Examination of Witnesses (Questions 700
- 713)
WEDNESDAY 21 JUNE 2000
MR GEORGE
RYDE, MR
M SPARHAM, DR
JOHN MCGURK
AND MR
PETER REED
Miss McIntosh
700. I would like to pay tribute to a personal
friend of mine, Rob Barne, who did work in the Department for
a number of years. He sadly died of malaria. I would like to think
he played some part in that. It is likely that the government
is going to agree at some future date to negotiations to be concluded
by the Commission on behalf of the European Union. Would you prefer
agreement to have been reached on access to Fly America, wet leasing
and cabotage before the Commission took over these negotiations?
(Mr Sparham) The short answer is no.
Chairman
701. No, you do not think the government is
going to be that ridiculous or no, you do not think that you should
accept it?
(Mr Sparham) Our understanding is that the European
Commission is likely to receive the mandate for negotiation by
the end of this year. Realistically, we do not see any shift in
the Americans' position by the end of this year. The reality is
that the European Commission will get a mandate before those issues
are resolved. What we would like to do would be to address that
situation. We take a fairly relaxed view about it. Clearly, the
big question is what the mandate is that is actually given to
the European Commission. One of the strengths of that is that
it may strengthen the negotiating arm that we have against the
US side.
702. In what sense? Forgive me but if you are
negotiating face to face with somebody and you have clear parameters,
why does it give one side a stronger term of negotiation by widening
both the parameters and the teams and everything else? I was brought
up by a man who said you never negotiate anything with a committee
and he was the general secretary of the Labour Party.
(Mr Sparham) As a trade union official, I would agree.
The reason I say it strengthens is, quite frankly, because it
will be bigger. You are then dealing with equal markets; you are
dealing with a market of roughly the same size. The US is about
a third of the total world aviation market. The European Union
is another third. You are dealing with a geographical area of
roughly the same size.
703. You can see that it would be possible for
the Commission to negotiate on behalf of all of those national
airlines, irrespective of their present status?
(Mr Sparham) If the mandate that is agreed is appropriate,
yes, I do. Certainly the AEA, the Association of European Airlines,
has already agreed a position on transatlantic common aviation
area which they have produced and we, with the union network,
are in the process of preparing our response to that.
Mr Stevenson
704. Given that there are several European Union
member countries, including so-called Open Skies agreements with
the United States, it has not altered one iota the domestic market
situation in the United States. How can you be so confident that
a European Union mandate which would include those very countries
would add greater pressure on the United States to deliver what
they patently have not delivered in their bilaterals?
(Dr McGurk) We do not know.
705. I am sorry, but Mr Sparham just said he
thinks it would strengthen their hand. You do not know. Which
is it?
(Dr McGurk) We have to wait until the detailed process
in the negotiations. We think that there would be a stronger chance
of—
Mr Stevenson: I need to get this clear in my
head so that we do not go out of this room any more confused than
we came in. I am still seeking in evidence from your good selves
how this would strengthen our hand in this extremely important
area, when already there is a number—Holland, Italy and
so on—that have reached bilaterals, so-called Open Skies,
that have not dented the American market one iota. How is it going
to strengthen our hand to climb in bed with the people—?
Chairman
706. How many failures make a success?
(Mr Sparham) I believe that it depends on the mandate
which is given to the European negotiators but the way the European
Commission works and the basis of its social approach I think
would ensure that there was a united front which seems to me to
be better than having individual fronts of 15 European countries.
We can only go on the documentation that has been delivered so
far. The main one is the document from the AEA that I have already
referred to on the proposed transatlantic common aviation area.
Although it has some problems with it, from our point of view,
that is clearly a balanced approach. They are still saying, "We
need to have the cabotage rights. We need to change the wet leasing
position. There needs to be a change to Fly America." Assuming
that the politicians pick up what the European airlines are saying,
we would be comfortable with that.
Mr Stevenson
707. I have spent ten years in the European
Parliament. I have some idea how the Commission works and I wish
I shared your confidence. It has been suggested to us, particularly
from large, American airlines, Delta being one, that unless there
is some real progress on access for American airlines to Heathrow
their hub activities will move elsewhere. Do you share that view
and, if so, does that not constitute a threat to jobs?
(Dr McGurk) Heathrow is a very attractive hub and
that is part of the issue here. That is part of the priority that
the Americans are putting on a bilateral agreement or basically
altering the air services agreement with the United Kingdom. Obviously,
airlines will make threats in bargaining situations, but we think
Heathrow is still a very lucrative hub. It is the premier business
hub in Europe. It is the premier business city in Europe and there
is absolutely no evidence that American airlines would be able
to service their business and premium routes in other European
hubs.
708. In summary, you think it is a bit of a
bluff?
(Dr McGurk) Yes.
709. My last question is about alliances. We
have had some of the major airlines in front of the Committee.
British Airways is one. In fairness to them, they want to see
some real progress in opening up the domestic market in the US,
but they consider that one way forward would be through getting
antitrust immunity to alliances, co-chairing and so on. They suggest
that, through that method, it may be possible to make some real
progress in the American market. (a) do you share that view and
(b) do you think alliances have a strong enough foundation on
which such important matters can be concluded?
(Dr McGurk) It is already quite clear that alliances
are fluid, often opportunistic business combinations. We do not
think that any lasting changes to the current regime should be
based on any sort of benefit for any given alliance. That is regardless
of what that alliance is. We do see the point of view of carriers
like British Airways, who believe that through alliances they
can open up the restricted markets in the US, but we believe the
real way to open up those markets is through a fair, balanced,
bilateral set of negotiations.
710. Briefly, on slots, the United States carriers
have said that, if there is success and they get more access to
Heathrow, they will want the slots. When they were asked where
they would get them from, they were rather ambiguous. There is
evidence to suggest that, if that happened, the first slots that
would go would be the regional service slots. Do you share that
view?
(Mr Ryde) Yes. We have great concerns about regional
services. You could argue that we have great concerns even under
the current regime, because there is no specific protection for
the existing regional services. I always try to think of them
in the public service element of aviation. They ought to be there.
The real issue is that, if pressure is put on slots by existing
airlines and Heathrow is having to give up slots to accommodate
new services for other carriers, it is a commercial decision that
will be taken and they will want to preserve as many transatlantic
slots as they possibly can, which will mean a number, in my view,
of regional routes will be lost and those slots will be used for
transatlantic services.
Chairman
711. You have indicated that there is not any
particular protection under the existing system.
(Mr Ryde) That is quite correct.
712. There is a whole list of regional services
which are vital to the people concerned and which have been lost
from Heathrow, so one could say that any change would not necessarily
be worse but certainly would be no better.
(Mr Ryde) Yes. I believe we can still have an issue
where we look for protection of regional services outside of bilateral
arrangements.
713. Which airlines do you think have really
benefited under Bermuda 2?
(Mr Reed) All British airlines who have operated under
it benefited. For instance, Laker's access to the USA was blocked
until Bermuda 2 enshrined his right in the route schedules. British
Caledonian negotiated points in the southern USA.
Chairman: That is very helpful. Gentlemen, thank
you very much. You have given us lots to think about.
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