Select Committee on Transport Minutes of Evidence

Examination of Witnesses (Questions 320-339)


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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