APPENDIX 7
Memorandum submitted by British Airways
plc
1. INTRODUCTION
1.1 British Airways welcomes the opportunity
to submit evidence to the Transport Select Committee on the subject
of the collapse of the airline EUjet and the provision of assistance
for "stranded" budget airline passengers.
1.2 British Airways is one of the largest
airlines in the world, operating to more than 215 destinations
in 90 countries. In the financial year 2004-05, it carried almost
36 million passengers and reported an operating profit of £540
million.
1.3 It is a founding member of the oneworld
alliance of scheduled airlines operating globally and has franchise
agreements with six carriers, which encompass marketing and selling
arrangements, and code-share arrangements with 11 airlines.
2. CONSEQUENCES
OF COLLAPSE
OF EUJET
2.1 Approximately 6,000 passengers were
left without return flights to their point of origin at the 18
destinations served by EUjet throughout the United Kingdom and
Europe, primarily Spain. Every destination to which EUjet flew
from and within the UK has flights operated by other airlines
to the South East of England, offering passengers options to return
to base.
2.2 In addition, it is estimated some 90,000
customers with reservations for future travel may have lost the
money paid for these, unless the cost of the ticket exceeds £100
and was paid for by credit card or they had insurance.
3. IMPACT ON
UK AVIATION
3.1 British Airways is concerned that the
failure of EUjet and the subsequent grounding of its fleet may
result in calls for the introduction of a levy scheme to protect
travellers using scheduled airlines, budget or otherwise.
3.2 In reality, the number of passengers
affected by the failures of budget airlines is extremely small
in respect of the total market. In July 2005, there were 23 no-frills
carriers, including EUjet, operating in the UK-Europe market.
These carried a total of 5,933,510 passengers, collectively accounting
for almost 51% of the total market[3].
Ryanair and easyJet account for 34% of the market, leaving a 16.5%
share to be spread around the other budget operators.
3.3 Since July 2003, there have been five
failures among the no-frills airlines serving the UK market. With
the exception of EUjet, none was UK based. The UK based airline
Duo was never in this niche—it was a lower cost business
airline operating to major airports with a full service product.
3.4 The peak market share attained by the
failed airlines during the July 2003-July 2005 period demonstrates
how small these carriers actually are in the UK market: Air Polonia
0.15%; Flying Finn 0.05%; Volareweb 0.17%; Vbird 0.05%; and EUjet
on 0.32%. Although operating in a different sector, the highest
market share reached by Duo was 0.42%.
3.5 British Airways believes that to introduce
a levy on all passengers travelling on scheduled airlines to provide
a fund to cover the repatriation and refund costs of those affected
by airline failures is unfair and disproportionate, based on the
market share highlighted in 3.4.
3.6 In addition, to introduce a charge on
all UK-based airlines would be ineffective for those passengers
flying with non-UK based airlines, which on recent performance,
are more likely to fail.
3.7 British Airways believes its inclusion
within any levy scheme will lead to a rise in prices to British
Airways' customers without providing justifiable consumer benefit
to them. It does not add value to their purchase. Many years of
hard earner financial diligence and professionalism allows British
Airways to be more confident that it is financially robust. Newer,
weaker airlines are unlikely to be in this position.
3.8 If a levy scheme is to be introduced,
we urge the CAA and the Department for Transport to consider an
alternative approach that regulates weaker players in the market.
Inclusion of all scheduled operators means that customers of these
less robust airlines would potentially be cross subsidised by
those travelling on the more-established carriers.
4. INSURANCE
4.1 Insurance is widely recommended for
everyone travelling overseas, on all forms of transport.
4.2 Passengers seeking cheap air fares with
smaller, less-established airlines do so on the basis of "Caveat
Emptor", and adequate insurance cover would ensure that those
unfortunate to find themselves without flights due to an airline
collapse could do so without difficulty or great cost.
4.3 British Airways supports the Foreign
& Commonwealth Office "Know Before You Go" campaign
which offers advice to all travellers. The campaign offers essential
advice and strongly advises that everyone should have proper insurance
for their trip, for medical and emergency cover, and also for
travel arrangements.
4.4 The aviation industry should not be
treated any differently from all other sectors of the economy
in terms of consumer protection. It is well recognised that customers
have a wide choice when purchasing air travel, and it is for the
individual to exercise this choice freely when opting for a more
or less risky product.
5. CONCLUSION
5.1 We would suggest an analysis be undertaken
of how many, if any, passengers were actually "stranded"
overseas or required consular assistance as a consequence of the
failure of EUjet before any proposals for a protection levy are
progressed.
5.2 If the Government were to intervene
in the commercial activities of the aviation sector it would distort
the marketplace and alter the relationship between supplier and
consumer. This would distance aviation yet further from normal
liberalised industries and business, and add another layer of
regulation instead of removing historical anomalies.
3 CAA Monthly Passenger Figures, July 2005. Back
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