Select Committee on Transport Minutes of Evidence


Examination of Witnesses (Questions 160-179)

5 MAY 2004

SIR ROY MCNULTY, MR JOHN ARSCOTT, AND MR ALEX PLANT

  Q160 Mr Stringer: Sir Roy, last time you were here you sent us a note explaining that your costs as regulator to the aviation business have gone up higher than the rate of inflation. Is not the conclusion we can draw from Mrs Ellman's question that not only have your costs been going up for regulation in this country, but there will be an extra cost of your European regulation on top of that, and what are you going to do to cut those costs?

  Sir Roy McNulty: I think the discussion we had last time related to a particular aspect of our regulation which is the regulation of airports, and that is very much governed by the cycle in which we do the regulatory reviews. At times it is lower, and at times it is higher when there is a lot of activity. I think the CAA's costs overall have been coming down in real terms. There is an issue to which we do not yet know the answer as to the effect of something like the European Aviation Safety Agency (EASA), where you are creating at a European level a new layer of regulation and the national aviation authorities still have responsibilities to exercise. The CAA is unique within Europe in that we recover all our costs from the industry, so we have a very active dialogue going on within the industry. I think the airline representatives earlier referred to a joint review which we are undertaking with them as to what will be the effect of the European Aviation Safety Agency (EASA), when will it happen, and what should the CAA be doing to reduce its costs in that situation. Many of the answers to that are not available today because there is not enormous clarity as to how fast the European Aviation Safety Agency will evolve, but we are conscious of the need to keep our costs to the industry to a minimum. We share a lot of data with the industry as to what our costs are, and we will continue to work at that to provide the best value for money that we can.

  Q161 Mr Stringer: The previous witnesses we had before us today all identified a prejudice against aviation within the European Commission. They do not believe they have a level playing field compared to inland waterways or rail. Do you agree?

  Sir Roy McNulty: I think we can detect that at times and, frankly, even within this country as well. Some people have prejudices as to which kind of transport is better than others. Because aviation is relatively successful, both economically and in terms of growth, some people see it as a fair target to receive their pet schemes. I would agree with what one of the airline representatives earlier said, that we would like a level playing field both within Europe as between different modes of transport and, indeed, within this country.

  Q162 Mr Stringer: And what are you doing to try and achieve that?

  Sir Roy McNulty: We represent as best we can within Europe the views we have concerning the development of the aviation sector and, as has been mentioned several times in this session, the European Commission has a lot of catch-up learning to do on aviation matters. Similarly within this country we express our views as best we can, both to the department with which we principally deal and also more broadly and publicly, that if there are issues which are common to different transport modes they should be dealt with commonly.

  Q163 Mr Stringer: You have said that when there is a European regulatory framework you trust and hope that that will be implemented evenly throughout the 25 countries of the European Union. Why should aviation be different from virtually every other area of regulatory activity within the EU?

  Sir Roy McNulty: I accept that as partly rhetorical. All I can say is that I think we have a reasonable hope that it will be better than what we have at the moment, because while a lot of good work has been done by the JAA to set common standards, in a number of countries the application and implementation of those standards leaves a lot to be desired—a great deal to be desired. I think the clear intention of the European Aviation Safety Agency (EASA) is to ensure not only common rules but also much more common implementation; there will be an audit mechanism which, from initial signs, will be an effective one to check how implementation is going, so we will have something to bolster implementation which we have never had before.

  Q164 Clive Efford: I am tempted to ask you what we can do to improve the Commission because each and every one of our witness has questioned the breadth of knowledge that the Commission has in this area, but I think I will pass on that and leave it on the table as a rhetorical question! What is the CAA view of the application of public service obligations under EU legislation to protect United Kingdom regional routes to Heathrow and Gatwick?

  Sir Roy McNulty: As you know, the Department is in consultation on this. The White Paper said that the Department would look afresh at the use and application of public service obligations (PSOs) within the United Kingdom. We in the CAA would tend to see public service obligations as a bit of a last resort but at the same time we recognise that leaving things open to the commercial market does not provide all the answers. We will submit our evidence to the Department as part of this consultation, and hopefully by later this year the Government will have arrived at some greater clarity on the way forward.

  Q165 Clive Efford: What about this issue in terms of EU legislation and how that has an impact?

  Sir Roy McNulty: The consultation being undertaken at the moment is within the current EU framework where there is the opportunity to introduce public service obligations. It is widely used in some countries like France; less widely used in other countries.

  Q166 Clive Efford: With the potential delay of ten years before there is a new runway at one of London's airports, will the CAA use this regulatory oversight to ensure the United Kingdom is able to maintain a balanced network, and could the EU trans-European network programme be used to achieve this?

  Sir Roy McNulty: I am not aware of anything in the trans-European network programme that is going to impact on that issue within 10 years. I think the only area where it is likely to come into play is within the context of the Single European Sky and perhaps the development of common air traffic control systems. There is some talk about trans-European network funding being used to assist that but that is the only case I know of.

  Q167 Clive Efford: What about in the more congested areas around Heathrow and Gatwick?

  Sir Roy McNulty: I am not aware of any discussion in that context. In so far as there is a solution in the near term to air traffic control capacity in the south east, it will come through the investment and efforts within National Air Traffic Services (NATS) to bolster their capacity in the next 5-10 years.

  Q168 Clive Efford: And is there any scope for the EU to intervene in your charging to BAA in terms of the pressure on you to accelerate their investment programme?

  Sir Roy McNulty: That certainly has not been the case to date. Obviously the investment programme that BAA have at the moment in Terminal 5 is being funded through the charges levels we set at the moment. As and when they come forward with projects to expand capacity at Stansted and/or Heathrow, then obviously the charges we set will be set at levels that allow that investment to be paid for.

  Q169 Clive Efford: And that will be done purely on the basis of your judgment?

  Sir Roy McNulty: That can be done within the existing regulatory regime which we operate under statutory provisions here. It is not a European scheme.

  Q170 Chairman: Sir Roy, you said that public service obligations are a bit of a last resort. Have you seen the advice that has been given to government in relation to charging at airports by the National Economic Research Association?

  Sir Roy McNulty: No, I have not seen that.

  Q171 Chairman: It is quite important because it is suggesting that European airports are under-used, and one way in which you can increase the use of airports is to develop a market slot, and presumably allow people simply to bid and the highest bidder will then get the slots they want at the airports they want. That must have quite an effect, must it not? The consultants are reporting to the European Union to the effect that any European airports could be significantly reorganised on the basis of that kind of open slot market?

  Sir Roy McNulty: As I say, I have not seen it.

  Q172 Chairman: Have you seen it, Mr Plant?

  Mr Plant: I have seen the NERA report. I have not read it all, I must admit, because it is quite long, but I have read some of it and have heard a presentation by one of the authors which explained some of the headline messages.

  Q173 Chairman: And what would be your view of that report and its conclusion?

  Mr Plant: Certainly the position that the CAA have taken on the desirability of having a secondary trading market in slots is one that the NERA report seems to broadly support, so I would to that extent be in agreement with that element of it. Where you have a scarce resource, as at Heathrow, having a fluid secondary market would seem a better way of allocating—

  Q174 Chairman: And therefore, in general, you would agree with the idea that only larger planes which are fully booked and are capable of doing long haul trips would be preferable, because that would automatically of course impact on any regional air flight, would it not, and Sir Roy has just told us that he thinks public service agreements are bit of a last resort.

  Mr Plant: There would be an impact. Our starting point would be to say that where you have a scarce resort like that you need some way of trying to see how you can most efficiently use it, and the starting point would be to say—

  Q175 Chairman: I know where you are starting from. I am only interested in where we are going to finish up.

  Mr Plant: Clearly, if you have a market in slots it does not necessarily deliver everything you might want.

  Q176 Chairman: I think we could say that, after 18 years of Conservative transport policy.

  Mr Plant: There may be some areas where the market does not deliver you what may be a desirable outcome, but it is a good place to begin because it allows those who value the slots most to use them so you get a more efficient usage at the starting point, but it does not necessarily give you everything you want.

  Q177 Chairman: Would you agree that QANTAS, for example, paid £10 million recently for their slots?

  Mr Plant: There was pay such an amount paid for slots at Heathrow. If you had a more fluid, proper secondary market, part of that value may be driven down further compare to the current quasi market we have in place.

  Q178 Chairman: You mean they might only have paid £5 million instead of £10?

  Mr Plant: Possibly. Once you have a market in place you have a way of better dealing with the beginning position. But to come to your end position, as Sir Roy said, we recognise that in not every case would it deliver everything you want, and that is why you might want to look at whether you can use public service obligations in certain circumstances.

  Q179 Chairman: Would you be discussing anything like that with the Commission who, after all, have no experience of this at all, do they?

  Mr Plant: We have rather more been discussing with the Government about how the forthcoming consultation will be framed, and we will be putting our views into that consultation when it comes out.


 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2004
Prepared 19 May 2004