Examination of Witnesses (Questions 840
- 859)
WEDNESDAY 28 JUNE 2000
MR BOB
COTTERILL, MR
TREVOR SMEDLEY
AND MR
DAVID BATCHELOR
840. I want to ask you something about your
priorities. What is more important for you: the UK consumer, UK
airlines or the UK economy? How would you prioritise those?
(Mr Cotterill) In terms of the first two our primary
focus is the UK air traveller, but we do not think—
841. The UK air traveller?
(Mr Cotterill) The UK consumer. That said, by having
that focus we do not think we cause any detriment to the UK airline
industry. If the UK airline industry is serving the consumer properly
then their interests should be complementary.
842. And yet some of the evidence you have given
us, Mr Cotterill, seems to be rather predicated on the assumption
that in the negotiation it is very important for you to protect
the interests of a major airline.
(Mr Cotterill) Certainly we had not intended to give
that impression, Chairman.
843. I am thinking of the economics of it now
as much as anything. You are presumably advising Government Ministers
on the basis of where the economic balance lies. If you are saying
you really start with the consumers then we would like to be clear
exactly how you see the priorities in the negotiations. Are you
saying "yes, we think the best deal from the point of view
of the consumer will be if we help get a very good deal for a
very large airline, possibly for other British airlines"?
(Mr Cotterill) No. Our primary reason for believing
that the UK should go for full liberalisation in the long-term
is because we think that is in the best interests of the air traveller.
That will create the most competitive position. We think it will
also give opportunities to British carriers. Our primary reason
is the UK air traveller and that also has beneficial effects for
the economy.
844. To what extent is all of this going to
be totally left behind simply by mergers and relationships and
all sorts of wonderful words that we have been offered by various
airlines? Are we in effect, Mr Cotterill, negotiating a deal that
will not have the slightest effect in real terms when we get round
to it?
(Mr Cotterill) I think, Chairman, the underlying thought
behind what you are saying is very real. There is no doubt that
one of the reasons why the whole move towards liberalisation of
the aviation framework is happening at various speeds in various
parts of the world is because the industry has been moving towards
those sorts of relationships across borders. To that extent that
has been a very healthy trend, what we would argue is—
845. It is healthy as long as the economic benefit
flows back to whoever happens to be the dominant partner. It is
not healthy if you are the smallest partner.
(Mr Cotterill) It seems to us that there are reasonable
grounds for supposing that the UK will do well out of that.
846. So what should governments do to respond
to that kind of speed of change?
(Mr Cotterill) Our view is that our Government should
respond by seeking to persuade the US and other countries towards
full liberalisation.
Chairman: With the greatest respect, I think
we are just trading words here. What do you mean by "liberalisation"?
I think I know what you mean by "liberalisation" but
then you say "of course, we are not suggesting that we worry
about things like Fly America or cabotage.
Mr Stevenson
847. I asked you earlier on when I used the
words the "full monty" and I took that to mean the whole
shooting match.
(Mr Cotterill) Yes, we do worry about those things.
Chairman
848. Supposing the Government does not get that
on the table. Let us focus for a moment. You have given us all
the facts and you say the UK airlines are very strong, they do
very well out of the trans-Atlantic flights, they are picking
up more people for their internal market than their United States'
equivalents are on the other side of the pond, you are only concerned
about the consumer, you think the consumer is going to get the
best deal. I am trying not to paraphrase. But then you say to
me "but we regard liberalisation as being everything in the
package". What advice do you give the Government if they
come back and say "those damned Americans will not give us
what we want because as far as they are concerned they cannot
negotiate things like Fly America, things like access to the internal
market, because they have to get legislation through in Washington"?
What advice do you give the Government then, "we do not care
what the economic benefits are, you must not sign because if you
have not got everything you have not got anything"?
(Mr Cotterill) As I said, what we are looking at is
what we think the long-term objective should be.
849. We are not negotiating in the long-term,
Mr Cotterill, we are negotiating now.
(Mr Cotterill) But I think what we do now can affect
the end result in the long term.
850. Who doubts that? What happened to PanAm
has had a direct effect upon aviation generally. I am sure if
the people who planned the creation of PanAm had known what would
happen within 15 years of its creation they would have behaved
rather differently. What I am saying to you is that the Government,
on the one hand, is being told "all of these changes are
happening very fast, they are happening in the industry, you should
not be in a position where you are running along like a small
child after the school bus" but, on the other hand, you are
saying to them "do not sign anything unless you get the whole
lot in one package at the same time". Is that the situation
or not?
(Mr Cotterill) No, we are not saying "do not
sign anything unless you get the whole package". That is
an issue of negotiating strategy which, frankly, has to be for
the Government and it is plainly the Government's responsibility.
851. I want to know about the economic benefits.
What is the bottom line, if we are going to use these awful phrases,
for the consumer in all of this?
(Mr Cotterill) The bottom line in terms of the best
advantage for the consumer, we believe, is to act in a way that
will maximise the prospects of getting full liberalisation as
soon as we can.
Mr Bennett
852. Does it matter to the consumer whose airline
he is flying on as long as there is an airline flying?
(Mr Cotterill) No, but under full liberalisation you
are likely to get more choices open to the consumer and more competition.
Chairman: Where have I heard that one before?
Mr Stevenson
853. I have one question, that is all. In your
evidence you offer a view about the move towards alliances as
not likely to achieve in the long-term full liberalisation, in
fact you describe them as "unstable". The Government,
we believe from the evidence we have had already, seems to indicate
that it may be prepared to move providing they can get some anti-trust
immunisation or immunity for such alliances. I am not asking you
to comment on the negotiating position but there is clearly a
difference of emphasis there if nothing else. Would you accept
that your view as reflected in the evidence you have given, both
written and oral, is that full liberalisation, as you have described
it to the Committee, is not likely to be achieved on the basis
of alliances?
(Mr Cotterill) Full—
Chairman
854. Liberalisation.
(Mr Cotterill) Full liberalisation can only be achieved
through what you have described as the "full monty"
which can clearly only be achieved through the EU. That would
allow mergers, acquisitions, alliances as the airlines saw fit.
855. You would like the big boys to eat up the
little boys?
(Mr Cotterill) No, very much not so. What this would
do is give the opportunity for all of them, large and small, to
go down the path that they want. Sir Richard Branson—
Mr Stevenson
856. Let me rephrase the question to try to
help. Do you think that progress along the path of alliances,
even with anti-trust immunity and agreement with the competition
authorities in Europe, will lead to changes to the Fly America
policy, to the cabotage policy and the ownership in the United
States that constitutes 40 per cent of the global aviation market?
(Mr Cotterill) I think moving down a framework that
allows alliances but only alliances one may then get full liberalisation
in the longer term because the American airlines and their government
decide that in the end they want to go down that track anyway.
There are reasons why they might. The US DOT held a conference
called "Beyond Open Skies" last year where they were
beginning to ask themselves and their industry the question "when
we have got our Open Skies policy fully in place, should we be
looking beyond that?" One of the questions was ownership
and control. It could well be that American carriers decide in
the end that they want to have the sort of full liberalisation
we are talking about. The question we raise is do we want to leave
ourselves in a position where they take that choice, if you like.
Chairman
857. Instead of us.
(Mr Cotterill) The central message of our submission
is if we give up this important card at Heathrow, if we trade
it for something less than full liberalisation, then there is
that risk. It is a risk, it is not a certainty, we may well get
through there in the end.
Mr Stevenson
858. Can you give the Committee one example
of an Open Skies bilateral between the United States and any country
you care to mention that actually has any effect whatsoever on
the cabotage, Fly America and the ownership rules in the United
States?
(Mr Cotterill) Certainly the Open Skies arrangement
that the US have been negotiating in Europe and elsewhere does
not include cabotage, that is its nature, they just do not include
that.
Miss McIntosh: A very brief question following
on from Mr Stevenson's remarks and questions. What advice would
you give the Government if they are to proceed with what appears
to be a heavily slanted negotiation for especially cargo but to
a certain extent passengers as well? Would the Government be advised
to conclude the present round of negotiations or would it be advised
to wait until the scenario of an eventual EU negotiation in the
possibly foreseeable future?
Chairman
859. Do they take their bat and ball home?
(Mr Cotterill) I am afraid at this stage I have to
come back to the point that that is essentially an issue of negotiating
strategy which it is not our job to do.
Chairman: Mr Cotterill, you and your colleagues
have been very kind. Can I seriously say to you that I think the
Committee found your submission extremely helpful. You may not
think so listening to us this afternoon but we found the work
that you had done very useful indeed, partly because it wiped
out some of the preconceptions that we were working under. I have
to say I think some of us may come to slightly different conclusions
from you and your team. It was very, very helpful to have this
detailed work. I think that there will be occasions when we will
want to come back to you and ask a series of factual questions
about some of the models that you are working on and some of the
changes. To be wicked to you right at the last minute, you are
not always 100 per cent right on all of your calculations, are
you? We are very grateful to you because you have done a very
good job this afternoon. On behalf of all those UK consumers who
are going to have fantastically cheap, safe, comfortable, incredibly
frequent trips across the Atlantic in the future I would like
to say thank you very much to all of you.
(Mr Cotterill) Thank you very much.
Chairman: Thank you.
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