Select Committee on Environmental Audit Minutes of Evidence

Examination of Witnesses (Questions 160-175)

Wednesday 11 June 2003


  Q160  David Wright: Is the figure of 480,00 flights a year, which was imposed by the planning inspector, going to be abandoned, in your view?

  Mr McDermid: It would have to be abandoned if a third runway were provided. What we have done, in our submission, is to try and make clear our view of what the environmental impacts are, as well as our view of the economic benefits of each of the options. In the consultation document that came out last year there are certain environmental aspects which we think have been overestimated in the Government consultation and there are other environmental aspects which we think have been underestimated in the Government's consultation document.

  Q161  David Wright: You have recently commissioned some consultants, have you not, AEA, to do some work on NO2 at Heathrow.

  Mr McDermid: Yes, we have.

  Q162  David Wright: What input are they going to make? If you are not going to respond in relation to environmental factors, why have you engaged them? Do you not think it would be better perhaps not to engage them and encourage the independent sector to do that work rather than you engaging and then I presume using those studies to inform the debate? You seem to be having two positions here.

  Mr McDermid: I would entirely accept that it would be very helpful if independent parties did undertake their own analysis of this. At the time we were asked to respond to the Government's consultation document, we could not be sure whether anyone else was or was not going to do that. We, like many other parties, were being called on by the Government to give our best assessment of what the benefits and disbenefits were. For that reason, we could see, as could anyone, that the scale of the air quality impact, as assessed by the Government's consultants, the same consultants, AEA, using the same model but in a less well developed form, was estimating a very dramatic air quality impact for the Heathrow option. Our belief was, from our own previous work in this area, that the model that was used, using the inputs that that model used, was probably overstating the impact. There are two issues that the Government was trying to address here. One was the comparative impact between a number of options. For that, you can argue that it does not matter as the model does not give very precise answers. The second issue that it is trying to address is: where there is an impact, what is the absolute impact? As I say, on the Government's operation of that model, a very dramatic impact would be foreseen. We could not be sure that everybody else was going to undertake further work on it. We thought it was right to undertake work on that ourselves for the possible eventuality that the Government might choose that option and did they have a right? The objective was to try and get it more accurate. We were not, as I know some commentators were suggesting to you, trying in some way to doctor the analysis. As it happens, the same consultants have used the same model but developed it in a way that it had not been developed in a more infant state at the time we undertook the analysis for Government. They have come out with their assessment that the impact would be lower, not non-existent; there is still a residual impact there, which is really quite significant, in our view. We think it could hold the prospect of being resolved if action were taken by Government and by the industry, but the judgment on that as to whether or not it could be resolved again we think is better undertaken by Government.

  Q163  Mr Ainsworth: If there were to be another independent survey done of the NO2, who should pay for it or who would you be happy to see paying for it?

  Mr McDermid: Probably Government, to be honest.

  Q164  Mr Ainsworth: Can I look at what may be another hidden subsidy here for the airline industry, which is the function of the single till approach? I understand that applies to regulating the balance between your retail input and the money that you receive from landing charges. Can you place a value on the subsidy that arises as a result of this regime?

  Mr McDermid: I cannot give you a precise figure but I can try and characterise it for you.

  Q165  Mr Ainsworth: Does a precise figure exist?

  Mr McDermid: Not as far as I am aware.

  Q166  Mr Ainsworth: Does it vary from year to year?

  Mr McDermid: It probably would vary from year to year. Can I try and put it into some sort of yardstick for comparison? As you know, this was a big issue at our last regulatory review. The decision was to keep a single till running. At best it might be argued the door should be left ajar for the issue to be re-visited at our next regulatory review. Our view is that if we were to move from a single to a dual till, then the cost of airport charges, which is how we get our money back from investment directly in airport facilities, would, over time, probably go up to some degree, but not dramatically. It would go up to some degree. We do not think that it would go up to a degree that would choke off demand to any material extent. What we do not think it would do is leave BAA with windfall profits. We just think it would give us better pricing rules on which to work with the airlines to pay for the facilities that they are requesting from us.

  Q167  Mr Ainsworth: Would you like to see the single till replaced with a dual till?

  Mr McDermid: That is what we asked for at the last regulatory review.

  Q168  Mr Ainsworth: Do you think the present level of landing charges is sufficient to influence the behaviour of airlines at all, really?

  Mr McDermid: Yes, we do think it has a role to play. Airport charges are by no means the biggest element of an airline's costs, but if they were immaterial to airline costs, we would not have the challenging relationship that we sometimes have with them over our negotiations to raise airport charges, so I think they have a role to play. They also have a role to lay in the way in which we structure our airport charges, which we currently structure in a graduated way to charge more for noisier aircraft than we do for quieter aircraft. We are also trying to introduce now an emissions element to that as well. We are in discussions with airlines currently over that.

  Q169  Mr Ainsworth: Did you propose that to the airlines?

  Mr McDermid: Yes, we did.

  Q170  Mr Ainsworth: What kind of reaction have you had?

  Mr McDermid: So far the reaction has been relatively negative, I have to say, but I think that is largely because of points of technical detail that we have.

  Q171  Mr Ainsworth: It is too hard to measure?

  Mr McDermid: It is quite hard to measure. That is correct.

  Q172  Mr Ainsworth: Have you discussed that, extending those charges to cover emissions, with the Department as well?

  Mr McDermid: I am sure we will have mentioned to them in passing that it is our intention to do that. I am sure they will be aware that we are proposing to introduce an emissions element. We would like to do it.

  Q173  Chairman: What sort of role do you think the airport industry can play in all this? You are, in a sense, indirectly involved. The airline companies create the emissions, not yourselves.

  Mr McDermid: I think there is quite a lot that we can do. Like many people, I do not think there is a single solution here. There are a lot of different things. I think we have shown ourselves to be influential in encouraging better environmental performance. I have to say that some of the airlines at our airports have shown a very responsible attitude towards replacing older fleets with more modern, more fuel-efficient aircraft. We would like to work with them to get a co-operative approach. As Peter Ainsworth I think knows, at Gatwick when we had an issue of aircraft track-keeping, we worked with the airlines in a very positive way and we received their positive support, now to the point where track-keeping is at a very high standard at Gatwick.

  Q174  Mr Ainsworth: Would you like to have bigger levers that you could pull to influence behaviour? It is all at the margin at the moment, is it not?

  Mr McDermid: It is at the margin. It depends on the specific proposition. In general probably we would like to have a bit more clout, if you like, in some areas.

  Q175  Mr Ainsworth: That might be to your commercial advantage as well, of course?

  Mr McDermid: It might be but I doubt we would get it for that reason.

  Chairman: Thank you very much indeed. We are grateful to you. We have a division.

  The Committee suspended from 4.42 pm to 4.41 pm

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