Examination of Witnesses (Questions 320-339)
MR ROGER
WILSHIRE, MR
ANDREW CAHN,
MR MICHAEL
O'LEARY, MR
RICHARD CHURCHILL-COLEMAN
AND MR
BARRY HUMPHREYS
18 JANUARY 2006
Q320 Mrs Ellman: Is there any problem
with transparency of information about the work of the CAA?
Mr Cahn: There is a problem about
transparency of charging and of costs in particular where we would
find a lot of benefit in having a clearer idea of their real costs
and therefore what charges should be passed on to us and to the
passenger.
Mr O'Leary: In the case of Stansted
in particular, we receive these regulatory accounts. The regulatory
accounts are completely unintelligible, they have large sums of
costs just plugged in there. As one of the major Stansted airlines,
we are still attempting to isolate 12 months later what exactly
is in these accounts and we are receiving no assistance from either
the CAA or the BAA in that respect. We have no idea what is in
Stansted's accounts.
Q321 Mrs Ellman: Does anyone have
any specific proposals on what could be done to improve transparency,
and have there been any discussions between yourselves and the
CAA on any of these issues?
Mr Wilshire: Speaking on behalf
of the airlines that were involved with other parts of industry
in the review with the CAA on their charges and costs, we did
get an improved level of transparency in doing that review and
we have been promised ongoing improvement in the transparency
as far as their charges are concerned, but it is a difficult area
and it is an area that I think the CAA needs to continue to work
at in providing for us who are paying for these costs that sort
of transparency that enables us to understand what activity is
going on and, in particular, the activity changes in relation
to EASA which is coming downstream towards the CAA.
Q322 Mrs Ellman: Has anyone here
been involved in any discussions with the CAA about improvements
in transparency or accessible information?
Mr Wilshire: We were part of the
study I referred to, the joint review with the CAA, as were other
parts of industry, the manufacturers, airports and air traffic
controllers. We did ask for information and we got a much better
level of information than had previously been the case, but that
needs to continue going forward.
Mr Humphreys: I think there are
differences between different parts of the CAA in this respect.
I think the economic group has always been relatively good in
terms of transparency and consultation. The safety group traditionally
has not been as good but, as Mr Wilshire says, they have improved
enormously, under pressure from the airlines, over recent years
and hopefully that progress can be maintained.
Q323 Mrs Ellman: Mr Churchill-Coleman,
you have given evidence which says that the CAA is mainly a 9
to 5 organisation and you are a 24/7 one. How do you think the
CAA could improve? Would it mean increasing its costs? Is it really
necessary?
Mr Churchill-Coleman: As Mr Wilshire
has alluded to earlier, one of the issues here is a matter of
adaptation by the CAA to the EASA regime. At the moment the CAA
is perhaps more heavily weighted towards its regulatory function
and less towards its monitoring function on the ground. What we
seem to suffer day-to-day is a lack of engineers, where perhaps
there has been some cost efficiency but that is inappropriate
given that the CAA's remit is expanding in that area.
Q324 Mrs Ellman: What about the Better
Regulation Commission which has now been set up, has that made
any difference to the work of the CAA?
Mr Wilshire: In general terms
we have not seen any change yet in the CAA, although we are in
the process of talking both to the DfT and to the CAA over issues
to do with better regulation. We believe there is a need for Regulatory
Impact Assessments for most of the major changes in regulation
and we have not seen many of those in the past from the CAA, there
have been some but very few and therefore it is an area that is
outside the normal better regulation agenda. We welcome the ability
to go in with the CAA and discuss ways of improving things. We
also think there is an opportunity to improve the administrative
efficiency of the CAA through electronic and other normal business
means and there are ways in which things could be streamlined
with cost benefits both to the CAA and to the industry itself.
Mr Cahn: Perhaps I could be just
a little bit more complimentary to the CAA in this area. I think
in the past they have not followed the principles of better regulation,
but I think they are making considerable efforts to move there.
We do not think that the principle of light regulation is the
proper regulation for our industry, where safety is paramount
and will always be paramount. We think the right principle is
proportionate regulation. Therefore, in areas of economic regulation
of monopolies, for example, there will always need to be substantial
amounts of regulation. In some areas of economic regulation, for
example, perhaps there should be a lighter touch. I think the
CAA has some way to go in to making that shift, but they have
recognised that and they are moving towards it.
Q325 Mrs Ellman: Have any of you
seen any of the CAA's Regulatory Impact Assessments and had the
opportunity to study them and perhaps comment on them?
Mr Churchill-Coleman: I have been
involved quite closely in the consumer protection Regulatory Impact
Assessment but not in any technical assessments. They seem to
be quite light on those.
Q326 Mrs Ellman: What was your view
of the assessment you saw?
Mr Churchill-Coleman: I thought
it was in-depth and well studied and I personally thought the
outcomes were well recommended. Clearly I represent the tour operator
industry which suffers from what we feel is an anti-competitive
disadvantage in being subject to the ATOL regulations unlike our
scheduled colleagues, so perhaps I have a different view from
others at this table.
Q327 Mrs Ellman: Has anybody else
seen any of the assessments and had an opportunity to comment
on them?
Mr Wilshire: Not personally, although
I have heard of one or two Regulatory Impact Assessments over
the last few years, but I have not dealt with any of those directly
myself.
Q328 Mrs Ellman: What about the lighter
touch regulation concerning safety, is there any general concern
that that is going to jeopardise safety? Does anyone have a view
on that?
Mr Churchill-Coleman: I think
I would echo what Mr Cahn said earlier, which is that I think
lighter touch might be a bit of a misnomer. What we are looking
for is simplicity and effectiveness in regulation, not necessarily
reducing it. Simpler application of the existing regulations,
more accessibility to them so that our engineers who work within
their parameters more easily is what we are looking for, and I
am not sure I see that as lighter touch, just more effective application
of the regulations.
Q329 Mrs Ellman: It has been suggested
there might be fewer inspections at organisations that perform
well. Would that give you any concern in that that could lead
to a change of attitude in those organisations?
Mr Wilshire: The process of safety
regulation is important to us and we welcome it, but it is important
to recognise the investment made by airlines and others in aviation
over the years into safety management systems. These moves have
been encouraged by the CAA, we think rightly. I think now we have
a much stronger structure in place throughout the whole industry
and therefore it is appropriate that the CAA changes its approach
to monitoring and to monitoring the system as much as the individual
events. I think it is very important that this type of approach
is taken throughout Europe as we move towards an EASA rule-based
system.
Q330 Mr Scott: Mr Cahn, British Airways
says that tighter regulatory standards do not necessarily lead
to higher safety standards. Could you explain what you mean and
provide an example?
Mr Cahn: It is very much what
Mr Wilshire has just said and what Mr Churchill-Coleman said.
It is not much use just having a form-based regulation where you
tick boxes. What you need is to have a focused regulation which
makes clear what is required and clarity of regulation. The greatest
danger to safety is a lack of clarity, confused regulation and
overlapping regulation.
Q331 Chairman: An example, please?
Mr Cahn: I think it is very clear
that there is a danger of overlapping regulation between EASA
and the CAA and that is something which needs to be kept constant.
Q332 Chairman: Perhaps you could
give us a note detailing the things you have in mind as you specifically
said, We are pleased that SRG has started to move towards a risk-based
approach to safety".
Mr Cahn: I will submit a note,
Chairman.
Q333 Mr Scott: Are the safety regulation
charges now proposed by the CAA reasonable and fair?
Mr Wilshire: This is safety regulation
charges, I presume and those paid for by the UK industry. The
airlines over a number of years have been paying in excess of
their share of the costs of the safety regulation charges in the
past. Following the review that I referred to earlier, changes
are now beginning to take place, but it will take a number of
years before we are in a position where the airlines are paying
approximately what it costs to regulate them. The charges themselves
cover all of the costs of the CAA's SRG and our concerns going
forward are that these charges are appropriate to the costs necessary
to implement what would become the EASA-based rules for the future.
So it is important for the safety group within the CAA to restructure,
which it is beginning to do, to address this change and their
costs should come down and proportionally our charges will come
down as well.
Q334 Clive Efford: How has the model
for constructive engagement between airports and airlines and
the airports review process gone so far?
Mr Cahn: We welcome the fact that
it was introduced. As was said in the last evidence session, Chairman,
the previous quinquennial review was not as well conducted as
we believed it would be and there were many bruised feelings at
the end of it and a feeling that the process had not worked well.
Constructive engagement seems to me a sensible and appropriate
response by the CAA to the criticism which we and others levied
at them. How has it gone? It is early days. It is going quite
well. It is better at some airports than others and better with
some participants than others. The point I would make is that
you cannot expect too much. Constructive engagement is not going
to end up with an agreement between the different parties because
they have radically different interests, but it is quite sensible
to try and clarify the issues, to get rid of the undergrowth and
identify the real areas of disagreement. In that sense it is useful.
Mr O'Leary: At Stansted, constructive
engagement is the sham that it was always designed to be. Constructive
engagement on its own is meaningless. Constructive engagement
without some penalty on either side for failing to engage in constructive
engagement is not really constructive engagement. There is a built-in
penalty for the airlines who fail to engage in constructive engagement.
The BAA rammed through their ludicrous spending projects, the
CAA rubberstamped them and the airlines and our passengers will
be paying the fee forever. There is no downside, unfortunately,
on the other side. There is no penalty for the BAA failing to
engage in constructive engagement, which is what has been played
out in Stansted for the last 15 months. There has been a repeated
attempt by the BAA in particular to characterise the low-fares
airlines at Stansted, the Ryanairs and Easyjets, as the crazy
boys", we would object to anything, we are not interested
in paying for anything and in actual fact that is unfair and untrue.
The process is wider; it also involves British Airways who share
our view in a lot of what has gone on at Stansted. Let me describe
how constructive engagement has happened at Stansted for the last
15 months. In the run up to the Stansted Generation 2 document
there was the proposed spending of £4 billion of our money
over the next 10 years. We have been looking for the traffic forecasts
that underpin the need for a second runway at Stansted, but for
15 months, up until 16 December, we have been told we cannot have
them, they are not ready, they are not available. We got them
at six o'clock on 16 December. Why? It is because on 17 December
this document was published.[4]
So the constructive engagement has involved the airlines at Stansted
looking for traffic forecasts for 15 months to underpin this proposal.
We got them the night before it. What we also got in exactly the
same week was a notice from the CAA hidden down in appendix E
on page 158 of its consultation paper which said that the CAA
have concluded that constructive engagement is not possible at
Stansted, it has been a failure. The airlines have been looking
for traffic forecasts for 15 months and we get them the night
before the BAA produce this document, and in the same week the
CAA say constructive engagement is not possible at Stansted. Well,
of course it is not possible when the BAA has no interest in engaging
in constructive engagement with the airlines. The Stansted airlines
unanimously (and that includes British Airways) called the BAA's
proposals for Stansted G2 a glorified waste, excessive, gold plating,
Taj Mahal, a complete waste of our money and passengers' money
for the next 30 years". It was signed unanimously by all
of the Stansted airline users and yet the CAA has said, It doesn't
matter. Constructive engagement is not possible at Stansted. We
will now decide what will get built at Stansted."
Q335 Clive Efford: Is it fair to say
that this approach has gone well at Gatwick, Heathrow and Manchester?
What do you put that down to? Why is there such a difference between
the approach of the airlines at Stansted and those at the other
airports?
Mr O'Leary: At the other airports
the BAA are not talking about blowing £4 billion when they
only need to spend less than £1 billion and they are not
talking about doubling charges to the airlines. At Heathrow it
is going well because T5 is being built, BA is getting the shiny
bauble, BA is quite happy with that and so it is all working and
that is fine. At Stansted you have the low-fares airlines that
have delivered the traffic growth in recent years, BAA has had
nothing to do with it and we want to continue to deliver it. We
support no cross-subsidisation even though the BAA is back looking
for more cross-subsidisation, and we support the fact that the
airlines at Stansted should pay for the facilities at Stansted.
We could not be clearer on it. All we want is some input into
the design and the location of each of those facilities. The BAA
has been 15 months preparing this document on the second runway
and all the other shiny baubles at Stansted. The consultation
says on page 19 that the process of identifying the options was
wide in its scope, covering wide spaced, close parallel and non-parallel
runway options to the east and north-east. The people they got
to advise on it were independent environmental experts, architects,
engineers, cost consultants, as well as the BAA's own in-house
experts". You will have noticed that missing from this list
were airlines or passengers. It is all done in-house. At a Stansted
users' meeting yesterday we finally got some detail on the traffic
forecasts for the next 30 years at Stansted. Guess what they are
based on? A middle manager in the BAA has forecasted that this
is what the traffic will be at Stansted for the next 30 years.
Did he consult with any airlines? No. Were any soundings taken?
No. They have paid £20 million of preliminary expenditure
getting consultants involved. We asked if we could have their
reports and we were told there were not any reports. We asked
how they got their input and we were told they had open briefing
sessions and someone took down the notes. This person spent £20
million taking down notes. This is what passes for consultation
at Stansted. There is not any consultation. The problem for the
airline users at Stansted is that BAA is to be rewarded by ramming
through £4 billion-worth of spending because the CAA has
already, in the same week BAA's G2 Consultation paper was published,
said constructive engagement cannot happen at Stansted.
Q336 Clive Efford: Mr Cahn, it was
suggested that BA takes the same approach at Stansted.
Mr Cahn: Unfortunately I do not
have Mr O'Leary's eloquence so I would not associate myself with
every word that he has uttered. What I think is true, and I certainly
agree, is that I find it a disappointment that BAA have been focusing
so much on Stansted. I noticed that when Mr Toms gave evidence
in the previous evidence session he said that the Government White
Paper recommended a runway at Stansted and he left it there. My
recollection is that the White Paper also recommended that a runway
should be built at Heathrow subject to some environmental concerns
being met. Our interest is to ensure that the BAA builds capacity
where the business case is overwhelming, where the passenger demand
and airline demand is overwhelming and where the interests of
the country clearly require it. My disappointment is not so much
as Mr O'Leary's is over what is happening at Stansted, it is that
the same degree of effort is not yet being put in to develop Heathrow.
Q337 Mr Goodwill: Mr O'Leary, what
is your customers' reaction when they find that they are paying
many times more for the charges of tax on a ticket than they are
for the actual journey? What is the feedback you get from them
about the service that they are getting from the airports and
the regulatory system?
Mr O'Leary: Our customers do not
really associate themselves as ever getting a service from an
airport. I have heard the previous witnesses giving evidence about
their care for customers while they are trying to ramp up the
charges. Most of our customers, from the point when they enter
the airport to the point when they depart the arriving airport,
have a view that somehow their interrelationship is with the airline
through the whole thing. When the airports make a mess of the
baggage handling, which frequently happens on a Saturday morning
in Stansted, Ryanair gets the blame, it is not the airport. BAA
will be decommissioning the CAT 3 landing aids from February through
to September to upgrade runway works. We will have numerous diversions
from Stansted over the next seven months because of this decommissioning.
However, Ryanair will get the blame. I would go back to the point
we made previously and I do not want to get back on to it, that
is the lunatic tax of £1 a ticket that was proposed by the
CAA. For 20% of our customers last year the air fare they paid
to Ryanair was zero.
Q338 Chairman: I do not think you
read our report. We are not going down that road again, but come
back some time and I will take you through it gently.
Mr O'Leary: Whenever you wish
to invite me, Chairman.
Q339 Mr Goodwill: Perhaps we should
move on to the European Aviation Safety Agency. I think the criticisms
that we have heard of the CAA today are nothing compared to the
criticisms that we heard last week from Sir Roy McNulty about
the way that safety may be compromised by transferring competences
to this new European agency. Do you share those very real concerns?
Mr O'Leary: Speaking personally,
I do not because the ultimate arbiter of safety is going to be
each individual airline, not what the CAA or EASA do. I think
the evidence of the last 20 years in the UK is we have the safest
industries in the world.
Mr Cahn: I speak with some personal
interest because I worked in Brussels at the time when the plans
for EASA were developed.
4 Referring to the BAA's Consultative document on
Stansted Generation 2. Back
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