Examination of Witnesses (Questions 1
- 19)
WEDNESDAY 2 NOVEMBER 2005
MS KAREN
BUCK MP, MS
SANDRA WEBBER,
SIR ROY
MCNULTY
AND MR
RICHARD JACKSON
Q1 Chairman: Good afternoon, Minister,
ladies and gentlemen, may I welcome you most warmly to this Committee.
This is your first blooding so, of course we shall be very gentle
with you, as is our wont. Can I ask you to identify yourself and
your colleagues?
Ms Buck: My name is Karen Buck
and I am the Parliamentary Under-Secretary responsible for the
aviation area. This is Sandra Webber, the official who leads on
this area.
Sir Roy McNulty: I am Roy McNulty,
Chairman of the CAA, and on my left is Richard Jackson who is
the Director of the Consumer Protection Group in the CAA.
Q2 Chairman: Am I to take it, Minister,
that you wanted to say one or two things to us before we begin?
Ms Buck: If that is okay, I will
perhaps make a few very brief opening comments. To start, I am
very pleased to be here and I want to say how grateful I am to
the CAA for the work that they did in preparation for this decision,
and I do understand (although it will be for Sir Roy to make his
own comments) that there will have been disappointment at the
CAA about the decision that we came to. The decision was not made
by looking at the work of the CAA and basically criticising and
deconstructing it; it was very much a question of saying: "Here
is an excellent piece of work, a very sound piece of work, setting
out the arguments for the levy", but that when it came to
focusing on that decision, which we did, as you know, in the preparation
for the Civil Aviation Bill, we felt that it was right to take
effectively a different approach; that it was really very much
in the context of the Better Regulation Framework, and that said
despite the undoubted advantages of the CAA's proposal in terms
of simplicity and in the comprehensive nature of the consumer
protection, we felt that, effectively, the problems that exist
in this area did not merit an approach based on compulsion. We
felt that, as the Better Regulation Taskforce Outline suggested,
it was more important for regulation to only be very much focused
on specific risk. In this case the level of risk—and there
is a level of risk—did not warrant a 100% compulsory levy.
We felt that we do not require insurance to be taken out in other
areas of life (and I am sure there will be some questioning along
those lines), but that as the travel market has changed so much
over the course of the last decade it really was very much now
for an increasingly independent-minded travelling public to make
their own decisions. We felt that whilst the CAA's proposal suggested
areas of inequity they would be replaced by other areas of inequity
and people would be paying the same levy if they were on a cheap
flight to Dublin or Prague as they would for a luxury package
holiday, and that there would also be the other inequities of
the system that people would be covered for insurance purposes
for an airline collapse but not necessarily for other elements
of the holiday package that they would have assembled independently.
So, in the end, on balance, we decided to go for the more deregulatory
approach. The three areas that we are concentrating on now and
for the future are how we can improve awareness and education
for consumers in the voluntary context (I will not go into detail
on that as I am sure people will want to ask questions on this);
that there are various options for cover that we want to promote
understanding of; that there is an arrangement around repatriation,
and we have had meetings already with a number of different airlines
to discuss improving the deal on repatriation, and then, of course,
also, the Committee will understand, the two sides of industry,
broadly (with some exceptions) came down on different sides: the
tour operators favouring the levy, the airlines not favouring
a levy. In recognising that the tour operators and package operators
would feel that they were left with a burden, the CAA has now
been asked—and we may want to discuss that more—to
review bonding. We hope with those initiatives under way and now
progressing that we will be able to move towards better consumer
protection but in a lighter touch and deregulatory framework.
Q3 Chairman: Can I ask you one or
two factual questions before we get on to these aspects (and the
various points you raise will undoubtedly be covered)? You did
not reply originally (you being the department) to our report,
and you said that you were asking the CAA to undertake some research.
They then did that. Am I to understand that having got their report
you totally re-jigged the terms of reference but did not ask the
CAA to do another inquiry; you simply said: "No, we do not
think that is a very good idea"?
Ms Buck: What we did was take
the work the CAA produced—as I say, I am not here to start
picking holes in that—and say here was a proposal in the
round. I can understand where that is coming from, it makes complete
sense in its own terms but is that the approach that we want to
go down?
Q4 Chairman: What you are saying
is that although that was presumably the kind of idea you put
to the CAA originally, you changed the terms of reference when
you got their report?
Ms Buck: I am not quite sure what
you mean by "terms of reference" in this context.
Q5 Chairman: Originally, the reason
that we did not get a reply—and this Committee were quite
relaxed about it—was that you informed us you were going
to ask the CAA to look into the question (presumably all aspects
of the question—I do not think you limited their inquiry)
and give you advice on how you should proceed, and that would
cover things like the inequity not just between the ATOL members
and the non-ATOL members but between people who bought their packages
one way and people who bought them another. Are you saying to
me you that you got that reply, you looked at it and you said:
"This is not right; it is not in-depth enough, we need a
different approach", but you did not go back to the CAA and
ask them to do it again, you simply said: "No, we don't accept
this"? Is that right or wrong?
Ms Buck: I would not phrase it
like that. I would say—
Q6 Chairman: I do not think we need
worry about the words, it is the result. Is that what happened?
Ms Buck: I think it kind of matters
because I do not recognise that as the approach. We asked for
a piece of work, the work was done, it was an entirely sound and
sensible piece of work—
Q7 Chairman: So good you ignored
it.
Ms Buck: In looking at that and
looking at what was an unfolding debate around the regulatory
framework we took the decision to go down a different approach,
not to criticise or undermine that work.
Q8 Chairman: I do not think we are
too worried about your relationship with the CAA; they are big
boys, I think they can probably recover if they feel you are being
unfair. Let us ask Sir Roy before we go any further. Do you want
to tell us briefly the main relevant findings of your report into
the collapse of EUjet?
Sir Roy McNulty: From our point
of view it confirmed the findings and the modelling that we had
done over last winter and into the spring that people would get
back but it would cost them significant amounts of money and cause
them both inconvenience and distress, not least due to the lack
of information as to what had happened to the airline they thought
they were going to return on. In other words, it was a bit of
a mess. The costs that people incurred were very close to the
modelling work that we had done with Ernst & Young over the
winter. So it worked out as predicted.
Q9 Chairman: So they did not realise
they were not protected against the failure of the airline?
Sir Roy McNulty: Absolutely. Between
60 and 70% of the people either did not know or actually believed
they were protected.
Q10 Chairman: Did they have to pay
additional fares to get home?
Sir Roy McNulty: They paid additional
fares. Easyjet for one week made a £25 flight available but
the big problem for most of those people coming from Kent was
that Easyjet took them to some place a long way away from Manston
and the surface transport to get them back home cost them, on
average, £100 per group of passengers.
Q11 Chairman: Do you want to tell
us approximately the percentages of who did what? Who got the
cheap flights for £25 in one week and who got the others?
Sir Roy McNulty: Can I ask Richard
Jackson, who has the detail to hand?
Mr Jackson: I am not sure I can
answer that question.
Q12 Chairman: Approximately.
Mr Jackson: We did a survey. What
exactly are you trying to find out?
Q13 Chairman: Tell me what happened.
In this group of passengers, what was their average payment, how
many of them got one scheme and how many got another?
Mr Jackson: About 16% of people
abroad were able to get back on the cheap schemes for £25.
Of those who did not return on the day they intended to, half
cut their holiday short to take advantage of that scheme because
the special offers were only open for a week. The airlines other
than Easyjet who offered cheap flights took relatively few passengers.
Our estimate is that about 53% of those stranded eventually came
back with Easyjet in some shape or form, paying a variety of fares
depending on how they had booked.
Q14 Chairman: We are assuming it
was at least £100 to get back to Manston.
Mr Jackson: Yes. It turned out
to be about £100 to get back to Manston; the model predicted
that there would be a considerable cost to get back to the original
airport.
Q15 Chairman: Sir Roy, are the airlines
that offered rescue packages to EUjet customers likely to be able
to point to some benefit to themselves from doing so?
Sir Roy McNulty: I would guess
so in the sense that they presumably filled seats that would otherwise
not have been filled.
Q16 Chairman: Did you have any indication
that EUjet was going to collapse?
Sir Roy McNulty: No, we did not.
I should make it clear that EUjet is an Irish registered airline,
looked after by the Irish Aviation Authority, and is not an airline
we deal with.
Q17 Chairman: We understand that,
but do you not have a watching brief if there is something wrong
with a particular body?
Sir Roy McNulty: We do.
Q18 Chairman: Had there been any
rumours? It was flying mainly out of British airports.
Sir Roy McNulty: There had been
rumours but no hard information. It was an odd situation with
the interlocking ownership between the airline and the airport,
which makes one wonder what the viability of the enterprise was.
Q19 Chairman: You think there might
have been some creative Irish accounting?
Sir Roy McNulty: I think it is
possible. It certainly was not very sound Irish accounting.
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