Memorandum submitted by Ryanair
Ryanair welcomes the opportunity to submit comments
to the Transport Committee on the performance of the CAA in relation
to its statutory objectives.
Although Ryanair is not a UK registered airline,
we are nevertheless affected by the decisions of the CAA given
our substantial operations in the UK. In the current year Ryanair
will carry more passengers (over 35million) than any other British
airline, including British Airways. However, we are becoming increasingly
concerned over the inability of the CAA to regulate monopolies
such as NATS and BAA. These regulatory failures are having a seriously
negative effect on the competitiveness of the UK air transport
industry. The CAA is also contributing to over-regulation of the
industry and increasing costs for consumers, for example, in its
failed proposals to include scheduled airlines in the ATOL system.
We highlight below some of these failures and
recommend that the UK Parliament strongly consider the break up
of the BAA monopoly in order to introduce real competition and
efficiency in the provision of airport services in London, and
opening up the provision of air traffic control services in the
UK to competition from other ATC providers. We also recommend
disbanding the Consumer Protection division of the CAA as it is
unnecessary in the current competitive airline environment and
only contributes to needless bureaucracy and over regulation.
1. FAILURE OF
THE CAA TO
REGULATE THE
BAA MONOPOLY
Ryanair has for years been calling on the CAA
and the UK government to break up the strangle hold of the BAA
monopoly on the three major airports in the London area. The UK
government should never have allowed a situation whereby one company
controls the vast bulk of airport capacity in London, the most
significant market in the UK. However, having done so, it is incumbent
on the CAA to ensure that this monopoly does not abuse its dominance
to the detriment of airport users and consumers. Indeed, Section
39 of the Airports Act requires the CAA to:
(a) further the reasonable interests of users
of airports within the UK;
(b) promote efficient, economic and profitable
operation of such airports;
(c) encourage investment in new facilities
at airports in time to satisfy anticipated demands by the users
of such airports; and
(d) impose the minimum restrictions that
are consistent with the performance by the CAA of its functions
under these sections.
We contend that the CAA has failed on all requirements
and has allowed the BAA to abuse its dominance by building gold
plated facilities in Stansted, that completely ignore the stated
requirements of users. The latest example of this abuse is the
proposed £4 billion spend on a new runway and terminal facilities
at Stansted, against the unanimous opposition of users. The recent
announcement by Luton Airport of plans to build similar facilities
for roughly one third the costs of what the BAA plan to spend
is graphic evidence of the BAA's regulatory gaming and the failure
of the CAA to prevent these abuses.
We are aware that the Stansted Airlines Consultation
Committee (ACC) have made a separate submission to the Transport
Committee regarding in particular the CAA's now revoked decision
to allow the BAA to recover £105 million in preliminary expenditure
on the new runway. The CAA initially ignored comments submitted
by Stansted users and it was only following the threat of legal
action that the CAA revoked its decision and re-initiated consultation.
We are concerned that the CAA will reissue the same decision,
despite the fact that BAA has refused to consult with users on
the overall cost of the project or on the extent of the preliminary
expenditure.
The CAA have also failed to prevent other abuses
by BAA. Ryanair was forced to take legal action in the High Court
against the BAA over an abusive fuel levy when the CAA failed
to intervene. The BAA had been imposing an inflated levy on Stansted
airlines claiming that it was for the purpose of recovering its
costs of constructing a fuel hydrant system. However, Ryanair
demonstrated that the BAA had recouped these costs three times
over and yet still refused to remove or reduce the levy. The BAA
only agreed to reduce this abusive levy after proceedings were
brought.
Ryanair recommends that the BAA monopoly be
broken up as it has seriously undermined the competitiveness of
the air transport industry in the UK and the CAA has failed to
regulate this monopoly.
2. FAILURE OF
THE CAA TO
REGULATE NATS
The CAA has also been an abysmal failure at
regulating the privatised air traffic control service provider—NATS.
Although the initial privatisation of NATS was admittedly a shambles,
with NATS being strapped with high levels of debt, the CAA has
nevertheless failed to encourage or force NATS to improve its
efficiency and lower its costs. As of this year, NATS is now the
most expensive ATS provider in Europe a poor reflection on privatisation
but more so on the CAA's inability to regulate this monopoly.
In addition to being the most expensive supplier
in Europe, the CAA has allowed NATS to shift the majority of the
risk for traffic shortfalls onto the users. Thus, not only are
users paying too much for the service but they are forced to bear
a substantial portion of the company's risk. This risk shifting
was characterised by the CAA back in 2003 as a one off",
exceptional" measure to relieve NATS from a financing crisis
following the events of 9/11. However, the CAA has maintained
this one off" measure in the current price review and has
indicated that it is now a permanent fixture.
A further complication with the regulatory oversight
in this area is that the majority of major UK airlines are shareholders
in NATS, which effectively stymies any criticism of the CAA's
five decisions on NATS. Only Ryanair has been a vocal opponent
of the CAA's handling of the NATS monopoly. However, the CAA have
ignored calls from Ryanair to impose more stringent efficiency
targets on NATS and to impose stronger penalties for its repeated
service failures. Under EU Regulation 261, airlines are now forced
to pay compensation in the form of assistance" to passengers
for ATC delays and failures and yet the CAA continues to shield
the monopoly from any responsibility for these shortcomings.
Ryanair recommends that ATC services in the
UK be immediately opened up to competition in order to improve
service levels and reduce costs. The UK was at the forefront of
liberalising air transport and has hugely benefited from increased
competition and lower prices and should take the lead in this
area also.
3. CAA'S FAILED
PROPOSALS TO
INCLUDE SCHEDULED
AIRLINES IN
ATOLS
We were very grateful that the Department for
Transport recently rejected the CAA's proposals for including
scheduled airline services in the ATOL system, which would have
involved the levying of £1 per departing passenger from the
UK to cover some notional risk that UK consumers might get stranded
abroad. This levy would have exceeded the airfare paid by around
25% of Ryanair's passengers last year—many of whom flew
at an air fare of just £0.01! This kind of—tax the
consumer—nonsense is typical of the kind of bureaucratic
approach in Brussels. We suspect that the CAA's proposals had
more to do with preserving jobs within the CAA Consumer Protection
division than any genuine need for regulation in this area. The
ATOL system has run its course and UK consumers are more than
capable of repatriating themselves in the event of an airline
failure given the proliferation of low fares services to and from
the UK. The recent failure of EUJet clearly demonstrated this.
Ryanair recommends that the Consumer Protection
division of the CAA be disbanded as the air transport industry
is now highly competitive, with dramatically reduced prices and
improved services.
We sincerely hope that Parliament's review will
lead to the opening up of the London airport market and the UK
ATC market to competition. The CAA has failed to regulate either
the BAA or NATS and this failure has damaged the competitiveness
of the UK air transport industry and has increased prices to consumers.
The Consumer Protection division of the CAA is no longer necessary
now that the UK air transport industry is highly competitive.
Its continued existence is leading to over regulation and is detrimental
to the competitiveness of the industry and does nothing for consumers.
It should therefore be disbanded.
14 November 2005
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