Examination of Witnesses (Questions 360
- 373)
WEDNESDAY 23 FEBRUARY 2005
MR DAVID
MCMILLAN
AND MR
CHRIS CAIN
Q360 Mr Pound: It is always a question
that politicians ask as elections get closer.
Mr McMillan: A lot of our modelling
has assumed two things, which are, if you like, the technological
fixes we know about, that is, that the average size of aircraft
at Heathrow is likely to grow, and the second thing is that the
average load factor of those aircraft is likely to become higher
as well. So you are already meeting capacity in those two ways.
The other thing is to use the existing two runways in a more efficient
way, which effectively means one variant or another of something
called "mixed mode", where you use the two runways for
both landing and take-off at the same time. That is one of the
things we are looking at very intently at the moment. Of course,
that in itself would have environmental consequences, and we have
to evaluate how serious those would be and the extent to which
they could be mitigated and the rest. In terms of whether we have
coming along aircraft which are fundamentally quieter than the
current generation of aircraft, or aircraft which pollute fundamentally
less than the current generation of aircraft, I very much regret
to say the answer to that at the moment is no. Most people think
we need to do more research and development on this but we are
nearing the end of the technology gains which we have secured
out of the current type of aircraft. Looking beyond 30 years,
who knows? But I am afraid that is the position at the moment.
Chairman: We are very grateful for that.
Now we have dealt with the interests of the Northern Ireland community
living in Ealing Broadway.
Mr Pound: It was included in the evidence,
Chairman.
Q361 Mr Beggs: What is the current
status of your request to the European Commission in respect of
giving consideration to the possible consequences for regional
air services arising from slot trading and what is the likelihood
of such a review being undertaken?
Mr McMillan: The European Commission
has consulted on the slot trading which already exists in Europe,
and the consultation period has closed. Their original ideas I
think you could describe as pretty radical. They were looking
at possibilities of trying to use the slot rules so as to engender
more competition in the market in particular. I do not think they
had a particular focus on regional services, though they did recognise
that was an issue. Their idea was that they would sequestrate
slots from people who already had them and put them into a pool
for auctioning. That was the principal and main idea which they
came up with. I think it is fair to say that that was not well
received by the airline or airport industries and they made some
very serious representations to the Commission, who have reflected.
We do not yet know to what purpose they have reflected but they
have told us that they intend to drive forward and to produce
a communication on slots in time for the UK presidency in the
second half of this year to take account of it and perhaps have
initial discussions.
Q362 Mr Beggs: Is there any support
for such a study from other European governments, or is the issue
of regional services to a country's principal hub just a problem
for the United Kingdom and Heathrow?
Mr McMillan: I do not think it
is only a problem for the UK, but I think I can tell you that
it is not an issue which raises its head very often in EU or ECAC
discussions, so I think it is probably true to say that, with
the exception perhaps of Paris, the UK is in an unfortunately
unique position in having such a congested hub airport.
Q363 Mr Beggs: Further to your response
to Mr Pound, do you consider that a move to a mixed mode operation
at Heathrow would have any impact on safeguarding retail services
in general and services to Belfast in particular? What is the
likelihood of such a move and how would the additional slots be
distributed?
Mr McMillan: I do not know how
likely it is that this could be developed. There are variants
on what mixed mode could be. There is already a mode of operating
Heathrow called TEAM, tactical enhanced arrival mode, which they
use in the early morning if there is a serious imbalance between
arrivals and departing aircraft. They obviously do not want to
have too many aircraft on the ground. It is conceivable that you
could do a bit more TEAM. That is one thing we could do. The other
way you can use mixed mode is that within the existing air traffic
movement limit you can make the airport more resilient by having
mixed mode operations of the airport. Neither of those two things
are likely to increase capacity, so I think they are neutral in
relation to services from Northern Ireland or anywhere else. The
third mode in which you could use mixed mode is to use it so as
to secure more capacity, that is, it is conceivable. We do not
yet know how much more capacity you could attain or to what extent
that would be environmentally acceptable. We hope to reach conclusions
on that work by the end of 2006, and then we will see.
Q364 Mr Beggs: You suggest that the
introduction of an open skies agreement could further increase
the level of demand for slots at London airports. What impact
do you think this would have on regional services to Heathrow?
Mr McMillan: The first thing to
say is that, although we gave the European Commission negotiating
rights with the US to negotiate what we call an open aviation
agreement, which would involve the ability for EU carriers, EU
interests, to buy US airlines and vice versa, which will open
up our cabotage markets, which would open up 3rd and 4th freedom
markets, which would be extensions of the 5th and 6th freedom
markets as well, they failed to produce an acceptable agreement
when last they tried, and the Transport Council rejected what
they came up with in the Council in the summer. There has then
been a hiatus, with the new American administration coming into
place, and indeed a new Commission, but I think the expectation
is they will re-open the negotiations—I think that is a
safe word—in the near future. It is really not possible
to say whether that is going to happen any time soon. If it were
to happen, it is certainly the case that if Heathrow Airport is
opened up to a wider range of carriers than is currently the case—under
the current arrangements, only American and United have the right
to serve that airport—pressure for use of Heathrow airport
would increase. In the case of the UK, you would also have bmi,
your principal or your sole supplier from Belfast to Heathrow,
also able to use Heathrow airport to serve the United States.
So there are clearly potential downsides. On the other hand, if
bmi is in there and it is seeking to serve the United States,
it would seek to secure feed for its US services, and I think
there is a very high chance that the Belfast-London route, which
is, I think, one of its more profitable routes, would be something
it would look fairly long and hard at before it sacrificed. Clearly,
there are plusses and minuses here.
Q365 Mr Hepburn: On this subject
of the Belfast City Airport Planning Agreement, what is the Department's
view on the seats for sale limit at Belfast City Airport? Can
you give us any other examples in the UK of measures to limit
operations for environmental reasons?
Mr McMillan: I think it fair to
say first that this is primarily a matter for the Northern Ireland
Department rather than for ourselves. We said in our memorandum,
and it is true, that it is entirely legitimate to seek to control
on an environmental basis an operation at an airport. It is also,
I think, becoming the case that the normal way of doing that would
be through a limit on air transport movements, coupled with a
noise contour limit set on the basis of the aircraft using the
airport. A "seats for sale" thing is a little bit unusual.
If you look at the White Paper and what it proposed for Heathrow,
it set out conditions for the development of Heathrow which were
precisely in line with what the ATM would be and what the noise
contours would be. So while it is entirely a matter for the planning
authorities in Northern Ireland to look at, this seats for sale
thing is a little bit unusual and it is not for us to comment,
except to say I guess you ought to look at the objective you are
seeking to achieve and then use the measures which get you there.
Mr Cain: I think that covers it.
Q366 Mr Hepburn: Ten years down the
line, if Belfast International wanted to acquire Belfast City,
what do you think the public interest issues would be and how
would you seek to remedy that?
Mr McMillan: I think there was
an MMC report into this some years ago, and that was looked at.
The basic questions which were looked at at that time were the
consumer benefit from either its requiring these two things to
remain in independent ownership as opposed to coming together,
as against the likely effect on the range of services which would
be offered and the effective competition as between the airports,
and the effective competition as between airlines using those
airports, which is the normal set of public interest tests.
Q367 Chairman: Has it changed since
1995, since that report? The market has changed. Has the view
of the Department changed?
Mr McMillan: The view that was
taken was the view of the MMC, and the MMC found that that was
the position. Clearly, there has been a change in the market.
If people felt that that had changed in a way which was anti-competitive,
it is always open to come back to the OFT in the first case to
take another look at it and see what they think.
Q368 Mark Tami: We have been told
earlier that the bid for funding to develop the City of Derry
airport is with Paul Murphy, hopefully for a decision fairly soon,
but what is the role of the Department for Transport in this?
Mr Cain: We have been liaising
quite closely with the Department for Regional Development in
Northern Ireland on the proposals that have been put forward to
improve a number of safety aspects of the airport and to address
some infrastructure enhancements, and we have been looking basically
as to the compatibility of those proposals with European state
aid. We are seeking to have discussions with the Commission on
those areas to see if we can clarify whether they are content
that the kind of proposals that have been put forward for public
funding would be compatible with the kind of state aid we are
talking about. I think it is important to mention at the moment
that there is a consultation on a range of new EC guidelines intended
to clarify that position, and that may be why we will need a little
while longer yet before we can have that conversation with our
opposite numbers in the Commission. One of the things we will
obviously be looking at with them is the extent to which any final
proposals they bring forward are actually incompatible with the
kind of things that have been proposed for City of Derry.
Q369 Mark Tami: While this is all
going on, obviously, we are told there is a threat to the Stansted
service and obviously, the position of Ryanair as well. What do
you see as the outstanding issues and when do you think we might
actually see a decision on this?
Mr Cain: If you look at the guidelines,
some of the things that the guidelines outline as being compatible
with the treaty are probably covered under the kind of proposals
there, but clearly it would be remiss of us to allow public funding
that could ultimately be regarded as illegal state aid to go forward.
At the moment the simple fact is we do not know and we want some
confirmation before any action is taken.
Q370 Mark Tami: Do you accept there
is a danger that, in the length of time that process takes, damage
may be done, and that damage may be irreversible?
Mr McMillan: I think it is the
case that Ryanair are having to take a payload penalty on the
service which they are operating at the moment to Stansted, and
that is clearly less than satisfactory for that airline, and indeed
for the airport. If you want reassurance that we are aware of
the urgency and we are trying to pursue it urgently, that I can
give you. We are certainly doing that in full consultation with
the Northern Ireland authorities.
Q371 Chairman: Have you expressed
that view to the airport and to its operators?
Mr McMillan: I have not personally.
Mr Cain: No, but we liaise closely
with colleagues in DRD, who certainly will be passing that on,
and we have pressed—in fact, we did it yesterday; we asked
again for a meeting on the City of Derry issue. Obviously, that
is in their hands. We have done it through the usual channels
and we are waiting to get an opportunity to speak to them.
Q372 Chairman: The Committee has
expressed a keen interest in this matter, and we would want to
ensure that the operator and the airport are well aware of the
views you have just expressed in terms of the speed at which you
are trying to go. It could make the difference between the sort
of catastrophe that Mr Tami mentioned happening and not happening.
Mr McMillan: We can certainly
undertake to pass those messages back.
Q373 Chairman: Are there any further
questions from the Committee? Gentlemen, thank you for your time.
We went through that rather swiftly, but I think we have got everything
down on record we wished to. Is there anything else that you would
wish to add?
Mr McMillan: I think you have
covered the ground very adequately. Thank you very much.
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