APPENDIX 12
Memorandum submitted by bmi
INTRODUCTION
1. bmi welcomes the opportunity to submit
comments to the sub-committee's inquiry into air services in Northern
Ireland.
BMI
2. bmi is the UK's second largest full service
airline and has its base at London Heathrow airport. bmibaby—a
"low cost" unit—and bmi regional are wholly-owned
subsidiaries of bmi. The bmi group operates over 3,000 flights
a week to over 90 destinations on domestic, European and transatlantic
routes. The group has a fleet of 56 jet aircraft. In 2004 the
bmi group carried over 10 million passengers.
3. bmi has been operating services to Ireland
for nearly 50 years. This is a record of commitment and dedication
which is hard to match.
BACKGROUND
4. As a group, bmi refocused its efforts
on serving the Belfast community in early 2003. bmi now offers
an eight times a day service between Belfast City and London Heathrow.
bmibaby flies to other UK and European destinations from Belfast
International Airport. In simplistic terms, Belfast City primarily
serves the business market and Belfast International primarily
serves the leisure sector.
5. bmi's current scheduled services to and
from Northern Ireland are as follows:
6. Northern Ireland is dependent upon aviation
links to the rest of the UK and Europe. There are no surface transport
alternatives without a sea crossing.
7. bmi has no current plans to alter its
pattern of service at Belfast City though, of course, the company
will respond to commercial and other pressures as and when these
arise. We are committed to serving the Northern Ireland community
as we have done with success for many years.
8. Our eight times daily service helps form
the vital link between Northern Ireland and London. The community
sees that link as important to the economic development of Northern
Ireland. In addition, the service provides a link to Europe and
beyond through interlining and codeshare services. bmi is a member
of the Star Alliance, the world's largest airline alliance. Our
links with other Star carriers at our Heathrow hub allow for convenient
connections to the four corners of the globe. This helps foster
inward investment and inward tourism, both essential for the Northern
Ireland economy.
9. The sub-committee's announcement dated
21 July 2004 stated that the inquiry would focus on four areas:
— the development of capacity at existing
airports;
— specific challenges facing Northern
Ireland as a peripheral region of the UK;
— the effectiveness of the Route Development
Fund; and
— the potential impact for Northern
Ireland of wider air transport issues on the island of Ireland.
Our response deals with these issues in turn,
concentrating on the first and third points as these are key to
bmi's business.
AIRPORT CAPACITY
DEVELOPMENT
10. As noted above, bmi refocused its Northern
Ireland operations in 2003. Prior to that, in 2001, our mainline
operation had transferred some services from Belfast International
to Belfast City.
11. Belfast International is a 24 hour operation
and has sufficient land available for growth. For bmi there are
no day-to-day or long term issues inhibiting our business or our
ability to serve the market.
12. The position at Belfast City Airport
is somewhat different. Its convenient location near the city centre
means that it is in a built-up urban area. There are physical
limitations that limit operations—primarily the short runway
length and insufficient taxiways. In addition, the airport is
subject to a planning agreement with the Northern Ireland authorities.
bmi has on several occasions noted that this agreement encumbers
our business and the ability to serve the market.
13. The UK Government's White Paper on Aviation
made several recommendations with reference to airports in Northern
Ireland. One of these was that the relevant authorities should
review that planning agreement. Such a review is now underway
and bmi has submitted its views to the Planning Agency. Our comments
are summarised below.
14. On the question of opening hours, the
2130 closing restricts our ability to provide a late evening service
from London to Belfast. bmi's last daily flight departs Heathrow
at 1940, arriving at Belfast City at 2100. This restriction restricts
the ability to do a full day's work in London or Europe.
15. Prior to moving our Heathrow services
to Belfast City in 2001 we provided a late arrival into Belfast
International Airport in order to serve the business community.
It was always our intention when moving to Belfast City to be
able to offer a similar service at this airport: ie a later Heathrow
departure affording better European connections.
16. bmi's position remains that the opening
hours restriction limits our ability to provide the service demanded
by the public and we support a reasonable extension of the opening
hours at Belfast City Airport. We fully appreciate community concerns
about increased operating hours. Yet, bmi believes that the opening
hours restriction hinders economic development in the region.
The restriction hampers bmi's ability to grow business into and
out of Belfast City in the face of unhindered competition from
other carriers operating from other airports in the region, most
critically, Dublin.
17. We are concerned that the ATM cap of
45,000 a year may become a potentially critical issue in the future
if, for example, the airport attracted new operators or we wished
to expand the range and/or frequency of our services. Whilst there
is existing headroom within the current ATM cap for minor operational
changes, the existence of a cap does limit future potential operations
and reduces the marketability of Belfast City Airport for customers.
18. bmi supports the removal of the seat
sale cap—currently 1.5 million per annum. We can see little
reason for retaining this cap, which appears to be based on terminal
operational issues rather than air traffic, runway operational
or environmental grounds. The UK Government forecasts a potential
increase to over 4 million passengers a year by 2030. The cap
will be under severe pressure well before that date, particularly
if an existing or new operator increases aircraft capacity.
19. bmi supports retention of noise monitoring
and preferential routeings over Belfast Lough subject to continued
review based on experience and operational requirements.
CHALLENGES FACING
NORTHERN IRELAND
20. Air services linking Northern Ireland
to the rest of the UK and Europe are an economic lifeline. Retention
of services must be an issue for the region. For our part, bmi
remains committed to the investment we have made to serving the
community. However, we understand that concerns remain about links
to London and Heathrow in particular. Heathrow is the UK's world
class hub and bmi believes it will remain so for the foreseeable
future.
21. But, Heathrow success is its own downside.
Slots at Heathrow are now at a premium because there is effectively
no capacity. We recognise that this raises questions as to safeguarding
of services between London and the UK regions.
22. bmi, for its part, has made a strong
case for the need to address this problem. We see the provision
of additional runway capacity as the main solution to the capacity
problem in the South-east of England. The Government's White Paper
on Aviation establishes a sound strategic framework in which that
capacity can be delivered in a sustainable way. Additional capacity,
through a third runway and, in the interim, measures to make best
use of the existing capacity—such as mixed mode operations—are
essential to ensure that Heathrow retains its position as UK's
global hub—linking the peripheral UK regions to London,
the south-east and the world.
23. bmi does not support the use of tools
to safeguard slots for regional services, such as the imposition
of the public sector obligation (PSO). Bmi submitted evidence
to the UK Department for Transport's consultation paper on the
guidelines for the use of PSO for regional air services. We made
it clear in that submission, that the best way to address the
issue is through additional capacity at Heathrow. In fact, the
use of PSO is not an appropriate mechanism for services to London.
ROUTE DEVELOPMENT
FUND
24. bmi has general concerns about the interference
of Government into the provision of air services. Providing subsidy
to private sector operators distorts the market. We are also concerned
about those airlines that remain in the public sector. In several
instances, state aid has been used to prop up loss making concerns
again leading to market distortion.
25. Nevertheless, we accept that for legitimate
public policy reasons legislators may wish to provide public funds
to support transport services meeting the public good which would
otherwise not be able to operate on a commercial basis.
26. Our understanding is that the route
development fund, pioneered by the Scottish Executive, is designed
to kick start air services using public funds to defray some of
the cost of airport charges. We note that RDF is a favoured method
of Government to help launch international routes from regional
points in the UK.
27. bmi has used the Scottish RDF scheme
to help start-up a new route between Aberdeen and Groningen in
the Netherlands. This is a good example of the type of route that
bmi believes might benefit from such assistance—ie a thin
route with some potential, connecting two peripheral regional
points. bmi regional operates the service Monday to Friday, five
times a week.
28. We have no pursued the RDF scheme set
up in Northern Ireland. We are not, as yet, aware of any significant
issues arising out the Northern Ireland experience.
29. In analysing potential routes, bmi considers
carefully the potential market and the profitability of a route.
As a private sector operator we will look to maximise profitable
routes. We do not ignore less profitable routes as there are broader
strategic reasons for maintaining these—such as network
coverage and interlining.
30. We will continue to look to grow our
business. We will examine the potential usage of the NI route
development fund, as appropriate. At the same time, we will want
to analyse the effect that RDF awarded for competitors' services
has or might have on the bmi's market share.
IMPACT OF
WIDER AIR
TRANSPORT ISSUES
31. As mentioned above, bmi finds that its
London-Belfast is in competition with services from London to
Dublin. The proximity of Dublin, which is a hub for the no frills
operator Ryanair and Aer Lingus now recast in the low-cost mould,
will continue to have an impact on Belfast City Airport's ability
to attract and retain passengers. The opening of the Dundalk-Dublin
motorway only exacerbates that position.
CONCLUSIONS
32. bmi has a long and successful connection
with Northern Ireland. Our current plans are to consolidate and,
where feasible, grow our business within the region. The planning
restrictions at Belfast City are a hindrance to growth at that
airport and we look to the relevant authorities to carefully consider
easing some of the restrictions.
33. We recognise the importance of air travel
to Northern Ireland and we believe our company provides a valuable
economic input. We are concerned that new subsidised services
may have an increasing effect on the air travel market. bmi does
not believe that subsidies are appropriate except where absolutely
necessary.
34. We look forward to continuing to serve
Northern Ireland in the future and we will work with the community
to help provide the right air travel package to the region.
1 February 2005
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