Select Committee on Transport, Local Government and the Regions Minutes of Evidence

Examination of Witnesses (Questions 20 - 39)



  20. You would not suggest either British Airways or American Airlines was small in terms of transatlantic traffic, would you?
  (Mr Cahn) No, certainly we are very large. Rather in the same way that Lufthansa and United who have got anti-trust immunity are large airlines, in the same way that Air France and Delta are just about to get anti-trust immunity are large airlines. I think people recognise the benefits that flow from the anti-trust immunity which has been given to alliances and the open skies which have been given to other European countries.

Mr Stevenson

  21. You see one of the difficulties we have is that according to information we have, British Airways did carry before September 11th some 69 per cent of UK scheduled airline passengers, 47 per cent of total UK air passengers, and yet you make losses. In the United States seven airlines control 81 per cent of the market, six of those major airlines make losses. Now all of these have consolidated. It does not seem to have done the trick. Would you like to comment on that?
  (Mr Cahn) I would simply comment that if you were to look at the German/American market or the French/American market you would find even higher levels of concentration. In fact, because of Government policies of having a multi-airline policy, we have strong and very effective competition from the likes of Virgin Atlantic Airways, an excellent airline, and we welcome that. It is simply not true to say it is an uncompetitive area, certainly on the ground it feels highly competitive, and I am sure Mr Humphreys would agree.

  22. I did not use the word "uncompetitive" I simply quoted the statistics which you may or may not recognise, Mr Cahn, but it does indicate that BA are in a dominant position in terms of UK air passengers and certainly it indicates that the consolidation that has taken place in the United States has not delivered profits.
  (Mr Cahn) It will be for the competition regulators on both sides of the Atlantic to judge whether we are or would be in a dominant position. I have every confidence they will conclude that we will not be in a dominant position. I do not believe we are, certainly it does not feel that way, it feels that we have to compete.


  23. Luckily feelings are very subjective. Mr Humphreys?
  (Mr Humphreys) May I just say, Chairman, I think there is some quite lazy thinking going on, particularly in Europe, about what people mean by consolidation. I do not believe it should be the objective of Government policy to have a smaller number of competitors in the marketplace. What should happen is that those airlines that are unable to compete on their own as effective competitors ought to be allowed to disappear, and we all know that there are airlines in Europe that fall into that category. I would hope that the policy makers would not see it as their duty to have an objective of reducing the number of airlines. The more smaller dynamic carriers there are in the marketplace the more the benefits for consumers will follow.

Mr Stevenson

  24. Final question, particularly for British Airways. Mr Cahn, has your company been buying/stockpiling Heathrow slots in advance of a US/UK bilateral deal? If so, how have you managed it?
  (Mr Cahn) We have not been stockpiling slots. We would never wish to stockpile slots. We seek to increase our Heathrow slot holding whenever we can, just as I am sure other airlines do, in order to introduce service from Heathrow. One of the things we always want to do is to serve destinations from Heathrow but, no, we have not been stockpiling slots.

  25. Have you acquired slots from North Africa or East European airlines?
  (Mr Cahn) We acquire slots from time to time.

  26. Did you buy them?
  (Mr Cahn) We trade slots as is permitted under—

  Chairman: For money?

Mr Stevenson

  27. How much per slot have you been paying?
  (Mr Cahn) That is commercially confidential information which I would not want to give.

  Helen Jackson: Can I ask a supplementary on the slots at Heathrow. You relinquished the Heathrow flight on your short haul programme to Belfast. When did you take that decision, was it before or after 11 September and why in terms of relinquishing that very regular slot?


  28. While you are on the question perhaps you can answer, you do seem to have taken over rather a lot of airlines recently. How many extra slots have you acquired?
  (Mr Cahn) When we took over BRAL we acquired three Heathrow slots. We have not been acquiring slots by takeover elsewhere. To answer the question from Ms Jackson, we took the decision to withdraw from the Heathrow-Belfast route after the events of 11 September.

Helen Jackson

  29. Because there was a connection?
  (Mr Cahn) Because we had been losing money on the route for a number of years. In fact, we had lost £38 million over the previous four years. Clearly that was troubling us prior to the events but afterwards, when we found ourselves in a financially very difficult position, like all the other airlines, we had to take tough decisions. That was a decision which was tough in the sense that we did not like doing it in particular for our staff, it was not tough in the sense that it was the only thing to do.

  Chairman: It was one you decided on earlier anyway.

Helen Jackson

  30. That was why I asked the question when was the decision taken or thought about?
  (Mr Cahn) The decision was taken after September 11, pretty soon afterwards. The Chairman asked earlier on did we act swiftly and the answer is, yes, we did act swiftly, within days. We did a number of things. One of the things we did was to stem losses, to stem the money, we grounded aircraft and we withdrew from this most loss making of routes. What we did try to do was to ensure that all our staff were looked after and I am glad to say that we were able to redeploy 40 per cent of the staff who worked for us at Belfast.


  31. Forty per cent?
  (Mr Cahn) Forty per cent.

  32. It is not very good.
  (Mr Cahn) I think in the circumstances it was quite good.

  33. Mr Nicol, is your Belfast route profitable?
  (Mr Nicol) Yes, highly profitable. It is one of the most profitable ones we have got. It is a route that we have been operating coincidentally for about four years or so, which Mr Cahn mentioned earlier. We now operate up to six flights a day on that route and other low cost airlines serve it as well, certainly Go serve it from Stansted.

  34. You had not noticed that there had been a change? Was there an immediate dip after September 11?
  (Mr Nicol) I think in line with most other airlines there was a dip. To tell you what happened at easyJet, because it is a slightly different experience from any of my other colleagues here at the table although we are not part of BATA, we saw immediately a drop off of around 26 per cent of our traffic on September 12. In terms of normal bookings we were 26 per cent down. Over the next few days that slowly recovered at a couple of percentage points a day for the next few weeks or so. One of the reasons why that has happened is we are actually carrying more passengers now than we would ordinarily have expected to because the low cost airlines went out within about 10 days and as a group made around 1.5 million seats available in terms of promotions. No-one had any idea how the market was going to respond and people, needless to say, were unsure, would people want to get back on an aeroplane. What we have proved is that people are prepared to travel if the price is right.

  35. Has there been a direct fall off on the Belfast route?
  (Mr Nicol) No. We are 25 per cent up on last year on that particular route. We have added roughly 25 per cent capacity year on year and we are seeing roughly a 25 per cent passenger increase in volume.

  36. So people are only afraid of flying in expensive seats?
  (Mr Nicol) The people are flying because the price is cheaper. When we try to put the prices up it is interesting.

  Chairman: So we may not be talking about the fear factor at all.

Andrew Bennett

  37. Could I just pursue the question of the slots. How many slots have British Airways now got that they are not using at the moment at Heathrow?
  (Mr Cahn) None.

  38. They are all being used?
  (Mr Cahn) Yes.
  (Mr Parker-Eaton) May I make a point. EasyJet are talking about low cost airlines as though that was one part of the market only. Can I stress that charter airlines were the original low cost airlines, and still are, and really they are talking about a no frills sector, not a low cost sector. To explain some of what happened after 11 September, with our tour operators what we have experienced is that short city flights, Amsterdam, places like this, where bookings are in the short term, have continued very well up. What we have experienced is that the longer term bookings have been the problem. On short term bookings this winter the traffic has been up well and, like easyJet, our tour operators have cut our prices to keep the business up. We have flown at high load factors. Next summer is another issue altogether for us.


  39. Mr Nicol, I should have asked you could you tell us what has been the average cost of your tickets over the last year?
  (Mr Nicol) £48 one way.

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