Memorandum by Airtours International (AS
12)
AIR SERVICE AGREEMENTS BETWEEN THE UNITED
KINGDOM AND THE UNITED STATES
Airtours International welcomes this opportunity
to submit its views to the Transport Sub-Committee Inquiry into
Air Service Agreements between the UK and the United States. It
is an important topic at the heart of the trading relationship
with one of our oldest allies.
Airtours International is one of the largest
non-scheduled airlines in the world. In 1999, in the UK alone,
it carried 2.76 million passengers on 13,800 flights. It is a
successful airline operating in the highly competitive international
charter market as part of the Airtours Group.
The company focus is in providing service to
leisure passengers.
Airtours International in general welcomes moves
to reduce regulatory barriers and promote free and fair trade
in goods and services to increase the opportunity for the company
to expand its market internationally. Our ideal would be for there
to be a move towards total de-regulation, with "open-skies",
and associated rights of establishment together with a removal
on constraints on airline ownership. This would bring the airline
industry into line with most other forms of international trade
and commerce.
We are concerned that the focus of the Committee's
Inquiry appears to be heavily influenced by the needs of the scheduled
carriers rather than looking at the broader needs of the total
aviation market between the UK and the USA.
There is a reducing distinction between scheduled
and charter service and products, and thus the appropriateness
of those labels to the regulation of International Air Transport
in the 21st Century may need to be reconsidered.
It is interesting to note that if Airtours were
to consider a move into the transatlantic scheduled market, by
for instance going part scheduled and selling seats direct on
certain charters, such a move would be frustrated by the current
bilateral impasse. The irony is that in such an instance we would
probably not want to change the level of capacity, or the routes
operated, but just the means of sale and distribution.
(a) The UK US bilateral and the UK Economy
The USA is the largest intercontinental market
from the UK. A number of studies have shown the economic importance
and contribution of air services to both local and national economies.
These include the most recent by the Oxford Economic Forecasting
group and work carried out by the CAA Economic Regulation Group.
We believe that the less liberal position that
has been adopted by the UK in its negotiations with the USA has
been detrimental to the overall development of the market between
the two countries. The primary beneficiaries have been those European
countries, such as the Netherlands, where "open skies"
agreements have been signed with the USA.
We are concerned that historically the needs
of the major UK scheduled carrier and the needs of the UK economy
have been assumed by Government to be the same, when developing
positions for bilateral negotiations with the USA. This policy
has not served the country or economy well and may have denied
opportunities for the development of new services, products and
fares.
(b) The UK regions and additional 5th Freedom
Rights
The Company already makes an important contribution
to UK's regional airports through its provision of high quality
service offering excellent value to a range of international destinations.
It already has a significant operation to the USA including regular
services to destinations in Florida and Nevada, while its parent
company has interests in US Tour Operation and Real Estate. The
Group is part owned by the US Company, Carnival Cruises.
Although we generally favour a more liberal
regime, we would not wish to see any general unilateral granting
of 5th Freedom Rights from UK regional airports to US carriers
without a commitment by the USA to similar benefits being granted
to UK airlines. This commitment would need to cover the broader
issues of rights of establishment, investment, ownership and control
by non US companies in US airlines.
(c) Current and future steps to resolve the
bilateral issue and the role of the EU
We are already finding that the opportunity
to expand our operations to the USA from airports in the South
East of England, particularly Gatwick and increasingly Stansted,
is constrained by a lack of slots. Under the current Slot Allocation
guidelines, as a non scheduled carrier, we have a lower priority
for available slots than a scheduled carrier.
We believe that the negotiating position with
the USA adopted by the UK needs to acknowledge the needs of the
total market, not just the vested interests of the established
UK scheduled airlines whose primary focus is operation from London
and particularly Heathrow.
With few viable slots available for transatlantic
operations at either Heathrow or Gatwick, we are concerned about
our tenure on slots at Gatwick if priority stays with scheduled
carriers. The broader interests of the charter sector and its
large UK customer base must be acknowledged in this debate. In
addition, the rules for slot allocation need to be changed to
recognise the changing nature of market demand.
The issue is not solely one of policy or procedure.
The UK US bilateral could have been resolved
a long time ago and may never have become an issue, if our major
airports in the South East of England had sufficient runway capacity,
thereby giving additional slots for the development of new services,
both scheduled and charter.
This raises a number of associated concerns,
not least the virtual monopoly position of the BAA in the management
and provision of airport capacity in the South East of the UK
and their lack of planning for and commitment to additional runway
capacity.
It also brings into question the commitment
of successive Governments, until recognised by the current Government,
to address the issue of airport policy, competition policy and
associated capacity requirements.
It is ultimately our customers, the consumers
of air travel, who are paying the price for the lack of adequate
infrastructure. They pay twice. Once through the cost of delay
and congestion caused by the present overcrowding and secondly,
by not being able to enjoy the benefits of new services to additional
US cities, or more frequent competing service at lower cost with
improved products.
With the evolution of EU policy, it is almost
inevitable that Brussels rather than London will in future dictate
the basis of bilateral relations between the UK and the USA. It
is therefore fundamental that the UK Government resolves the current
impasse as soon as possible and ensures that the future position,
interest and opportunity for all UK airlines, their passengers
and shippers, are recognised and maximised.
OTHER ISSUES
It is a sad reflection on the state of bilateral
relations between the UK and the US that we do not have a more
open and pro-development regime. Both the UK and USA are founder
members of ICAO, with well established safety oversight procedures,
as such what is the point of having restrictions on airline ownership
and control. We cannot understand what benefits such restrictions
bring the consumer of air travel between the UK and the US. In
our view such controls should be lifted as they frustrate rather
than promote trade and service development. Already, 25 per cent
of Airtours is owned by the US Carnival group. Under current US
restrictions no non US company can own more than 25 per cent of
a US airline, and yet many other large US transport enterprises
(and other companies) are owned by foreign companies. We fail
to understand why airlines are still considered to require different
controls.
In the British airline industry it has been
accepted that a number of our major charter airlines are not within
UK ownership and control, yet they have been granted exemptions
to fly as if UK carriers, including on charter services to the
USA. If such exemptions can be granted for this reason, it is
difficult to understand why a more general exemption cannot be
made. It seems to be a mercantilist nineteenth century approach
to a very twenty-first century industry.
We also believe that the bilateral relations
with the USA must highlight and resolve the continuing anomalies
of US policy whereby the UK permits US carriers to operate 3rd
and 4th freedom services on behalf of UK airlines out of the UK,
whilst such exemptions are not afforded to UK airlines by the
US authorities. Similarly, the UK must seek to end the ruling
of the US Government that its employees must fly on US carriers.
April 2000
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