaluated the opportunities presented
by many of the UK regional airports including Gatwick, Stansted,
Birmingham and so on. There are several points, if I may just
cover them. First of all, it implies a split operation. We have
always operated from Heathrow. It is of course feasible to have
split operations, I think Sir Richard made that clear as far as
he is concerned. We find that undesirable from the logistical
and cost viewpoint. I suppose you might say we are a very profitable
carrier, which is true, and perhaps we should not be overly concerned
about such matters. I suppose one reason we are profitable is
because we take precisely that view and do control our costs.
From a purely commercial viewpoint our view and our experience
is that for all its drawbacks the business traveller still prefers
to go from Heathrow, not necessarily prefers it because it is
convenient but because it offers frequencies and options. I know
there is always a queue on the M4 spur but they still seem to
use it. Gatwick does not offer such a range of business destinations
or transfer points, neither does Stansted. Insofar as Virgin is
concerned, I believe Sir Richard says he operates more services
from Gatwick than from Heathrow but I noted that most of those
destinations are leisure orientated not business orientated and
his business destinations are nearly all from Heathrow. We remain
open-minded. We saw Birmingham Airport not so long ago and if
in the future we recognise opportunities to mount operations,
we will certainly look at that.
351. What are the implications to Singapore
airlines of an eventual EU negotiated mandate with the US and
other countries?
(Mr Alfreds) So long as these multi-lateral initiatives
result in a liberalised world then we would welcome this kind
of thing. Sometimes people use multi-lateralism to block liberalisation
and thwart it and that would not be in the interests of the consumer.
Chairman
352. So you object to airlines being negotiated
in the same way as, say, GATT?
(Mr Alfreds) We are involved in an initiative in the
Far East where certain like-minded countries, the United States,
New Zealand, Singapore, Brunai, are getting together to try and
cover an area where we can then approach another group of countries
to push the open skies idea a little faster than it now is.
353. If one creates a fairly powerful partnership,
it is not usually to make things more open, is it?
(Mr Alfreds) Our attitude to competition is not only
is it good for the consumer but competition has been very good
for us. The competition on the London to Singapore route over
the last 25 to 30 years has been very good for us. We have thrived
on it and we would like to see that competition extended on other
routes as well.
354. Why do you think Air Kuwait and Air New
Zealand have got Fifth Freedom rights to operate between the United
States and the UK.
(Mr Alfreds) I believe it is historical, they have
had them for several years. We were a bit puzzled that the air
rights for Air India increased from January. The UK Government
had been telling us we had do wait for the UK/US talks and Air
India got it overnight.
355. What did the British Government say was
the main thing that caused you to be different from those other
nations?
(Mr Alfreds) We do not know. They keep on saying they
cannot consider our request until the UK/US dispute is sorted
out. They only said this in April 1997. Earlier, as I mentioned,
they set us a goalpost of 21 flights between the UK and Singapore.
When we reached that threshold it shifted stance.
356. What services do you already operate from
third countries into the United States and Fifth Freedom rights?
(Mr Alfreds) We operate from Amsterdam and Frankfurt
in Europe. Also from Seoul, Tokyo and Hong Kong in Asia.
357. What other rights would you like if they
could be negotiated?
(Mr Alfreds) We think Heathrow would be, as I think
Sir Richard mentioned, the crown jewel.
358. Do you think most passengers between London
and the US do not really pay the full advertised fare?
(Mr Alfreds) Not just on that route but also in many
parts of the world in many routes the full fare is not paid.
359. What is the average level of a discount
fare?
(Mr Stevens) I am not totally familiar with the New
York route but certainly on our routes the discount on a business
class fare can be as much as 35 per cent off the published level.
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