Examination of Witnesses (Questions 40-60)
5 MAY 2004
MR MIKE
TOMS, MR
STEVE HARDWICK,
MR ALAN
CRUICKSHANK, DR
JONATHAN BAILEY
AND MR
KEITH JOWETT
Q40 Mrs Ellman: Does that mean that you
are satisfied with the negotiations?
Mr Cruickshank: We are satisfied
with the end result on this technical amendment. In the sense
it has allowed the situation to continue, yes, we are satisfied.
Q41 Mrs Ellman: Does that suggest that
the present mechanisms can work, and do work, in most cases?
Mr Toms: The present mechanisms
do work in the sense that they allocate slots and slots are allocated
effectively. The challenge is to make sure that if there is a
legislative change it improves the allocation system rather than
damaging it, which is the objective we set ourselves and why we
were pleased we got the outcome we did, because the alternative
would have been more damaging.
Mr Jowett: I think your question
was really aimed at do the Community processes work, in which
case we might say about the slots regulation that it could have
fallen because of objections from numerous states who saw no benefits
in secondary trading for their own states and had to be persuaded
that there was a necessary case for the UK alone. On this occasion
they were so persuaded, but it is easy to see circumstances in
which they would not have been persuaded and might not be in the
future. That just makes our case about one size not fitting all.
The situation in the UK, particularly on slots and congested airports,
is particularly unique and it needs a particular solution and,
in our view, the Community should restrict itself to dealing with
matters of principle and framework legislation, leaving the individual
states to interpret that appropriate to the local need.
Q42 Mr Stringer: On that point, the last
time we had representatives of the Commission here, they told
us that what they objected to about the secondary market trading
in slots was that it was not transparent. Does that mean that
it is now transparent?
Mr Cruickshank: It is not as transparent
as a number of people within the industry and within Government
want it to be. The existing situation is continuing with the amended
regulation but a number of people, including ourselves, are looking
to see how we can make that process more transparent.
Q43 Miss McIntosh: Mr Toms, you spoke
at the opening about the staffing of the Commission. It is possible
for national administrations to second national experts. Would
not a way forward be for each main administration to second as
part of a negotiating committee within the Commission a national
expert? You said that there is not much prospect of having permanent
staffing levels increased within the aviation division of the
Commission.
Mr Toms: There must be scope for
more secondment. There are real experts out there that the Commission
should try and obtain from national governments if it can.
Q44 Miss McIntosh: Have you argued that
case with the present Government?
Mr Toms: We have informally discussed
it with the present Government; we have not made an enormous play
of it.
Q45 Chairman: Mr Toms, it is not very
realistic to assume that the Commission, which already employs
vast numbers of civil servants of its own, is going to happily
adopt other people's national civil servants, not without some
enormous sea change, which certainly I see no sign of?
Mr Toms: My understanding is that
there are some national civil servants seconded into the Commission
at the moment and that there should be scope for doing more, particularly
where it is a question of building up expertise in the permanent
staff.
Q46 Miss McIntosh: Mr Jowett, in your
written memorandum you referred to the cost to industry incurred
by reviews such as that recently on the Ground Handling Directive
where there may be no certain benefit going to the consumer. How
do you address that particular issue? Who absorbs the costs?
Mr Jowett: The individual industry
members absorb the costs, particularly, I suspect, the larger
companies because they have the large resources available to address
the issues and to respond. The trade bodies, like ourselves, get
very actively involved over a long period of time on these issues
but this is being multiplied by twenty-five times across Europe.
The concern with the Ground Handling Directive is that it has
not been in the view of many in this state fully implemented to
date elsewhere in Europe. We do feel that there should be some
motivation on the Commission to ensure its effective implementation
across Europe before it gets involved in more detailed and potentially
destructive reviews. The initial proposals that are coming out
of the review look as though the Commission is intending considering
cascading the Ground Handling Directive down to smaller airports,
which would multiply its impact across Europe many times, and
that would be a significant cost to airports in the one million
to two million category where they are usually struggling just
to get to that serious breakeven, serious player level and this
would hit them hard in achieving that.
Q47 Miss McIntosh: Finally, Dr Bailey,
if you take the Air Service Agreements as regards the overall
impact on Manchester, whether it is an Air Service Agreement with
the US that hopefully will include cabotage or fifth freedom rights
with Pakistan and Singapore, what will the net impact be of those?
Will they be broadly similar on an airport like Manchester?
Dr Bailey: In terms of getting
traffic rights for, say, Pakistan International Airlines, you
mean? In terms of the US, that is open for us, so if the EU negotiates
a more liberal agreement with or without cabotage, the impact
on Manchester would be less than if there were a greater number
of Open Skies agreements with other carriers simply because we
have got further down the track of liberalisation. A daily service
from Manchester to the States operated by a foreign carrier runs
into millions of pounds a year for us in terms of the benefit
and it is roughly equivalent whichever airline is operating, provided
they are successful and attract sufficient traffic.
Miss McIntosh: Have you as an industry,
particularly in regards to Air Service Agreements, had time to
assess the implications of the merger of KLM with Air France?
Chairman: We want to move on from this.
I assume all those shakes of the head mean no.
Q48 Mr Donohoe: Can I continue with the
negotiations and the fact that there is a change in the bilateral
negotiations, or an intention. What do you see as the advantages
to shifting from national to the EU in particular to conduct the
negotiations with the US?
Mr Toms: My colleague from Manchester
may want to add to this. All other things being equal, Europe
in total should be a stronger negotiating partner than any individual
national government because it has more to offer on the table
and, therefore, should be able to take more back. In principle,
I see that as being one of the great strengths of Europe negotiation.
However, in practice the test will be whether Europe is as strong
as its strongest nation at the negotiating table or as weak as
its weakest nation and that has yet to be tested. So far we get
no clear signal out of the negotiations with the Americans but
we are very open-minded on that outcome yet.
Q49 Mr Donohoe: Why do you believe that
will be a better way of going forward? In addition to what you
say to get to a solution, given that all the interests there are
across Europe attempting to do something and get agreement out
of that, do you honestly think you are going to get that?
Mr Toms: As I said, it is too
soon to judge. There are two powerful forces pulling here. There
are those states who will want a settlement on relatively unadvantageous
terms because they have particular national interests in the short-term,
and other states who will want to hold out for the best.
Q50 Mr Donohoe: Why has the EU failed
at this stage in terms of securing agreement?
Mr Toms: Can I put the question
the other way round and say one of the most important points is
that the EU has not failed in the sense that it has not given
away an agreement that will be disadvantageous to Europe and,
if you like, that is at least a minimum position which should
give us some temporary comfort. Whether or not it will carry this
forward remains to be seen.
Q51 Mr Donohoe: Some of the Members States
have already got agreements, have they not?
Mr Toms: They have, yes.
Q52 Mr Donohoe: Therefore, it should
be simple in that sense to get the remainder and have that settled
earlier rather than later?
Mr Toms: It should, except for
the fact that for those states that do not have agreements what
is left on the table are very significant items indeed. On the
United States' side there are very large issues about ownership
and control which go to US domestic politics which are very difficult
negotiating issues for the Americans. On our side, of course,
there are issues such as Heathrow access and Community designation
which are also very big outstanding issues.
Q53 Mr Donohoe: When do you expect this
agreement to be concluded?
Mr Toms: Frankly, it is impossible
to say. There is an old saying about war between Russia and China
being inevitable but inconceivable and I think settlement between
the EU and the US is in the same category.
Q54 Mr Donohoe: I have asked this question
before and the answer has not been satisfactory, and that is not
your fault, but is it not possible in the circumstances that in
trying to get this settlement sooner rather than later that if
what we get is a weaker agreement than we otherwise would get
it would be a failure of the whole concept of having the EU negotiate
rather than the UK negotiate?
Mr Toms: If that happens that
would be a failure. That is the eventuality which we all have
to be alert to.
Q55 Chairman: Are you afraid that the
European Commission will give away its strongest card in order
to get some kind of agreement? That is what we are really asking.
Will they be prepared to accept any agreement even if it is not
as good as the one that the individual states had before in order
to get an agreement?
Mr Toms: You cannot discount the
possibility. It requires eternal vigilance on behalf of national
governments and members of the industry to make sure that does
not happen.
Q56 Mr Donaldson: Just following on from
those answers on the question of an agreement with the US, do
you feel that the governments of the Member States within the
EU and the aviation industry are sufficiently involved in those
negotiations?
Mr Toms: I will get my colleague
Mr Cruickshank to comment more on this because he has actually
been at the negotiating table here, but perhaps I can just give
you an overview. I think the governments of the European Union
are pretty actively engaged in this issue because they all have
significant national interests at stake. One of the problems is
that their national interests are slightly different.
Mr Cruickshank: Perhaps I can
move on to the second part of your question and say that, as industry
representatives, we would like greater opportunity to observe
and to some extent take part in those negotiations, but on a reality
test we accept and understand why we might be excluded, because
it would be very difficult for hard negotiations to take place
with such perhaps a plethora of interests in the room, so we would
like more, but we reluctantly accept that that is the way it is.
Q57 Mr Donaldson: How does your involvement
at the moment compare to your involvement when there were bilateral
agreements negotiated by the UK?
Mr Cruickshank: Our involvement
is less. Perhaps Dr Bailey could add to that, but our involvement
at the moment is less.
Dr Bailey: It is less because
individual companies cannot be represented at the EU and you have
to go as a trade association, so airports are represented by the
ACI, and Alan sits in that arrangement, whereas with the UK negotiations
it is perfectly acceptable for British airports to attend negotiations,
although, by and large, they would attend only a few of the most
important ones at that level.
Q58 Mr Donaldson: What do you think might
be the effects of liberalising access to Heathrow on the European
aviation industry as a whole?
Mr Toms: I will give a broad comment
on that and my colleagues may want to join in. As the Committee
is well aware, the biggest issue about liberalising access to
Heathrow is the limit on Heathrow's capacity and what it says
for how that capacity will be used, whether it can be used more
effectively by more US service coming into Heathrow, bearing in
mind that up until such time as there is additional runway capacity,
any additional service to the United States will potentially displace
other valuable service, but it is difficult to speculate. We know
what a lot of the individual operators would like. US airlines
currently excluded from Heathrow would like to get in and that
would increase the level of US service and that, in turn, would
probably reduce fares on the US, but of course there would be
knock-on consequences for non-US services, including, for the
sake of argument, short or regional services, so you can see a
general shift under that over time to more long-haul.
Q59 Chairman: So you can get in from
Cincinnati, but not from Belfast?
Mr Toms: Well, I would not speculate
on a situation where Belfast is not served to London, Madam Chair,
but the general proposition that under liberalisation there might
be more long-haul and less short-haul is pretty difficult to contest.
Q60 Mr Donaldson: So it is possible that
regional services within the UK might suffer in terms of access
to Heathrow in order to accommodate the impact of opening up access
to the US and other carriers?
Mr Toms: I think you have to say
that there is that possibility, yes. It depends very much on the
terms under which any liberalisation is agreed. Liberalisation
would be much easier to accommodate at Heathrow if it took place
in a phased way over time rather than if we were faced with, I
think it is, all 16 US services from Gatwick landing at Heathrow
on one morning.
Chairman: Thank you very much, gentlemen;
you have been very helpful and I am very grateful to you all.
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