Examination of Witnesses (Questions 240-259)
MR KEITH
JOWETT, MR
MIKE TOMS,
MS ROWENA
BURNS AND
MR IAN
HALL
18 JANUARY 2006
Q240 Chairman: Are you sure of that?
Mr Toms: We saw none, Madam Chairman.
Q241 Chairman: Not quite the same
thing. I will take your word for it.
Mr Toms: We saw none and we have
asked to see it.
Q242 Chairman: You asked to see it?
Mr Toms: Yes.
Q243 Chairman: Were you told no or
was there a policy of omission in place?
Mr Toms: What we were told at
the time was this was a first principles decision based upon a
theoretical analysis, a first principles analysis of how the market
should function. What was important to us was there was a clear
understanding in the end of what the on the ground consequences
would be for the amount of capacity, air fares and choice. That
was what we missed and what we hope the CAA will address when
it looks at this issue again in this review. It started, and we
are very pleased to see they are doing market analysis, but we
think they have a way to go before they know what the position
is.
Q244 Graham Stringer: I find that
answer extraordinary. What you are saying is you not only have
no view about the way new runways should be, that should be left
to the Government, but you have no view about how you should be
regulated, either collectively or individually as airports. I
find that extraordinary for a business to say that. Can you explain
why you do not have a view between those two positions?
Mr Toms: I do not recollect having
said that we have no view of where new runways should be provided.
Q245 Graham Stringer: This is not
something I have made up. You will find BAA representatives, at
various inquiries by this Committee, saying that it was the view
of the Government as to where runways should be put.
Mr Toms: I was the person who
gave that evidence at your last investigation.
Q246 Chairman: We remember, Mr Toms.
Mr Toms: I am sure you do. The
position has changed substantially since then. We have a clear
policy framework which says the next runway should be at Stansted
and we are very happy with that policy framework. The Government
says it should be at Stansted, we will adopt that policy and we
will promote it energetically. You can see from the investment
we have undertaken since then we are promoting Stansted development
but we are determined upon the early delivery of Stansted runway.
I think we have a very clear policy on that. I am not saying we
have no view on system and stand alone pricing, what I am saying
is that is an issue which is an issue for the next regulatory
review. It is an extremely complex issue. We think it should be
determined on the ultimate test of what is best for passengers.
The evidence we have so far is that what has been best for passengers
has been the early production of capacity at Stansted to generate
competition between airlines. We do not care whether this is called
system pricing, stand alone pricing, any other kind of pricing,
what we want is a regulatory structure which allows us, and incentivises
us, to deliver Stansted as early as possible. The language is
not important.
Q247 Graham Stringer: Answering the
question is important as to whether you want Stansted regulated
separately and from your answer I still do not understand whether
you do want it regulated separately. I might interpret what you
are saying—and you can correct me if I am wrong—that
behind all those words is what you want is cross-subsidy from
the other BAA airports for Stansted. Is that what you are saying?
Mr Toms: I am going to try and
answer that in the context of the remit of this investigation,
if I may, which is the purpose, performance and function of the
CAA. What we are saying in this relation, and we want to say a
little more than this because we have a lot of separate discussions
with the regulator, is that the CAA needs to organise itself to
properly address what the benefits are of different ways of pricing.
There are not just two ways, there is not just stand alone and
system pricing. There are different ways of doing stand alone,
there are different timing processes. This is a cat which can
probably be skinned many different ways and we do not want to
play now what we think the right way is because I expect within
the next year a number of different ways will emerge. I can tell
you that what we do want is an outcome which delivers the runway
as soon as possible because that is in the best interests of passengers.
Q248 Graham Stringer: Can I ask that
question again but in a different way: do you want a pricing system
which gives you subsidy from Heathrow and Gatwick to Stansted?
Mr Toms: I do not recognise the
concept of subsidy as you have described it, I have to say. All
the issues are subsidised to the extent that the drinkers and
smokers and car parkers at the airports are meeting the cost of
airline operations.
Q249 Graham Stringer: Mr Toms, that
is slightly disingenuous, is it not? I did not intend to go along
this line of questioning but you understand apportioning costs
to particular airports that are associated with those airports,
apportioning costs associated with Heathrow to Heathrow, those
associated with Gatwick to Gatwick and those associated with Stansted
to Stansted. If when you look at the income against those costs
you are taking the surplus from Gatwick and Heathrow then you
are cross-subsidising. I think, and there is no point beating
about the bush, you are trying to not tell this Committee that
what you want is subsidy for that extra runway at Stansted. Is
that what you are telling us?
Mr Toms: I am not conducting a
negotiation with the regulator with this Committee.
Q250 Graham Stringer: So you are
not going to tell us?
Mr Toms: No, I think it is an
issue which is properly the subject for the regulatory review.
For us to deal with it in short form, in a session such as this,
is not doing justice to the complexity of the issues.
Q251 Chairman: Mr Toms, if I thought
you were being asked things which were unfair I can assure you
I would stop you. I would stop the questioning and I would stop
the progress of the Committee. It is a legitimate line of questioning
and you have come before us before and expressed a very clear
view. I take it for the moment we are not going to get an answer,
is that probably the best thing to accept?
Mr Toms: You are not going to
get any more answer than I have given you, Madam Chairman.
Q252 Graham Stringer: Can I move
on to Manchester Airport. This is a small question I hope you
can clear up. In your written evidence you accuse the CAA of being
slow to bring in new technology, and you mention particularly
light emitting diodes for lights on the runway. When we asked
the CAA those questions they denied any knowledge of it or that
they were slow introducing new technology. Do you think you could
help us by expanding on your evidence?
Ms Burns: The example that we
alluded to in our written evidence to you was a form of lighting
which is in regular use, and has been for a number of years, at
airports right across Europe. The technology in question is highly
reliable, has been proven in practice to be highly reliable, reduces
maintenance costs, and generally improves efficiency which must
be in the interests of the airlines, the airports and our end
users, the passengers. The CAA have yet to licence that technology
for use in the UK, we do not know why.
Q253 Chairman: Have you asked them
to have it licensed? Has anyone asked to have it licensed?
Ms Burns: Yes, indeed, Madam Chairman.
Q254 Graham Stringer: That is very
helpful. On a bigger question, in terms of economic regulation,
do you believe that Manchester Airport should be economically
regulated by the CAA?
Ms Burns: Madam Chairman, the
first thing I would say is that we are an airport which is driven
by the demands of the market and the pricing that we propose to
airlines is driven by our belief that we operate in a highly competitive
environment, indeed increasingly competitive, as evidenced by
the development of new airports which are on the fringes of our
catchment area and sharing the ability to serve that catchment
airport. We believe, also, as a business that the right way for
us to proceed is in a collaborative relationship with our airline
customers. We have been very active over the years—increasingly
active—in forging partnerships with our airline customers.
The CAA's approach to the next quinquennial review, the process
of constructive engagement, is we believe a step in the right
direction in that it is actively proposing that airports and airlines
should seek to resolve issues between themselves, reducing the
scope of the regulatory intervention, if you like, to that of
the court of last resort and to deal with matters which airlines
are not competent to negotiate with airports directly.
Q255 Mr Martlew: On that point, and
obviously having a constituency in the North, I am very conscious
that Manchester does not only own Manchester but they own quite
a few northern airports, the reality is that there would be a
concern if it was just left to the markets that you could exploit
that situation.
Ms Burns: I do not believe so.
Our airports in the North include Manchester Airport, obviously,
and Humberside Airport to the east.
Q256 Mr Martlew: Liverpool?
Ms Burns: I regret to say, Madam
Chairman, that Liverpool is not in our ownership. The overlap
between the catchment areas of our airports is minimal and indeed
there are two airports which sit between Humberside and Manchester
Airport.
Q257 Mr Martlew: None of any size
in comparison with Manchester. There are four large airports in
England, Manchester is one of them, it serves the north of the
country.
Ms Burns: It is one of a number
of airports that serve the north of the country.
Q258 Mr Martlew: It is the largest
by far, is it not?
Ms Burns: Madam Chairman, it is
the largest by far and it is also the case that Liverpool is the
fastest growing airport in the North of England.
Mr Jowett: If I may contribute
from a more independent position. The present designation of airports
was introduced nearly 20 years ago now in a very different historical
context. Since then, of course, we have seen radical change in
airport ownership and the activity of airports across the country.
If you look at the North of England today, where Manchester is
located, it is in a very strongly competitive position alongside,
as Ms Burns has said, a number of strongly growing competitors.
Therefore it is a candidate, one would think, for the regulators
to review the position of it, as I think Mr Bush said last week
when he was here at this table.
Q259 Clive Efford: Mr Jowett, perhaps
you would like to start and others can come in, how has the new
model of constructive engagement between airports and airlines
in the airports review process gone so far? The CAA has adopted
a new approach of airlines and airports working together, can
you comment?
Mr Jowett: It takes a number of
angles. It is early days yet. There is the economic side and the
safety side. On the economic side there have been some good attempts
at constructive engagement between the parties; that has had mixed
success across the UK. One or two airports represented by my colleagues
here have had more difficulty with that than others. On the safety
side, there has been a high degree of engagement between the safety
regulator at airports, certainly in terms of some of the regulations
or practices in seeing how they can become more objective-based
rather than prescriptive by nature, and that has opened up new
areas of discussion between us to the benefit overall of the industries
and our ultimate end user, the consumer.
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