Forewarning?
62. It is clear from the evidence we received
that there were concerns over the viability of EUjet before its
collapse. When asked if there were indications that the company
was going to collapse the Chairman of the CAA said "No, we
did not."[110]
This may have been strictly true but was not the whole story.
Sir Roy also told us that "There had been rumours but no
hard information."[111]
63. The company was not regulated by the CAA however
but by the Irish Commission for Aviation Regulation as it was
registered in the Republic of Ireland.[112]
The CAA told us that EC Licensing Regulation 2407/92 states that
the principal place of business of a licence holder is required
to be in the Member State responsible for issuing the company's
Operating Licence.[113]
That Regulation gave no legal role normally to the CAA in regulating
EUjet. [114] This was
a cause of concern to the CAA however as the majority of EUjet's
scheduled business was based in the UK.[115]
EUjet background
64. The CAA conducted a study of EUjet's background
after this committee's hearing on 2 November.[116]
EUjet's parent company, PlaneStation, had traded under a number
of names: "In March 2001, as the Wiggins Group plc, it received
censure from the Financial Reporting Review Panel and the Financial
Services Authority for overestimating its results between 1995-2000,
which on their restatement resulted in significant losses."[117]
Subsequently, a "number of directors left the Group".[118]
In July 2003 the Group's shares were briefly suspended at its
own request "while it was in discussions on a possible takeover."
[119] These events
took place before the Group, which changed its name to PlaneStation
in January 2004, invested in EUjet in May 2004.[120]
65. Kent County Council which took a small shareholding
(1.5%) in PlaneStation "in order to assist in the regeneration
and development of east Kent" nevertheless assessed that
investment as "high risk".[121]
There were problems with the financing of EUjet. This prevented
it beginning scheduled operations in the summer of 2004 and additional
funds were raised then, and again in December 2004. Passenger
numbers were lower than expected, and when a land sale designed
to prop the company up broke down in the summer of 2005 PlaneStation
announced its suspension on 25 July.[122]
66. How much information about the chequered history
of EUjet's parent company the CAA knew prior to the company's
collapse earlier this year is unclear. But given the CAA Chairman's
comment to us on 2 November that "If we hear information
that leads us to believe that something ought to be looked at
we have, on occasion, contacted the regulatory authority in the
country concerned",[123]
and his suspicion that the company may not have been viable,[124]
it might have been reasonable to expect that the CAA would have
pressed its concerns urgently to the Irish Commission for Aviation
Regulation, EUjet's regulatory body, even on the basis of "rumours".
Had such action been taken, it is possible that the problems experienced
by thousands of UK travellers could have been avoided earlier
in the year. We accept that EUjet was not regulated by the CAA.
We hope however that the CAA will intervene more courageously
in future if presented with similar circumstances.
67. It is surprising that the CAA did not pursue
the case as it had been sufficiently concerned about the general
issues arising from EUjet's Irish registration to contact the
Irish Commission. The CAA explained in detail the severe constraints
on the action it can take over a non-UK air carrier about which
it has concerns.[125]
For example:
It cannot require financial information from a non-UK
carrier
It has no legal powers to take action against such
carriers
Public exposure of concerns about a non UK carrier
could open it to "censure" from the European Commission
and possible reciprocal action against UK carriers.
68. In January 2005 "87% of Eujet's then
81 flights per week were departing from the UK."[126]
Quite properly, the CAA was concerned and approached the Irish
Commission for Aviation Regulation in January proposing that EUjet
should be regulated in the UK, but this was rejected. We understand
the CAA is "looking at this problem with the Department for
Transport".[127]
The problem must be addressed as a priority. It is absurd that
the present rules prevent the CAA regulating a company's aviation
activity where the majority of its flights depart from this country.
We hope that a common sense solution is being pursued vigorously
by the CAA and the Government with the European Commission.
Air Travel Trust Fund
69. The Air Travel Trust Fund (ATTF), as explained
in paragraph 16, is used to provide financial support when required
for the ATOL bonding scheme. One of the recommendations of our
predecessor committee was that the funding for ATTF should be
reformed:
"There is no power to raise a new levy to
replenish the Fund, despite the fact that its Trustees have called
for one for over 12 years. Successive Governments have promised
the necessary primary legislation, but it has not been brought
before Parliament. The Fund was exhausted in 1996 and is now [£9.6m]in
deficit. It now meets its liabilities through commercial borrowing
against a Government guarantee. The interest costs ATOL-bonded
operators £500,000 every year."[128]
70. We are pleased that the Government has taken
the opportunity of reform offered by the Civil Aviation Bill currently
passing through Parliament to ensure that the present approach
is rationalised: "The provision on replenishing the Air Travel
Trust Fund (ATTF) in the Civil Aviation Bill gives scope for a
single fund collected from tour operators instead of a two-part
approach of bonds plus the ATTF."[129]
While this is welcome however it is no more than overdue housekeeping
and has no direct bearing on the wider issue of air protection
policy.
93 Ev 47 Back
94
Ev 47 Back
95
Q 52 Back
96
Ev 18 Back
97
Financial Protection for Air Travellers, Oral Evidence, Q 289 Back
98
Letter, Tony McNulty to Gwyneth Dunwoody, 2 September 2004 Back
99
Letter, Charlotte Atkins to Gwyneth Dunwoody, 15 September 2004 Back
100
Letter, Charlotte Atkins to Gwyneth Dunwoody, 27 October 2004 Back
101
Letter, Gwyneth Dunwoody to Charlotte Atkins, 21 March 2005 Back
102
Letter, Charlotte Atkins to Gwyneth Dunwoody, 5 April 2005 Back
103
Letter, Gwyneth Dunwoody to Karen Buck, 9 August 2005; Transport
Select Committee, Press Notice 03, 9 August 2005 Back
104
Ev1 Back
105
'Airline levy scheme sparks dispute with Treasury', The Independent,
25 June 2005; 'CAA backs £1 levy to bail out failed airlines',
The Independent, 22 September 2005 Back
106
Ev 6. Transport Select Committee, Financial Protection for Air
Travellers: Government and Civil Aviation Authority Responses
to the Committee's 15th Report of Session 2003-04,
HC 639, Seventh Special Report of Session 2005-06, pp 2,3 Back
107
Q2 Back
108
"Bridget Kinsella was told of EUjet's demise after arriving
at Malaga with husband Michael and their children, Kate,11, and
Claire, nine. She said: 'We're looking at around £500 extra
for the familiy if we want to get home today and that's without
the taxi at the other end.'" Daily Express, 28 July 2005 Back
109
Uncorrected transcript of Oral Evidence given by the Rt Hon Tony
Blair MP, HC 709-I, Q 20 Back
110
Q 16 Back
111
Q 18 Back
112
Q 16 Back
113
Ev 20 Back
114
Ev 20; The exception to this is "on evident safety grounds",
Ev 20 Back
115
Ev 20 Back
116
Ev 18 Back
117
Ev 19 Back
118
Ev 19 Back
119
Ev 19 Back
120
Ev 21 Back
121
Ev 19 Back
122
Ev 20 Back
123
Q 22 Back
124
Q 18 Back
125
Ev 20 Back
126
Ev 21 Back
127
Ev 20 Back
128
Financial Protection for Air Travellers, para 11. Financial Protection
for Air Travellers, Oral Evidence, HC 806-I, Q 220 Back
129
Ev 2 Back