Examination of Witnesses (Questions 480-499)
WEDNESDAY 19 MARCH 2003
MR GEOFF
MUIRHEAD, MS
ROWENA BURNS,
AND DR
JONATHAN BAILEY
480. So there is a need for some pretty radical
thinking. I do not think you gave me the impression that you were
over-enthusiastic about how effective the European Union may be
in this whole business of allocation of slots, would that be correct? (Mr
Muirhead) I think the European Union are also caught in the
dilemmas that we are talking about here. There are grandfather
rights. Once you have started a route, actually to be told that
every five years you have to go and re-bid for it, is a difficulty.
So there is a whole range of issues around this. It is not clear
cut.
481. Indeed, it is a complicated business, but
I think that when we put the complications to one side and get
down to the basics, there is something pretty radical which has
to be done here if we are to make the changes that we all agree
are necessary or at least most people agree are necessary. Mr
Muirhead, you said it is dangerous to interfere in the market.
We tax passengers at airports. In other words, there is a tax
on the movement of people, is there not? (Mr Muirhead)
Yes.
482. Why do we not consider the idea of taxing
slots in a progressive way, so these very valuable commodities
that the airlines claim, can be subject to this fiscal interference
that would give an impetus, an advantage, to the less attractive
regional operations? (Ms Burns) Can I clarify that,
before we answer that, so that I understand what you are saying?
483. Did you understand my question? (Ms
Burns) Can I play it back to you and check, are you talking
about having differential taxation?
484. I am talking about having differential
taxation. We tax people to move. I do not know why, with this
European Union of free movement of goods, people and capital,
we tax people, but we do not tax capital. I do not understand
that. However, that is a different argument. What I am getting
at is, has any consideration been given, in this very complex
but serious issue, to using fiscal measures that actually are
designed to give an advantage to regional services to give them
some sort of protection in a progressive differential way? (Ms
Burns) We have canvassed this issue in our own submission
to the DfT about the idea of using fiscal measures.
485. When did you do that, can I ask you? (Ms
Burns) We responded to the DfT consultation within the deadline. (Mr
Muirhead) The original deadline.
486. There is a specific reference to this in
your submission, is there? (Ms Burns) Not in respect
of the use of slots, but the principle of trying to use the influence
of utilisation of capacity.
487. My final question— (Mr Muirhead)
Before we go on to that, I would like to make this point. It is
only in this country that we tax people on a departure tax. I
am not aware that we do it anywhere else. If you remember my opening
statement, I was very concerned that there was a level playing
field here and this playing field is not level. In terms of public
transport, aviation is the only transport mode that actually pays
a tax every time you get on or off a piece of equipment.
488. I understand that, Mr Muirhead, and I know
it is controversial as to what I am suggesting, but my belief
is that we have to get your opinions about this. I remember the
dire predictions that were made by yourselves—not you personally,
but others in the business—when the airport tax was introduced,
that this would drive people away and so on and so on. It does
not seem to have done that, because of the growth that you are
anticipating having. (Mr Muirhead) It will have done
that. It may have been matched by other developments in the business.
489. The question I want to put to you is, what
would be your reaction to progressive differential fiscal measures
being introduced to encourage the differential use of slots in
favour of regional services? (Mr Muirhead) I think
that if you put "progressive", "fiscal" and
"taxes" together, those three words, I think, are themselves
contradictory. If there is a need to safeguard the public service
type of engagement, then I think we should just do that. Trying
to find out what is the right level of taxation to encourage one
type of traffic against another type of traffic, what the relative
differences are in terms of profitability of different types of
uses, would be a hugely complex area to get into. I think the
clearest and cleanest way to protect Public Service Obligations
would be to protect slots.
Chairman: I want to let you go by half past,
so we have Mr Osborne and then Mr Stringer.
Mr Osborne
490. This is a formal way to speak to one of
my constituents, but can I ask you this. Picking up on that, would
you agree with me, Mr Muirhead, that any unilateral taxation on
aviation, be it on passengers, aviation fuel, slots or anything
else—unilateral in the sense of being applied only to the
UK airport industry—would have a negative impact on the
UK airport industry and obviously on jobs? (Mr Muirhead)
I think that is irrefutable and absolutely true. There is a penalty
to be paid if we take unilateral action, which is why I talked
not just in terms of aviation versus other forms of transport
in this country, but also aviation relative to international aviation
in other countries. There needs to be a very level playing field.
The aviation industry is saying that it is right and proper that
we should pay the external costs of the business in terms of its
environmental impact, and if taxation does that across the board,
that would be fair, but it also needs to ensure that taxation
for roads, taxation for rail, taxation for all other types of
transport, is equally covering its external costs in terms of
environmental impact. That needs to be properly balanced and it
is not at the moment. Only aviation is singled out.
Mr Osborne: Even if it were covered across other
modes of transport, of course, you would still be disadvantaged
relative to other European modes, would you not?
Chairman: Forgive me, but I think we have actually
covered this point. I understand your point.
Mr Osborne
491. You have obviously built a second runway.
What are the lessons you learned from that process? Obviously
other airports are now considering second runways. (Mr
Muirhead) I think you need to explain to people exactly what
the policy framework is and the rationale for doing it. You have
to be consistent in the way in which you approach the communities
that surround the airport, in terms of explaining the impact.
You have to be honest about the implications and you have not
to make false promises.
492. This is not something the people I represent
would necessarily agree with. Do you think it was a mistake not
to build two runways that were fully operational in the sense
that you do not have to cross one runway to use the other; and
that with hindsight, if you are going to build a runway somewhere,
you may as well build one that is totally separate and can be
used to maximum capacity? (Mr Muirhead) It is eminently
sensible to do that if you can. A decision about what runway to
build, how it would work and what capacity you get out of it,
has to be thought of in the context of its impact not just in
terms of capacity at the airport, but also its cost of construction,
the availability of land to do so, the implications on the environment
that will flow from it. We considered several options, including
full independent options, and we ended up with what we ended up
with as the best that we could achieve.
493. You are owned in a quite unique way by
a string of local authorities, are you not? (Mr Muirhead)
A string of them, yes.
494. Did that help the way you took your decisions,
or did it hinder the way you took your decisions? (Mr Muirhead)
At the time of the second runway, we took the decision on commercial
grounds. While we may be owned by local authorities, local authorities
in the context of Manchester Airport are looking on it as an investment
that they seek a return from, and the investment needs to have
a proper business case made for it. We had to do that before we
could make an investment. We do not sit back and hope that someone
else is taking these decisions for us. We do actually think about
what is needed and make the case for it in the appropriate way
at the appropriate time. (Ms Burns) May I make two
points. One is that I think our local authorities, our shareholders,
have always taken a long view of the airport's development. That
facilitated, I think, the right decision at the right time in
terms of the runway. The second point is that I think their influence
was evident in terms of the airport's commitment to working with
the local community to recognise and respond to the negative effects
of growth in a way that probably owed something to that ownership.
495. Perhaps I could ask two final questions.
First of all, there is a difference between your East Midlands
operation and your Manchester operation, in terms of their use
by low-cost airlines of those airports. Would I be right in saying
that those low-cost airlines do not bring the same broader economic
benefits to the area around an airport in terms of encouraging
businesses to locate there? (Mr Muirhead) I think that
case is yet to be proven. I do not think there is any evidence
to say that they do not. There is an increasing preponderance
of business traffic on low-cost carriers that would want the same
sort of benefits that the full-service carriers will bring now.
So I am not able really to say that that would be true or false.
496. My final question is one which I asked
of the other airport directors. Would you like the statutory power
to fine airlines that were off track? (Mr Muirhead)
For the record, you know we do and you know what they say.
497. That is why I am asking. (Mr Muirhead)
You know we have made applications for that power to be granted
to airports. Airports have the power to fine on noise. They do
not have the power to fine on track-keeping. While we place a
lot of emphasis at Manchester on getting aircraft to fly down
routes that are minimum-disturbance routes, obviously maximum-disturbance
routes for some people. We have made huge improvements, through
voluntary means, with airlines on that basis, but there are still
a few rogues that you need an ultimate sanction to bring into
line. So the objective is not to have a fining system with heavy
fines; the objective is to have a fining system that encourages
compliance.
Mr Stringer
498. You said in your written evidence that
you are in favour of the Government declaring a unilateral "open
skies" policy for Manchester. What do you say would be the
immediate benefits for Manchester and the region of doing that? (Mr
Muirhead) I think the whole issue of Air Service Agreements
between countries is one which sometimes airlines hide behind
as the reason why they are not flying, and there is really no
commitment to flying a particular route. It would take away all
of that froth, so we would be able to concentrate on the real
opportunity, rather than diverting our efforts in areas which
are not really opportunities for us to develop networks. I think
the liberalisation within Europe has helped greatly in developing
the network out of Manchester, and I think that the liberalisation
between the UK and the US for regional airports has equally helped
in the development of routes between Manchester and the USA. There
is still a bilateral limitation in the rest of the world, and
we seek that not to be either an issue to hide behind or an issue
on which we do not have to concern ourselves in developing a service
to Manchester in particular. However, it would equally apply at
the other airports over time.
499. When the points you have just mentioned
are put to the Government, they say that there is no evidence
that anybody has not been allowed into Manchester, that the bilateral
agreements are not a hindrance to access to Manchester and other
regional airports for that matter. What is your response to them?
Can you give us evidence that airlines have not come to Manchester
particularly because there are not open skies? (Mr Muirhead)
I would rather turn that on its side.
| 
