Examination of Witnesses (Questions 260-279)|
18 JANUARY 2006
Q260 Clive Efford: Have any of your
members expressed any concerns about the position of any particular
organisation, for instance BAA in its position, that without competition
the concept of constructive engagement will not operate efficiently?
Mr Jowett: No, Madam Chairman,
certainly that has not been raised by any of my members who are
airport bodies. We operate in the UK, as you know, in a very diverse
market, very largely privatised and very competitive between the
number of major groups and independently owned airports and operated
airports across the UK. None of them has raised an issue concerning
Q261 Clive Efford: Mr Toms, is it
correct to say there has been little progress in terms of constructive
engagement at Stansted and, if so, can you give us a reason?
Mr Toms: I will just set it in
its context very quickly. The CAA embarked on a process of encouraging
airlines and airports to try and agree the major issues for regulation
in advance of a review in the aftermath of the last review. I
think it is fair to say a lot of airlines were very bruised by
the outcome. Actually we welcomed it in principle because we needed
to find ways to get together to talk to our customers better,
more clearly, and with less confusion and less ill-will, although
we always have a realistic expectation that the outcome might
not always work. I think it is fair to say that we have worked
very hard at constructive engagement over the last year. We have
invested a very large amount of money in it. At all three South
East airports we have adopted the same approach, the same culture,
the same information base for constructive engagement. The CAA's
current thinking, as we understand it, is that process is working
at Heathrow with the Heathrow airlines, at Gatwick with the Gatwick
airlines but it is not working at Stansted with the Stansted airlines.
Q262 Clive Efford: Is it true to
say that at Stansted, as suggested, the BAA, because of its position,
will not engage constructively in this process?
Mr Toms: No, it is not true. If
I can give you some examples of the way we have engaged in the
process. We have provided the airlines with our capital expenditure
programme in great detail. We have provided the airlines with
our traffic forecasts in considerable detail. We have provided
airlines with an analysis of our operating costs. We have held
a long series of meetings to discuss these issues with airlines.
We have given them the same information as we have given the Heathrow
and Gatwick airlines, which is information which Heathrow and
Gatwick airlines have been able to work on. For reasons which
you are probably better asking Stansted airlines about, the Stansted
airlines have found it difficult to respond with the same degree
of engagement as the Heathrow and Gatwick airlines have.
Mr Jowett: If I can just add to
that, the regulator, the CAA themselves, have commented that the
additional information being sought by the airlines is not pertinent
to the process of constructive engagement that they have proposed.
Q263 Clive Efford: It has been suggested
to us that Stansted are saying that the power is skewed against
airlines and that there is no incentive for BAA to engage constructively.
Has anyone got any comment on that?
Mr Toms: Stansted Airport is regulated
and any power we have in the market is regulated upon us. In that
respect we are not in a position of unconstrained ability to do
what we want, the regulator has told us he wants to engage constructively
and we have gone step by step through the process the regulator
has expected us to produce. We know that if we perform badly or
if we perform in an unreasonable way, at the next regulatory review
the CAA or the Competition Commission will come along and make
us pay the price. There is every incentive for us to do this.
Apart from anything else, it is a good idea to talk to your customers
and we do try and do that as far as possible; it has just not
been as productive at Stansted.
Ms Burns: Can I come in on that
point, if I may. I think the constructive engagement process is
the application of common sense.
Q264 Chairman: You find a lot of
common sense in the aviation industry do you, Ms Burns?
Ms Burns: Perhaps patchy at times.
It must be in the interests of airports to engage with their customers.
I believe that the approach the CAA have taken in attempting to
foster a dialogue between us is one which makes it relatively
simple for airports to respond and does not impose obligations
which are more onerous than those we would impose upon ourselves.
It is early days yet at Manchester to see how the process will
work because we are a year behind the BAA in respect of the commencement
of the next quinquennial review but the early indications are
that there is considerable appetite amongst our airline customers
for engaging with us in that process.
Q265 Clive Efford: We have received
evidence, also, that the CAA does not take full account or properly
understand the economics of low cost air services when it is undertaking
its regulatory role. The evidence we have had suggests that is
not applied in the case of Stansted. Would you agree that the
CAA regulates according to one size fits all rather than taking
it by the particular organisation it is regulating?
Ms Burns: The current structure
of economic regulation, as you say, applies in the same way to
all of the economically regulated airports. I think there must
be a question as to whether that is sensible going forward. The
process of constructive engagement does allow sufficient flexibility
I believe for airports and airlines to adapt their approach to
individual circumstances pertaining at particular airports and,
to that extent, it does pave the way for an approach which is
more particularised than it has been in the past.
Mr Toms: It is interesting that
in the consultation paper recently published by the CAA on the
policy issues for the regulatory review the paper is very heavily
weighted towards the discussion of issues which are particularly
relevant to the low frills or low cost sectors of the market.
Indeed, they are clearly very much in the CAA's mind. I think
it is fair to say the CAA is struggling towards a full understanding
of how this sector of the market works and the challenge for the
next year is for us and the airlines themselves to inform the
CAA so they do understand it before they make their pricing decisions.
Q266 Mr Scott: Mr Jowett, you stated
in your written evidence that some CAA employees were too specialised
and there are skill shortages in the safety regulation group.
Do you believe the CAA has sufficient resources to recruit and
retain appropriately skilled individuals?
Mr Jowett: The challenge for the
Civil Aviation Authority at the moment is the continental model
being adopted through EASA means that in the ultimate long-term
there will be not the need for the number of experts that they
currently employ today, let alone additional ones. Therefore,
attracting and retaining appropriately skilled staff within the
organisation is always going to be a challenge for them in this
context and setting. There have been examples, which we could
provide outside of this occasion today, of where in our view there
has been insufficient ability to respond to questions and queries.
I think the airlines, who you are seeing later in the day may
also have their own examples pertinent to that.
Q267 Mr Scott: We heard from the
CAA that EASA is not yet fit for the purpose. Would you agree
with that view?
Mr Jowett: It is not a matter
of direct consequence to us at the moment because, as you are
aware, they currently do not have a remit for regulating airports.
Q268 Chairman: It will be, Mr Jowett.
If there is a Europe-wide authority you will not escape their
attention for very long, will you?
Mr Jowett: Madam Chairman, no,
I was going to concur that we are very concerned about the way
the future may develop. We look at what is happening with the
regulation of certification and maintenance standards and as we
detect, both from what our peers in the airlines and aerospace
industries say, and indeed from what was said at this table last
week by the CAA themselves, all is not happy in that setting.
Certainly EASA have taken on, it would appear, more than they
are able to properly address at the moment and their ambitions
to extend those responsibilities to air traffic services and airports
do concern us. We do not believe that they should even consider
or plan for the adoption of airport regulation until they are
well on top of, and demonstrably so, their existing remit and
Q269 Mr Scott: Do you believe the
creation of EASA was a good idea in principle?
Mr Jowett: There are certain benefits
from having a single authority, a single set of standards that
apply throughout Europe. Having said that, of course, airports
are already determined and regulated by ICAO standards under annex
14. We hope that if and when EASA begin to determine such matters,
or have the responsibility for airport regulation, they will pay
very, very close attention to ICAO standards which have been universally
adopted worldwide and not seek to double regulate. The CAA have
been generally careful not to burden us with additional regulation,
although there have been occasions; we would certainly be very
worried if there were yet more examples of that coming from EASA.
Q270 Mr Scott: Is their creation
a good idea or not?
Mr Jowett: I believe it remains
to be determined. I think I would have to adopt the same line
as the Chairman of the CAA who himself last week spoke to this
Committee and said at this moment it has not yet got there, if
it carries on as it is we will become increasingly concerned.
We hope the CAA will exercise increasing influence in Brussels
over the role and future direction of EASA and over its policies
Chairman: We get the general idea, Mr
Q271 Mr Wilshire: Could I follow
that by saying that last week Sir Roy said to me in this Committee
that my constituents, right next door to Heathrow, would be less
safe in the future if something was not done about EASA. Can I
ask all of you what would you do to make my constituents safer
rather than at risk?
Mr Hall: I cannot be clear about
the context in which Sir Roy made his remarks.
Q272 Mr Wilshire: In the context
of EASA, as it is, I specifically asked him the question that
if something is not done will my constituents be less safe in
the future, to which he said yes on the record.
Mr Hall: On the broad principles,
the standards which the CAA maintains in the UK, and particularly
the air traffic standards, we believe are at an appropriate level
and a higher level than is the standard across Europe. If his
concern is that EASA ultimately will lead to lowering of standards
then my response to that is as far as National Air Traffic Services
is concerned we will continue to have safety as our paramount
aim and we will continue to invest in order to maintain the safety
standards that we do at the moment. Our concerns in terms of EASA
and the relationship that the CAA has with EASA are ensuring that
we have a level playing field in terms of single European sky,
development of air traffic services across Europe, and no dilution
of the safety standards that we have.
Q273 Mr Wilshire: If EASA were to
adopt a lower standard than the safety standards NATS currently
enforces, what would NATS then do, apply new standards?
Mr Hall: No, we would not. Even
as it stands at the moment we do not apply a minimum standard
to safety. We are continually working with both the CAA and in
Europe, establishing improvements to safety management and air
Q274 Mr Wilshire: You are entirely
satisfied that whatever the CAA may say to you, or EASA may say
to you, you will have the authority to disregard that if it is
diluting safety standards?
Mr Hall: The requirements to be
set inside the UK, certainly underneath our economic regulatory
review, allow us to agree with the customers whatever equipment
and standards we think are appropriate. So long as we have an
effective way of investing in the systems and being reimbursed
for the investments that we make then there is no reason why safety
standards should reduce. The only question would be whether EASA
started to introduce and impose standards which somehow meant
that we were forced to lower our standards, and I cannot see how
that would happen.
Q275 Mr Wilshire: Can I ask one other
thing about safety. You are being either incentivised or penalised,
depending on which way you look at it, to reduce delays in the
mornings by financial arrangements, to try and put it neutrally.
If you are subject to financial pressures to reduce delays, does
that not compromise safety?
Mr Hall: No, it does not and it
does not have to at all. The issue around the delays in the morning
simply means that where, and at the request of the airlines, they
want to improve punctuality at that particular time of the day,
then we will point the resource in that direction. If there is
a reduction in resource at some other time of the day, then we
would distribute the workload accordingly. There is no correlation
at all between safety standards and the financial arrangements
early in the morning.
Q276 Mr Wilshire: There are financial
penalties which are higher for delays in the morning than at other
times. That is an economic pressure to change your working arrangements.
How can you meet that financial pressure without compromising
Mr Hall: So long as we continue
to meet the traffic growth uniformly across the system then we
will not incur those penalties. Our analysis indicates that the
arrangements, put in at the request of customers, would simply
mean that we would prioritise those flights against flights at
other times of the day but not that we would reduce safety standards
in the morning.
Q277 Chairman: Before you leave that,
you say that the regulatory reviews of NATS are long, complex,
time-consuming and costly, and you would like to see them shorter
and simpler. How are you going to simplify a process with much
complex material involved?
Mr Hall: The regulatory review
has been thorough and it has been extremely transparent. The arrangements
under single European skies and the fact that we are the only
service provider to have that transparency does put us in a considerably
Q278 Chairman: You are saying everybody
else is secret so they do better than you?
Mr Hall: It is secret which means
that when it comes to openness and benchmarking, when it comes
to our ability to consider what will happen under single European
skies in terms of expansion, everybody else can see our books
and we cannot see anybody else's books.
Q279 Chairman: That is a minor disadvantage,
I will give you that. Does the CAA say anything to you about developing
methods for minimising delays without compromising safety?
Mr Hall: The way in which the
particular delay penalty was set up was a part of the extensive
discussions under the CP2 review, so, yes, we did discuss it.
There is no particular conversation about how in particular we
are going to meet the delay penalty without reducing safety. There
is an inherent assumption that is what we are going to do and
that is what we are doing.