Examination of Witnesses (Questions 140-159)
5 MAY 2004
SIR ROY
MCNULTY,
MR JOHN
ARSCOTT, AND
MR ALEX
PLANT
Q140 Mrs Ellman: So that is what you
meant?
Sir Roy McNulty: Yes. An example
of that is the Maastricht control area which stretches across
Germany, Holland and Belgium. They have an arrangement, albeit
specific to that area, to handle things in common in a regulatory
sense. I think if the Single European Sky is successful and that
kind of common management of air traffic areas comes to pass,
there will be a greater need to have common approaches to economic
regulation, safety regulation, and airspace management.
Q141 Mrs Ellman: So how would you see
the role of the Civil Aviation Authority changing?
Sir Roy McNulty: I think, as is
beginning to happen with the European Aviation Safety Agency,
there will be a redefinition of what we do. There will be some
things we do at present which will be done centrally in Europe,
but a lot of the detailed implementation will remain with the
national authorities.
Q142 Mrs Ellman: Could you indicate which
things you think will move away from you?
Sir Roy McNulty: I think already
with the Single European Sky programme they are setting policies
which will be common across Europe for air traffic management
in a number of senses. They probably will set some standards for
interoperability and things like that, so our discretion and total
control of those things will no longer be here in the United Kingdom.
Q143 Mrs Ellman: So what would the role
of the Civil Aviation Authority be? Would it still be needed at
all?
Sir Roy McNulty: The role of the
Civil Aviation Authority will be to provide an expert input into
the deliberations that lead to these common standards, and then
to make sure they are properly and officially applied within our
own sphere of influence.
Mr Arscott: In this whole debate
one has to consider the sovereignty issue and the involvement
of the military who are excluded from the Single European Sky
but have to be brought in through national arrangements, and that
is what the governments have agreed. Clearly a body like the CAA
is ideally placed to bring those interests of all air space users
to bear and to take them forward into the European forum as a
single activity.
Q144 Chairman: When these things like
administrative arrangements, control of airspace and its provision,
and all aspects of interoperability move away from you, will you
become a much smaller organisation?
Sir Roy McNulty: I would expect
so, yes.
Q145 Chairman: And you would expect,
for example, air traffic to be controlled not by you but by some
European institution?
Sir Roy McNulty: Not in so many
words. As I was trying to explain earlier, I think there will
be a division of activity between rules set centrally and local
implementation, so I think we will retain a degree of influence
but not the total control of these matters that we have had heretofore.
Q146 Chairman: For example, are the CAA
safety regulations accepted in the European Aviation Safety Agency
(EASA) regime?
Sir Roy McNulty: We are comfortable
so far with what we have seen the European Aviation Safety Agency
(EASA) coming up with. Largely they have accepted the standards
and rules that had previously been set by the JAA. We are satisfied
with the regulations they have so far issued, but so far they
have only begun their task. As I said, it will be probably 8-10
years before they cover the whole of aviation.
Q147 Mr Stringer: Can we go back to negotiations
with the United States, because I am slightly puzzled having listened
to Virgin and British Airways. They were very unhappy about what
the European Commission were prepared to accept in terms of the
agreement between the United States and the European Commission,
yet you seem to be willing to accept it. Should you not, in your
role as the CAA, be saying very loudly to the European Commission
that what they are doing is not acceptable?
Mr Plant: I have not heard anybody
from the Commission who says they are prepared to accept the sort
of deal the United States have outlined. I have not heard that
from them so that, I think is unfair. In fact, what the Commission
have said, and indeed Madame de Palacio has said publicly on this
issue, is that the current deal offered by the US is just not
good enough.
Q148 Mr Stringer: So you do not think
they are trying to rush to come to a conclusion on the deal?
Mr Plant: I hope not. It is a
risk that we in the CAA have identified, and we have been saying
very loudly, as have many members of the Special Committee of
Member States that advises the Commission negotiating team, that
rushing to an early deal would be short-sighted and harmful to
the interests of United Kingdom aviation and EU aviation. What
is more important is to get a good deal rather than an early deal.
Q149 Mr Stringer: And what response have
you had, because our other witnesses have not had that impression?
Mr Plant: As I said before, the
Commission seem to be keen to try to keep the negotiation going
forward but they recognise the point we have made. They have said
to the US that there has to be something additional on market
access, either through something like cabotage or through a change
on ownership rules which currently restrict EU ownership of airlines
in the US. Indeed that has been part of the press releases that
the Commission have put out at the end of each round of negotiations.
So, there is a risk there and it is a fear understandably and
one we must guard against, but I have not seen anything from the
Commission that says they are going to accept the current US deal.
Q150 Mr Stringer: "Or" is a
huge word in that sense. Are you saying that the Commission are
likely to accept either a change in ownership rules, which would
allow European operators to own more of American airlines, or
freedom to supply within the US but not both?
Mr Plant: I think at the moment
the US have said they would not accept either.
Q151 Mr Stringer: We understand the United
States' position, but what is the European Commission's position
and the CAA's position in relation to that?
Mr Plant: Looking at the European
Commission's position, clearly there is an element of difficulty
because they are in the middle of a negotiation so being very
hard-line about what they would or would not live with is something
they have been keen not to do, but their statements have said
there must be something that improves market access for the EU.
The CAA view has been that either there has to be something like
freedom to fly within the US, the sort of cabotage rights that
we have talked about, or there has to be a shift in ownership
and control rules. The CAA view has been that, if you are going
to get a liberalised deal with the US, it is unlikely you will
get everything in one go and it probably needs to be a phased
deal. But what will be crucial is for that first phase to be a
big enough step to represent a balanced deal, one which is good
news for United Kingdom and European airlines. That has to mean
the US giving more than they are prepared to at the moment and,
if they do not, the CAA view is that we should not accept a deal.
Q152 Mr Stringer: So we would, or you
would, be prepared to accept an asymmetric deal in which the Americans
would own a larger chunk of European airlines and the European
airlines could own American airlines, with freedom to fly in both
places?
Mr Plant: We have not considered
something as detailed as that.
Q153 Mr Stringer: With respect, that
is not a detail. Those are the two fundamental issues in the negotiation.
Mr Plant: What I think we would
be wanting to see is a balanced deal. To my mind that means there
has to be some give from the US, and to my mind that is more likely
to be on ownership. I think the cabotage issue is more difficult
and less likely to be delivered because of the political situation
in the US. On ownership there is more potential for the US to
move, and I have not been taking a position where I would countenance
an unbalanced deal on ownership. I have been imagining something
which allows ownership restrictions to be lifted on a reciprocal
basis. Currently the US has a 25% foreign ownership limit and
the EU 49%. Fifty-one% both ways would be an excellent result
because it would be a first step towards a fully liberal arrangement
between the EU and the US.
Q154 Mr Stringer: I am still not sure,
so I will ask the question one last time. Would you be willing
to accept different ownership regulations for European/British
owned businesses in the United States than American businesses
have here, different rights, or different rights for cabotage
between the European Union and United States?
Mr Plant: It would have to be
considered in the context of what the total deal was, and the
reason I am being hesitant is I am trying to think through exactly
what it might mean. What strikes me as possible is that the US
could say, "We are prepared to go to 51% ownership"
which would allow European operators to set up an airline in the
US, for example, or take over an existing US airline. But the
US airlines already have, as you will be aware, very considerable
rights to fly within Europe on a kind of cabotage basis, so that
is an existing imbalance. I could probably think of something
like that where the US opening up their ownership restrictions
and maintaining their ability to fly within Europe, so there was
still an imbalance of sorts as the EU would not have cabotage
rights in the US. But, crucially, what would be different would
be that EU companies would have a way of accessing the US domestic
market which currently is completely closed off to them. They
would have to do it in a particular way; they would have to go
and buy up an airline or set up a subsidiary or something, but
it is a way in and I could probably live with something like that
even though there was still an imbalance.
Q155 Chairman: That would, of course,
require a change in legislation.
Mr Plant: Yes, it would, and that
is the most difficult element of this and, as the US negotiators
spend no little time telling us, they have to get Congress to
agree and that is a very difficult process.
Q156 Chairman: And there is absolutely
no indication whatsoever of any change in the situation.
Mr Plant: That is probably right.
We carry on trying to lobby and speak to Congress—
Q157 Chairman: But you will understand
what I am saying to you, will you not? You are saying it is simply
a 2% in the negotiating procedure—
Mr Plant: It is a huge difference.
Q158 Chairman: It is an enormous change
and America is maintaining, from the American point of view very
successfully, protectionist policies that mean that would require
a legislative change through both houses, who in the past have
made it very clear that they have no intention of doing anything
of the kind.
Mr Plant: Yes, as indeed would
a move from 25 to 49% which they are currently tabling, and that
is a difficult hurdle, but I think it is important that we do
not sign up to anything until we are clear that a real change
in market access has been delivered.
Q159 Chairman: Precisely. In other words,
we must not give anything away until we know what we are getting.
Mr Plant: I agree.
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