IV. List of Conclusions and Recommendations
(a) We expect to see firm proposals for the
future of aviation in the forthcoming Aviation White Paper, which
is due to be published in the autumn of 2002. We are concerned
that the timetable for the White Paper has already slipped (paragraph
(b) The air transport industry is cyclical
and susceptible to downturns in the economy. Since 2000, there
have been signs of a general slowdown in the global economy that
led to fewer passengers and less money for investment in the industry.
Many sectors of the United Kingdom's air transport industry were,
therefore, already experiencing a significant reduction in business
even before the terrorist attacks in the United States. There
has been a marked contrast in reaction by the various industry
sectors in responding to that reduction in business. The low-cost
sector appears to have been the most successful in generating
traffic and improving profitability by exploiting new markets
and, in some cases, use of secondary airports while restraining
costs (paragraph 8).
(c) We do not support long-term public assistance
for the additional security costs incurred by the air transport
industry as a result of 11 September (paragraph 11).
(d) We condemn the hasty manner in which the
insurance industry withdrew cover for aviation following the terrorist
attacks and welcome the Government's prompt and appropriate action
in implementing short-term measures to ensure continuity of essential
insurance cover. The Department should provide a report on progress
towards a return to a wholly commercial insurance market, and
an indication of its view on long-term solutions to providing
war risk and terrorism liability insurance cover for the air transport
industry. We recommend that the Treasury publish figures on the
amount of money it has received from the industry by way of premia
and explain what it intends to do with the money (paragraph 14).
(e) The immediate impact on airlines of the
11 September attacks was severe, particularly for those providing
premium services to the United States. But there is no compelling
evidence to suggest that there will be a medium to long-term reduction
in passenger confidence in aircraft safety and security. In the
past, passengers have adjusted to the imposition of more stringent
security regulations and are unlikely to find difficulty in doing
so again. We do not anticipate that the latest security requirements
will have an adverse impact on the market for air travel (paragraph
(f) There is no doubt that, even though passenger
confidence is recovering, times are tough for the air transport
industry. We do not consider it appropriate to increase either
the regulatory burden or the costs to any sector of the air transport
industry now. We recommend that the CAA seek to postpone the introduction
of any proposed increases in charges at regulated airports that
may result from its recent review (paragraph 20).
(g) The events of 11 September had implications
throughout the air transport industry, including general aviation
and ground service providers. We recommend that the Government
bring forward firm proposals to guard against the permanent loss
of highly skilled jobs and personnel in the industry (paragraph
(h) Without prejudice to the findings of our
separate inquiry into NATS finances, we find it remarkable that
the Department had not prepared a contingency plan for NATS going
into administration or receivership (paragraph 23).
(i) The evidence that we received at the beginning
of this inquiry about the duration of the current downturn seems
to have been pessimistic. We welcome signs of recovery that suggest
that in the absence of another incident traffic levels could recover
within the two years forecast by the more pessimistic analysts,
although we do recognise that the recovery in traffic may have
been achieved with some dilution of revenue (paragraph 25).
(j) Although we accept the reationale for
waiving the 'use it or lose it' rule, the Government should firmly
resist implementing any further European Union directives on slot
allocation that are inappropriate to the United Kingon's needs
and circumstances (paragraph 29).
(k) The Committee considers the United States
compensation package to have provided an unfair advantage to US
carriers. It is imperative that the United Kingdom Government
ensure that the competitive balance between US and UK carriers
is restored (paragraph 31).
(l) The Government must ensure that any future
international aviation agreements maintain the competitive position
of United Kingdom carriers. However, the Government should not
make concessions to United States airlines in receipt of US State
Aid, merely to hasten the signing of a new US UK bilateral on
open skies (paragraph 34).
(m) This Committee believes that the bilateral
agreements on open skies must include progress on the critical
issues of open skies, cabotage, wet leasing and ownership. As
we concluded in our July 2000 Report into Air Service Agreements
between the United Kingdom and the United States, it is imperative
that the Government maintain its efforts to agree beneficial aviation
bilateral agreements with the United States (paragraph 34).
(n) We remain to be convinced by arguments
in favour of changes to the rules of ownership or that consolidation
will bring benefits to the industry or consumers. The Government
should be cautious about changes to the rules of ownership that
would allow unfettered consolidation within the industry. We recommend
that the relevant competition authorities give rigorous scrutiny
to any further moves towards consolidation of the United Kingdom
airline industry (paragraph 36).
(o) The present situation has strengthened
arguments in favour of Public Service Obligations to ensure the
continuity of vital regional links with Heathrow and Gatwick.
We recommend that the Government ensure that slot allocation at
the main London airports be consistent with its aims of ensuring
access to the United Kingdom's peripheral regions as regional
air services are "socially and economically vital to the
regions". Prior to the availability of any additional runways
in the south east, we believe the Government must adopt Public
Service Obligation protection for the most vital links to the
United Kingdom regions. This is a widely established policy within
the European Union. We do not see or anticipate any European regulatory
impediment to securing such slot protection. We are aware that
some airlines and airport operators may be against the use of
such designation at congested hub airports but the needs of the
United Kingdom regions should have priority (paragraph 40).
(p) The Sub-Committee intends to consider
aviation infrastructure and capacity requirements when it conducts
its inquiry into the Aviation White Paper (paragraph 41).
(q) The Committee is concerned that the Air
Travel Reserve Fund should be maintained at a sufficient level
and calls on the Minister to bring forward legislation providing
for that at the earliest opportunity (paragraph 42).