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

Examination of Witnesses (Questions 340 - 359)



Mr Stevenson

  340. Again, one of the main concerns of this Committee in the past has been the whole issue during the bilateral negotiations on Bermuda II of access to the American market. Are you able to give us any indication of what, if any, progress has been made on that rather thorny issue?
  (Mr Griffins) From the last time I was before the Committee on this issue—and I can put this either way—I am sorry to say that there has been little development in our policy but, on the other hand, I could also say that our policy has remained consistent and it remains that which was broadly endorsed by the Committee at the time.

  341. I share your view about the quality of this evidence, I must admit. Could we be reminded of what is Her Majesty's Government's policy on the whole issue of access to the American market?
  (Mr Griffins) What we want is a full and fair liberalised market between us and the United States. If it was possible to persuade the US Government to open their market totally, either/or with both cabotage—that is to say foreign airlines serving within the US markets—and/or waving their controls over ownership and control of US carriers, that would be excellent.


  342. It would be a miracle.
  (Mr Griffins) It is worth aiming at eventually.

Mr Stevenson

  343. What happens if your aim, which is generated by Government policy, (a) does not strike its target, (b) is not within a million miles of it targets, in other words you make no progress whatsoever on the critical issues of cabotage, wet leasing and ownership? Can you give us any indication, Mr Griffins, of progress which could be made that might satisfy the UK Government as distinct from—I think what has been suggested—the US Government totally agreeing which is not going to happen we know? Can you give us some idea of what you are looking for as a reasonable compromise before you would agree to changes to the bilaterals?
  (Mr Jamieson) If I can say in a broad brush way, the scenario that you painted, where the Americans would not concede to anything, clearly would not lead to any agreement being made. We have to strike an agreement and all these things are negotiations where we have to give and take. We would have to strike an agreement which was of some advantage to the United Kingdom. Any bilateral agreement could not be wholly to the advantage of the other party. We would have to be getting considerable advantages out of it before we would sign up to it.

  344. Those considerable advantages, Minister, would include some progress on cabotage, ownership, wet leasing, etc?
  (Mr Jamieson) They could do. There would be a package of things which would have to be to our advantage and some of those things could be component parts of it.

  345. Just getting back to Mr Griffins' point about slots, is not the reality the capacity constraints at Heathrow and Gatwick mean that the practical effects of any agreement are going to be somewhat limited?
  (Mr Griffins) I can answer that point while picking up the last point too. Pending nirvana, that is to say the fully liberalised market which the Committee's common sense tells it will be a long time coming, the pragmatic approach is to find another way pro tem. The other way is to get access for our carriers to the US hinterland through alliances. Alliances, however, have to be acceptable to the competition authorities and such remedies as the competition authorities require—and you have heard different arguments as to whether there should be any—need to be accepted by the carriers involved. Given that that happens, and it is a big given, the quid pro quo for that would be access to Heathrow. Slots we are told, and the carriers make this point, are available and can be made available. It is not for this part of Her Majesty's Government to opine on what might flow from the competition authorities' consideration, that is to say our own competition authorities and the Department of Transportation—there is an important point there—in the United States. Were that also to release slots clearly there are more slots available there, were that to happen.

  Mr Stevenson: So any pragmatic agreement based on access through alliances would be in the Government's own pro tem.


  346. Awaiting nirvana.
  (Mr Griffins) Yes, we would prefer nirvana.

  Chairman: I imagined you were defining the third way there.

Mr Stevenson

  347. Very last question. Given that we are told that even in the current situation Heathrow is up to capacity on slots, if not over, and you have said, Mr Griffins, that the quid pro quo would leave slot availability in Heathrow, and you are told that slots could be made available, where in your opinion would those slots emerge from?
  (Mr Griffins) I think I said the quid pro quo would be access to Heathrow.


  348. There would not be any slots to back it up but they would have the right to look for them if there were?
  (Mr Griffins) Yes.

  Andrew Bennett: There would not be the slots to Manchester and Teesside and places like that.

  349. You see I think what we are really saying to you, Mr Griffins, is that if you look at the summary of slots requested and allocated at major UK airports, whilst we are quite sure that you mean well when you tell us that these are the slots that are being requested, the slots requested, summer 2001, 335,419 at Heathrow, 206,419 at Gatwick, slots allocated, ones available in other words, 282 and 174. So it does rather look as if your slots are not there. What you are really saying to us is one of the suggestions of the third way is that people would have the right of access but unfortunately what they would not have would be access, or do I misrepresent you?
  (Mr Griffins) May I answer?
  (Mr Jamieson) Yes.
  (Mr Griffins) I do not want to monopolise the answering here.

  350. No, you have had long enough to think now, Mr Griffins.
  (Mr Griffins) What I think is on offer is not guaranteed slots with access.

  351. Yes. Careful, you are almost getting round to answering my question.
  (Mr Griffins) There are slots there. There is movement in the slot market. We, the UK, would like to see greater movement in the slot markets. We are pressing in Europe to shift the regulation which does control this. We are pushing to get variations in that regulation in a number of ways to facilitate a market in slots and, as I think I said last time, to give Member States a greater flexibility in how they can control the slots vis a vis their own regional services. That flexibility, which was referred to earlier this afternoon, is exceedingly limited as it stands at the moment.

Mr Stevenson

  352. Would it not mean that inevitably if the deal was done along the lines we have discussed over the last few minutes, and given the demand for slots at Heathrow is not matched by the capacity, that is clearly the case, historically that is the case, that the pressure on airlines, such as British Airways, to curtail their regional services and allocate those slots to the alliance, would that not be almost inevitable, it would be inevitable that would happen, in that circumstance, what would be the position of the UK Government?
  (Mr Jamieson) Perhaps if I could take that. Firstly in terms of the negotiated agreement. The negotiated agreement could give access to Heathrow but I think what Mr Griffins is saying is it would then depend on the availability, just as any other airline has to depend on the availability of those slots before they can get access in reality. At the moment they do not have the access at all but to get that access they would have to trade those slots in some way. I fully understand your feeling about regional airlines. The argument often put up by British Airways is that the slots that they use for their regional services interline and feed in to their international services. So the argument they usually put up is that is the reason they keep them. I think if we found ourselves in a circumstance where there was severe pressure on regional slots we would probably then get in requests for public service orders and protection of those slots from various parts of the country. At the moment, of course, that is not happening, we have only got one request in at the moment, but we would obviously have to react to that changed circumstance as it came along.

  Chairman: I want to go as quickly as I can. Mrs Ellman?

Mrs Ellman

  353. On the final point you made on public service obligation orders, if you can anticipate the situation developing further, should you not be making preparations now?
  (Mr Jamieson) I do not think so, no, because at the moment particularly into Gatwick where many of the services go, there is no real pressure on their slots and slots are becoming available. We were under pressure for a while over BA coming out of Belfast, and we could have made all sorts of preparations, but what we found was that in fact another airline stepped in and I think the evidence you had before you at your last oral session was that British Airways said that they were losing on that particular line but another airline stepped in and said it was the best line that they had. I am not sure that we can prepare for that circumstance. We will have to see what happens. We would listen very carefully, as we have in the case of Inverness who has made an approach to us, and we have listened very, very carefully to the argument they have put forward for protecting their slots from Inverness to Gatwick.

  354. Do you have a concern about withdrawal of regional links in terms of the impact?
  (Mr Jamieson) The simple answer to that is yes. Regional links are absolutely vital and the more peripheral the areas are in the country the more important those links are, particularly for inward investment, and I am thinking of some of the more far flung parts of the country, Scotland and Cornwall come immediately to mind, as areas where there is still fairly low inward investment and still some economic development to be made, and strong arguments will be put forward in those areas. So the simple answer to your question is, yes, we would have concerns.

  355. Do you have any proposals to support the Air Travel Trust Fund to assist travellers who have been let down?
  (Mr Jamieson) We do support it already, as you know. We have underwritten somewhere in the region of £10 million of overdraft on that particular fund when pressure was put on it some years ago. The bonding arrangements have worked successfully up to now. If there were further pressure on that fund then we would have to act appropriately. To take that matter further, we would actually need primary legislation. If there were the pressure on that fund and if the circumstance arose, then of course we would come to Parliament and bring that legislation forward if the circumstances arose.

  356. But are you preparing that legislation because requests have been made over a number years?
  (Mr Jamieson) I think the answer to that is simply yes.

Mr Donohoe

  357. Have the Department offered the Airline Group of NATS additional funding?
  (Mr Jamieson) NATS have made an approach to the Government for additional funding.

  358. Can you tell us how much that is?
  (Mr Jamieson) There is no actual figure that we have been asked for but they have come to us as a shareholder not as the Government. As a shareholder they have approached us, they have also approached the Airline Group. Our response to that is obviously we are looking at that and negotiating with NATS. We have obviously got to make an assessment of how the cash flow improves over the next few weeks and months—and that is very uncertain at the moment—and on the basis of that we will make our reaction as a responsible shareholder in the company. We are still the largest shareholder, 49 per cent, and we will react as any responsible shareholder would.

  359. Given that the Government had adopted at the time of the transfer, the two-centre strategy as part of the Bill and the Act, would it not be sensible if you are giving them money to ring-fence that money in order to make damn sure that Prestwick continues in its investment programme?
  (Mr Jamieson) NATS are still completely committed to the Scottish sector and so is the Government. We were asked by NATS after 11 September if there could be a pause in the building programme there and we acceded to that because of the massive reduction of income they had at that particular time. We are still totally committed to the centre but it will, of course, depend on how the industry picks up in the next weeks and month. I said earlier some of the indications are fairly optimistic that it will pick up, but we will have to gauge that on a month-by-month basis as we go on but the commitment is still very strongly there.

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