Examination of Witnesses (Questions 260
- 279)
WEDNESDAY 12 JANUARY 2005
MRS DOREEN
BROWN, MR
BRIAN WHITE,
MR ROBIN
MCMINNIS
AND MR
HARRY BAIRD
Q260 Chairman: I know there is a
lot of confusion and concern that most of the figures that are
presented seem to be computer generated and I know that those
who have concerns have said, "Why on earth can we not just
put somebody on the street and try to note the decibels recorded
at ground level because that would be a better indication of noise
nuisance?". Is that something that has been considered?
Mrs Brown: Some of them are computer
generated models but in validating that it is also tested through
on-the-spot noise measurement. One of the reasons why we want
to undertake this review that we are just embarking on is that
we are conscious of the unhappiness with the computer generated
approach and we want to see whether there are better ways of approaching
the problem.
Chairman: That is comforting. Thank you
for that.
Q261 Mr Pound: Turning to the Route
Development Fund, how is it promoted or marketed (if that is the
right word) to potential airlines? How do you go about spreading
the word on this?
Mr McMinnis: We started off by
launching the scheme and giving it a fair splash in doing so.
In fact, we brought all of the airports in and briefed them on
the operation of the scheme and the lessons that we learned from
Scotland.
Q262 Mr Pound: Sorry to interrupt—all
existing airlines or potential airlines?
Mr McMinnis: Airports. In addition,
our consultants, who work directly to us, AviaSolutions, who have
immense knowledge of the industry, meet regularly with all airlines,
not just the existing airlines who operate out of Northern Ireland
but also European airlines, and continually keep check on their
thinking and their development plans. In addition we sent a small
team to last year's International Routes Conference which was
staged in Madrid and we promoted Northern Ireland and got people
to think about investing in Northern Ireland and air routes in
Northern Ireland. Now and again, keeping our ear to the ground,
we will try to identify opportunities. One such example is the
success we had in securing the Continental route. We went out
to Houston to secure that deal. We brought them over to Northern
Ireland, and sold them on the idea of investing in Northern Ireland.
So we do it in a number of different ways. I was, I have to say,
quite surprised to hear that Flybe had not learned of the existence
of this scheme until comparatively recently but I am glad to say
that they have caught up.
Q263 Mr Pound: You mentioned Flybe.
Flybe are a very effective, efficient, entrepreneurial company,
although they have slightly unusual taste in the football teams
they choose to support. They said, and I know you are well aware
of this, that they were not completely clear as to the criteria,
although they were later successful, I believe, in the bid for
Norwich-Belfast. How would you respond to that? I appreciate you
have already touched on it but I am giving you the opportunity
to elaborate.
Mr McMinnis: I would just make
this point: our relationship is with the airports. The airports'
relationship is with their customer and I can quite understand
that some airlines might not be as alive to this as others, depending
on where the airline is based, for example, and because of the
existence of the cap and so forth at Belfast City. I have brought
with me and am happy to leave with the committee the brochure
that was produced. The details of the scheme are all set out in
this and have been made readily available to each airport authority
in Northern Ireland.
Q264 Mr Pound: The criteria that
you establish in your submission refer particularly to links with
continental Europe and the statement you made earlier on clearly
underscores that. Have the criteria changed because there have
been inter-UK applications?
Mr McMinnis: Let me be candid.
When we launched this scheme we were unsure as to what the uptake
would be. Just over a year ago we watched something like five
routes leave Northern Ireland in the wake of 9/11. We had only
one international direct service to Amsterdam. Frankly, we did
not know what the market was going to produce so we did not want
to rule anything out. We looked at each route on its merits and
if there were routes to GB and gaps in the network we wanted to
plug those but it was always conditional on there being a direct,
real, economic benefit to Northern Ireland. We only support routes
that deliver that economic benefit to Northern Ireland.
Q265 Mr Pound: So routes like Derry-Birmingham
and Derry-Manchester were considered on economic criteria rather
than a policy criterion specifically aimed at continental Europe?
Mr McMinnis: Essentially on economic
criteria. As you know, the Manchester and Birmingham routes were
linked to the City of Derry Airport. It helped to reinvigorate
and regenerate growth at CODA, but the Norwich route was identified
as being one which could deliver quite good economic benefits
in terms of business linkages, allowing business people in Northern
Ireland to conduct a day's business in Norwich, in East Anglia,
with savings in time travel and also helped us in terms of the
growth of tourism in Northern Ireland which, as you know, last
year hit two million for the first time. In each case we look
to the economic benefits as being the reason for the investment.
Mr Pound: I thought you were going to
say it was going to economically benefit Birmingham for a minute,
but that might be beyond your brief! Thank you very much indeed.
Q266 Mr Luke: I would like to pick
up some of the points raised by Stephen. When you drew together
your plan of action you talked about "selected and targeted
routes". Is there a list of what you would currently consider
priority routes?
Mr McMinnis: We started with a
blank sheet and we said, "Look: we have only got one route
to Europe at the moment. Where should we focus our attention?".
We came up with a kind of informal list and Charles de Gaulle
airport was very near the top, if not the top, because it is a
hub, and it helped to strengthen our direct linkages with Europe.
But we never published it and we have relied on the airlines,
the airports, the market if you like, coming forward with a proposal,
at the same time keeping an eye out, as I said earlier, for
opportunities like the continental proposal.
Q267 Mr Luke: You have also got a
flight to Nice but you have turned down recently flights to Malaga
and Alicante?
Mr McMinnis: Yes. They are not
the same. I was interested in that point. I accept entirely that
Alicante and Malaga are basically sunshine destinations. So is
Nice but Nice has a number of added advantages. I do not know
whether you know it or not but certainly the economic appraisal
that we did into that route revealed that it was the second largest
French airport, handling between six and eight million passengers
per year. Also, the Cote d'Azur is the second largest conurbation
in France. It has the largest, most significant science park in
France, in fact one of the biggest in Europe. It is a renowned
centre for technological companies and, of course, we were trying
to develop links with our science park in Belfast. It also gave
great scope for inbound tourism from that part of France and northern
Italy, so there was a whole host of reasons, none of which pertains
to the two Spanish resorts that were mentioned before.
Q268 Mr Luke: There is also the Cannes
Film Festival.
Mr McMinnis: You could say that.
Q269 Mr Luke: Stephen mentioned the
UK flights. We have seen you create them and I am very supportive
of the work you do in flights to the United States as well as
to Europe. Do you have a proportionate balance between which one
you are giving the highest priority and funding to in order to
develop them?
Mr McMinnis: No, we do not. We
take them as they come. We do not take them all and some of them
fade away. Some we go after harder than others, depending on their
value and worth. We look at each one, as I said earlier, on their
merits. I will not pretend to you that the Norwich route is of
the same weight as, say, securing a direct route to Newark in
New Jersey or to Charles de Gaulle or, indeed, the most recent
ones, to Geneva, Rome, Berlin and so forth, but they are all important
and each has been demonstrated to be value for money and of real
economic benefit to Northern Ireland. We are currently embarking
on a review. We have to take stock because we have committed most
of the existing fund and, if I may, suggest Chairman, that, having
heard evidence from the various stakeholders, it was the view
of this committee that this fund remained of value to Northern
Ireland, we would be very glad of your support.
Q270 Mr Luke: But if you are thinking
of spending it there might be a nice flight to Dundee to save
me getting across every five weeks.
Mr McMinnis: We will try and arrange
it.
Q271 Mr Luke: Going back into the
analysis that you are doing, you have talked about the economic
benefits. Has an analysis been done on the projected numbers of
people you think are going to use the flight as part of the equation?
Mr McMinnis: Yes. Most of the
proposals that come to us do not really surprise us because we
have been working closely through our consultants who are in daily
contact with the airlines and airports. But when a proposal does
emerge and a firm application arrives with us we look at it on
two levels. We look at it first of all against the published criteria
which are set out in this document which I will leave with the
Clerk. That looks at things like the technical ability of the
airline to deliver, whether it hss slots, what size of aircraft,
whether it has the handling capacity, whether the airport has
the capacity to service, what time the flights would come in at,
whether that is convenient for business people, that sort of thing.
We also look at CAA data in terms of whether there is a potential
market there and what the prospects are for business traffic or
inbound tourism. We look at all of that initially and there is
a negotiation then which might take place through the services
of our consultants. The proposal then goes to the board and the
board looks at it in principle and decides on the basis of that
information whether it is worth exploring further. If it is we
embark on a detailed economic appraisal which probes the kinds
of things you are talking about. That is done by PricewaterhouseCoopers
quite separately from the consultants we use, so we have a robust
system to ensure that taxpayers' money is safeguarded. We also
look at the extent of the risk which the airport authority is
running relative to the airline and relative to ourselves, wanting
to make sure all the time that the risk to the public sector is
not out of kilter with that by the private sector. Finally, we
want to make sure that the proposal would not have gone ahead
without the investment support from the Route Development Fund.
Q272 Reverend Smyth: As I understand
it, the fund is a compensating payment as a discount on landing
charges that an airport operator may want to charge, particularly
on certain routes. Can you explain how the contribution level
is set?
Mr McMinnis: Essentially it is
a negotiation. We know that there are published tariffs and then
there are the actual tariffs that are charged to an airline. That
happens right across Europe. It is common commercial practice.
That is why we employ AviaSolutions, to get behind the printed
charges, to get at the real truth of what the deal is between
the airport and the airline. As you quite rightly say, it is based
on aeronautical charges and the discount that is offered. We then
ask the airport, "What in addition are you doing to secure
this particular route?", because those charges have been
published for a very long time and have not brought in these additional
services, so the question is how much further are they cutting
the charge to try and attract? We try to match that and it is
very important indeed that we get at the truth of the matter.
Obviously, even when we get onto the same page, we then have a
commercial negotiation. That is handled by our consultants initially.
The board stays slightly detached from it so that we can take
a clinical view of what comes out of that process.
Q273 Reverend Smyth: Are you satisfied
that from this perspective the scheme does not contravene EU regulations
since we are all aware of Ryanair and their problem at Charleroi?
Mr McMinnis: Yes, we are satisfied.
Our scheme is modelled on the Scottish scheme. The Scottish scheme
relies very heavily, as you probably know, on the Manchester decision.
I believe that the Scots did in fact make inquiries about it before
they launched their scheme. We took legal advice on the matter
and indeed consulted with the Department of Transport as well.
Q274 Reverend Smyth: You did refer
to the budget that you have got, initially being about four million
and it goes for three years, as I understand it.
Mr McMinnis: That is correct.
Q275 Reverend Smyth: Is it likely
that it will be renewed or was there a plea in an earlier response
to make sure that it is and that it rises with inflation?
Mr McMinnis: Or perhaps a little
bit more. The four million figure contained a small element for
administration of the company and also for consultancy advice
but, as I indicated earlier, the scheme's success has been quite
remarkable. Those funds are all committed and as a result of tomorrow's
announcement that will exhaust the fund. We are taking stock of
the situation and we are looking around. We recognise that there
are other targets out there, Scandinavia, for example, northern
Germany, perhaps another North American route, but we can only
do that if we have the money. We have excited the market. It has
been very difficult. There were three or four years, as many Northern
Ireland representatives will know, when we had a very difficult
time. We lost the national carrier and so forth. Now that we have
got that momentum going I personally believe that we need to build
on that. The world will not stand still, the aviation market will
not stand still. We have to keep going to build those links and
reduce Northern Ireland's peripherality.
Q276 Reverend Smyth: Can you share
with the committee how much of the initial budget has already
been allocated on these new routes?
Mr McMinnis: All of it.
Q277 Reverend Smyth: Would it be
possible to provide in writing to the committee details of the
support provided or committed from the fund to date in terms both
of routes and of passenger numbers?
Mr McMinnis: Yes, certainly. With
your permission, if the Clerk would be kind enough to drop me
a note I would be happy to respond through our Minister.
Reverend Smyth: We would appreciate your
response. I just make one caveat. When you talk about consultants
and auditors and keeping the public sector at the level of the
private sector, some of the private sector, with all their protection,
have not done terribly well, so we should not rely completely
upon spending too much money on consultants.
Q278 Chairman: You have been very
helpful to us in letting us know how you measure economic benefits
and decide on which routes should be acceptable to the fund, but
could you very quickly tell us about how you continue the evaluation
to make sure that what you intended is borne out? In particular
I am looking at issues such as the Charles de Gaulle/Paris route
because if you look at it in terms of business of course it could
be argued that it would be very good for Northern Ireland but
we would expect that a number of people would be using that route
to interline and go on to onward flights. How many passengers
do interline? Has that study been done? Would that form a basis
on which you would evaluate whether or not the fund is working?
Mr McMinnis: First of all, those
kinds of questions were asked before the original investment decision
was taken because we were able to trace that through the Civil
Aviation Authority data. For example, a number of people from
Northern Ireland prior to the introduction of the service to Paris
were going to Heathrow or Gatwick and then going on from there,
so there was information available. Once the route is established
we then monitor the route on a monthly basis. We get statistics
on passengers. This is information provided by the airline so
it is quite separate as it were from our contractual arrangement
with the airport authority, so we have no reason to doubt the
information. In any case we also have access to the Civil Aviation
Authority data. All of this information comes back to us. We know
how many business people are travelling, which direction they
are coming from, the extent of the inbound tourism. Locally then,
as you probably know, as you travel frequently through Northern
Ireland airports, there are surveys conducted by the Northern
Ireland Tourist Board and there are surveys conducted by my own
department, Enterprise Trade and Investment in terms of picking
up employment levels because one of the side benefits of this
scheme has been direct and indirect job creation. Possibly as
many as 500 jobs will result from the scheme. That was not one
of the objectives of the scheme when we introduced it. Some of
the routes that we have been able to secure have been secured
not directly because of the operation of the scheme but because
the scheme attracted the airlines and drew their attention to
the prospects for development in Northern Ireland and so the kinds
of routes you mentioned in Spain, and indeed the Prague route,
Barcelona, all came out of the side show which followed the introduction
of the fund. I hope that helps.
Chairman: It does indeed.
Q279 Mr Beggs: I want to direct a
couple of questions in respect of the City of Derry Airport. What
is the department's view of the potential for growth at the City
of Derry Airport and in particular what conclusions have you reached
on the PricewaterhouseCoopers report that the City Council commissioned?
Mrs Brown: On the PricewaterhouseCoopers
economic appraisal in relation to the long term strategic development
plan that the council drew up, a decision has not been reached
yet. This has proved to have taken quite a long time to examine.
It raised a lot of quite detailed and complex issues. The Secretary
of State and Ministers are currently considering the case but
have not yet come to a conclusion. In terms specifically of the
PWC economic appraisal, which I do not think is a published document
but I know that the executive summary appeared on the Derry City
Council website, looking at that from a government department
point of view and from the point of view of our economists, we
did have some concerns about the figure work in the appraisal,
the main one being that we believed that the appraisal overestimated
passenger figures. The appraisal chose a highly optimistic passenger
forecast of 826,000 passengers by 2010. That is rising from currently
about 200,000 passengers and that figure did not tie in at all
with the figures which had been put forward in the Air Transport
White Paper. On that point therefore we had to make known to PricewaterhouseCoopers
that we did not believe that that forecast figure was credible.
That therefore affected the other figure work in that economic
appraisal because a lot of the benefits flowed from the high passenger
figure.
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