The
Committee consisted of the following
Members:
Chairman:
Mrs.
Janet
Dean
†
Blizzard,
Mr. Bob
(Waveney)
(Lab)
†
Butler,
Ms Dawn
(Brent, South)
(Lab)
†
Carmichael,
Mr. Alistair
(Orkney and Shetland)
(LD)
†
Clelland,
Mr. David
(Tyne Bridge)
(Lab)
†
Cunningham,
Tony
(Workington)
(Lab)
†
Grayling,
Chris
(Epsom and Ewell)
(Con)
†
Kawczynski,
Daniel
(Shrewsbury and Atcham)
(Con)
†
Merron,
Gillian
(Parliamentary Under-Secretary of State for
Transport)
†
Michael,
Alun
(Cardiff, South and Penarth)
(Lab/Co-op)
†
Rosindell,
Andrew
(Romford)
(Con)
Rowen,
Paul
(Rochdale)
(LD)
Stuart,
Mr. Graham
(Beverley and Holderness)
(Con)
†
Watson,
Mr. Tom
(West Bromwich, East)
(Lab)
Emily
Commander, Committee
Clerk
†
attended the
Committee
The following
also attended, pursuant to Standing Order No.
119(5):
Dunwoody,
Mrs. Gwyneth
(Crewe and Nantwich)
(Lab)
European
Standing Committee
Monday 23 April
2007
[Mrs.
Janet Dean
in the
Chair]
Aviation Agreements
4.30
pm
The
Parliamentary Under-Secretary of State for Transport (Gillian
Merron):
It is a pleasure to serve under your chairmanship
this afternoon, Mrs. Dean, as we deal with this important
matter. I shall make some opening comments, after which I will be more
than happy to engage in debate and to answer questions.
The subject of the debate is
the draft aviation agreement between the European Union and the United
States of America, the signing of which has been unanimously endorsed
by the EU Transport Council and is envisaged for the EU-US summit
meeting at the end of the month. Before I explain why the Government
support that decision, it might be helpful if I briefly recap the
background to the draft agreement.
Hon. Members will be aware that
since its inception in the 1940s, international aviation has been
regulated through a complex web of bilateral air services agreements
between pairs of countries. They set out in detail the rights and, more
particularly, the restrictions that determine which airlines can fly,
and how frequently and on which routes they can do so. They also
include limitations on commercial pricing, ownership and partnership,
as well as more legitimate provisions relating to safety, security and
fair competition.
Of
those bilateral agreements, one of the most convoluted is that which
has been place for the last 30 years between the US and the
UK, the so-called Bermuda II treaty. Liberalisation of that treaty and
other such restrictive agreements has long been an objective of the
Government. In 2002, Bermuda II and many other bilateral agreements
were ruled illegal under European Community law because they infringe
the fundamental principle that rights should be available to all
community operators, not just those from one member state. Other EU
countries’ bilateral rights should therefore be available to
UK-based carriers, and our rights should be available to operators from
other member states.
In 2003, the EU Council of
Ministers gave the Commission the mandate to open negotiations with the
US for a new EU-wide air transport agreement that would resolve the
long-standing problem. In so doing, the Council proposed an ambitious,
comprehensive agreement to replace all existing bilateral treaties with
the US, which would sweep away all commercial restrictions and
establish a single, transatlantic open aviation area, built on the
example of a single aviation market that had been established in the
EU. That level of ambition proved difficult for the US to
accept.
Despite the track record of the
US in pursuing open skies agreements for international services, US law
specifically forbids foreign airlines from operating in its domestic
market. The US Government were unwilling or unable to contemplate
changes in that law. They showed greater flexibility when it came to
relaxing rules on foreign ownership of US carriers. Ultimately,
however, the Administration’s efforts to adjust their
restrictive practices were blocked by opposition in Congress.
Negotiations continued none the less. In March, after 11 rounds of
talks spanning nearly four years—patience is a virtue—the
negotiators arrived at the draft treaty, which was conceived as a
first-stage agreement. I want to emphasise that we are talking about a
first-stage agreement with a commitment to continue negotiations on
further stages according to an agreed
timetable.
The main
element of the draft first-stage agreement is the complete opening up
of transatlantic services between the EU and the US. It will allow any
UK airline, for the first time, to fly to any point in the US, rather
than only to the current, restricted list of destinations. It will put
an end to all limits on frequencies and fares. By broadening the
nationality criteria to an EU-wide basis, the agreement will correct
the problem identified by the European Court, so ending the legal
uncertainty of the current arrangements. In the process, it will allow
UK airlines to fly to and from the US to any other EU member
state.
The draft
treaty also contains a great many other provisions, including those on
the ability to run through services to other destinations and operate
free-standing services from the other country, which at this stage is
available to EU airlines only on a limited basis, and new rights on
code-sharing, leasing, franchising and branding. In addition, there are
important provisions on increased convergence and co-operation between
the EU and the US on safety, security, competition, state aid and the
environment.
What will
that mean for passengers? By opening competition between airlines and
airports, we can expect ticket prices to come down and a greater choice
of services and destinations. Many new direct services are likely to
open up, meaning greater convenience for travellers. By removing the
current restrictions on freight operators, there should be benefits for
business, the wider economy and indirectly for
consumers.
Of course,
the precise level of benefits will depend on the commercial decisions
of individual airlines, but they will now be able to make their
decisions on where, when and how often to operate on a commercial basis
in response to passenger needs rather than according to the diktats of
restrictive route schedules set out in the annexes to a 30-year-old
intergovernmental
treaty.
There are some
things that the new agreement does not address but that we still want.
It falls short of the full open aviation area that remains our ultimate
goal and that of the EU. It does not include access to domestic markets
on either side and, as I have mentioned, we are disappointed that the
US Administration have not yet been able to deliver the relaxation of
the limitations on the ownership and control of US airlines which many
would like. There are small improvements in that direction in the
treaty but the case remains that, for no good reason, foreign
investment in airlines on both sides of the Atlanticis far more
tightly restricted than in most other
industries.
There
are other issues that need to be tackled, such as the US
Government’s iniquitous and anti-competitive “fly
America” policies on Government-funded travel. Those issues will
be addressed in further stages of the agreement, and negotiations on
them are required to start within 60 days of the first stage coming
into effect. Importantly, a clear timetable for the conduct of the
second-stage negotiations has been set out in the agreement, with
sanctions available if no second-stage agreement is signed in
accordance with that timetable. The Government led the debate on
ensuring those tough commitments to a second stage of negotiations,
which are intended to complete the liberalisation of this key aviation
market.
As Members
will be aware, the draft agreement was presented to the EU Transport
Council of Ministers on 22 March with the recommendation of the
Commission and the presidency that the Council endorse it with a view
to signature at the forthcoming EU-US summit meeting, which will take
place in Washington on 30 April. The Council unanimously gave that
endorsement, subject to certain conditions including reaffirming the
Commission’s mandate to deliver a full open aviation area
agreement through further stages of the agreement, moving back the date
of the introduction of the new agreement to give airlines and airports
more time to prepare and agreeing an internal process for the
suspension of rights by the EU side in the event that a satisfactory
second-stage agreement is not reached by the
deadline.
We came to
the view that, subject to the conditions set out, endorsement of the
agreement was consistent with the UK’s overall interests. My
right hon. Friend the Secretary of State made it clear that he would
not sign up to a deal that was not in Britain’s best interests,
and we are firmly of the opinion that the deal will be of benefit to
the UK economy and to passengers. I hope that my short explanation of
the background to the agreement and the reason for the
Government’s position will helpfully inform the Committee in its
deliberations. I am sure that hon. Members will wish to take part in
debating this important
matter.
The
Chairman:
We now have until half-past 5 for questions to
the Minister. I remind Members that they should be brief and asked one
at a time. There is likely to be ample opportunity for each Member to
ask several
questions.
Chris
Grayling (Epsom and Ewell) (Con): I am grateful to you,
Mrs. Dean. I have six questions for the Minister and, if I
may, I shall ask them in groups of
two.
The Secretary of
State made it clear to the Select Committee on Transport that he would
not sign up to an agreement that was not in Britain’s national
interest, and the Minister has just reiterated that point. The Select
Committee said—I am sure that the hon. Member for Crewe and
Nantwich (Mrs. Dunwoody) will amplify this later—that
it is
“convinced that
the draft Agreement is imbalanced and lacks reciprocity. It would
benefit American interests to the detriment of the broader European
interest and to the detriment of the UK national interest in
particular”.
Why does the Minister think that the deal
is good for
Britain?
Gillian
Merron:
We are indeed grateful to the Transport Committee.
My right hon. Friend the Secretary of State was very happy to meet it
to discuss the matter. In all negotiations, we debate matters of
judgment, but although I am extremely respectful of the points made by
the Committee, we do not share its conclusions.
For three reasons, I do not
consider the agreement to be a bad deal for British interests. First,
passengers will benefit from increased competition, lower fares and
more convenient services; secondly, the wider economy will benefit from
deregulation and the cutting back of red tape, which I am sure all
Members will welcome; thirdly, our airlines will benefit, too. I
believe that that is in Britain’s best interests, and I
emphasise that the Secretary of State has insisted that there will be
sanctions if the deal does not produce what we
need.
Chris
Grayling:
Let us be clear about those sanctions. The rest
of Europe and the United States appear to have gained from the
negotiations much of what they had hoped to secure, whereas, on
ownership and access to the US market, this country has not secured the
benefits for which we hoped. Given that Europe and the US have got what
they wanted, will there be successful phase 2 negotiations, and can the
Minister give a clear, unequivocal commitment to the Committee about
the Government’s policy on the negotiated sanctions, should such
an agreement not be forthcoming?
Gillian
Merron:
On sanctions, I hope that we do not get to that
stage. Indeed, we are in negotiations, but I do not share the view
expressed in the first two questions that the deal is unbalanced. A lot
has been made of what the US will be able to do, but I emphasise, for
example, that EU carriers will have the same fifth-freedom rights to
operate onward services from the US to other countries. Certainly, that
will make it much easier to support the development of freight traffic,
about which we hear very little.
We have a lock on the
situation. If no second-stage agreement has been signed within 30
months, either side could begin withdrawing rights. I hope that we will
not be in that situation, but I must emphasise to the Committee again
that the Secretary of State, on behalf of the UK Government, and
supported by other member states, ensured that we have that lock in
place. We are conscious of that, but also serious and quite clear that
we want an agreement that continues to serve the British interest, as
the first stage does—it is just a first stage, as I said in my
opening
comments.
Mr.
Tom Watson (West Bromwich, East) (Lab): It strikes me that
the deal is better for British consumers than for British industry, but
no one was really expecting the United States to open up some of its
restrictive markets overnight. Will my hon. Friend say how the
agreement might allow us to keep pressure on the United States to relax
its restrictions on foreign ownership? What are our prospects of
achieving that over the next few years?
Gillian
Merron:
In truth, my hon. Friend raises
a difficult problem. The US Administration would welcome some
relaxation of what are very restrictive limits on foreign investment;
that is recognised to be a form of protectionism. However, very strong
vested interests are working against such relaxation. I believe that
they lie often behind spurious arguments about national security, which
we should recognise. At the moment, it is true to say that those
interests have the upper hand in Congress, but I firmly believe that
there are plenty of voices in the US industry and in the Government
that recognise the need for change. This has been a laborious process.
It has been going on not only under the present Government, but under
the previous Government, and we had not managed to make progress until
recently, so we are at the first stage of a two-stage agreement. We are
working together with other EU member states. United States
commentators say that change is inevitable sooner rather than later, so
what we are discussing is part of a
continuum.
Mr.
Alistair Carmichael (Orkney and Shetland) (LD): When the
Minister talks about making progress, I think that perhaps sometimes
she confuses making progress with just giving in. She speaks about the
importance of sanctions, and I accept that the liberalisation of the
transatlantic market will be a positive development that is popular
with consumers. In the event that it is necessary to impose sanctions
as a result of a failure to secure a second-stage agreement, what
reaction does she anticipate from the consumers who have benefited, and
what impact might that have on future Government
negotiations?
Gillian
Merron:
I do not share the view that the hon. Gentleman
expresses; I do not recognise the view that we are just giving in. This
is about removing red tape. It is about deregulation and consumer
interest, as well as support for the UK economy. We should remember
that we have already made immense progress in this field across the
whole of Europe with the introduction and success of no-frills carriers
such as Ryanair and easyJet. We have seen that liberalisation of these
markets has produced tremendous improvements, and passengers will see
the improvements sooner rather than later. We have to work towards the
second stage of the deal, but in the first place we have to sign it,
and it will be signed by the EU and the United States on 30
March. We know what our final aim is, but our job then is to set out
the negotiating markers and the means by which we get there, so it is
not appropriate to talk about giving things away. There are tremendous
benefits, some of which I have
outlined.
Mrs.
Gwyneth Dunwoody (Crewe and Nantwich) (Lab):
In that case, will my hon. Friend tell us exactly
what was earned by British airlines from their transatlantic traffic in
the past five years? How much of that will be changed when Heathrow is
no longer available to the same degree to British airlines, and what is
the exact timetable that has been set out, not only for opening
debates, which, as the Minister herself says, have taken up four or
five years, but for concluding an agreement that would enable the
British Government to impose sanctions when, as we all expect, the
United States reneges on its commitments?
Gillian
Merron:
I hope that we will not find ourselves in that
position, and we will work with our EU colleagues to ensure that we do
not. The point that I want to emphasise in all this is that the status
quo was never an option. Had we not worked towards where we are, we
would have found ourselves anyway in a position of having to negotiate
with the US, and we have previously been, frankly, rather unsuccessful,
so my view is that we have been as successful with EU member states as
we could be. On the issue of British Airways, I understand that in the
evidence given to the Transport Committee
recently—
Mrs.
Dunwoody:
All British
airlines.
Gillian
Merron:
May I ask my hon. Friend to repeat the question? I
heard a reference to British
Airways.
Mrs.
Dunwoody:
I have the figures for British Airways if the
Minister does not have them. I am asking what was the total amount
earned by British aviation—defined as British aviation
companies—in the past five years, because unless we can be
clearly aware of what they normally earn and what they will forgo, we
cannot judge the efficacy of this agreement. I am sure that the
Minister has those figures at her
fingertips.
Gillian
Merron:
I must be honest again and say that I regret that
I do not, but I will be pleased to make them available as speedily as
possible.
Mrs.
Dunwoody:
And the
timetable?
Gillian
Merron:
Likewise.
The
Chairman:
Order. Can we not have supplementary questions
until I call hon. Members to ask
them?
Daniel
Kawczynski (Shrewsbury and Atcham) (Con): What will be the
effect on regional airports? A number of us on the Committee represent
west midlands seats, and the Minister will know that Birmingham
International airport is extremely important for our constituents. Will
she expand on what benefits this agreement will bring for airports such
as Birmingham
International?
Gillian
Merron:
As I have said, some concerns, which I think are
quite legitimate, have been raised about UK regional services in
general, and particularly about the use of slots going to Heathrow.
Carriers will certainly review their use of slots, but they would do so
in any case.
I have
always been committed to the development of regional airports,
independent of this agreement, and we should support their development.
There is a considerable emphasis, obviously, on the airports in the
south-east, which are, of course, very important—Heathrow is an
international hub. However, my view is that there is considerable
benefit to local economies from the development of airports such as
Birmingham, Robin Hood airport in Doncaster and all the rest of
them. If this agreement opens up the whole market, I believe that it
will create a range of opportunities for airlines and airports all
around the country. Of course, as a boost to the UK economy, the
agreement would benefit Birmingham and the area around
it.
Mr.
Carmichael:
Further to that question, I would like to
point out that the opinion of the Transport Committee, quoted on page 7
of the bundle, is
that
“The
consequences of these changes would be a damaging reduction of feeder
routes into
Heathrow.”
What
assessment of the reduction of the feeder routes into Heathrow has been
made by the Government? Do they accept the Transport Committee’s
conclusion? If so, are they reconsidering their position with regard to
public service obligation orders in relation to
slots?
Gillian
Merron:
I accept that there is concern about that issue.
As I have mentioned, airlines review their commercial operations at all
times, and they will do so independently of the
agreement.
I certainly
recognise the importance of regional air services, and there is no
doubt about their importance. That was why, in December 2005, we set
out guidance on how we might use PSOs. Obviously, the imposition of a
PSO on a route would enable slots to be reserved for that service,
which already happens in France and Italy. We have had no applications
for PSOs for regional services to London since that guidance was
published. The provision and availability of regional services is
there, and I assure the hon. Gentleman of our commitment to those
services.
Chris
Grayling:
I am not desperately reassured by the
Minister’s answer to that question; her answer calls into
question just how much detailed homework her Department did before
signing up to this
agreement.
May
I press the Minister on one other area? She will know that, in reality,
the average person that flies economy across the Atlantic is unlikely
to see a significant price benefit as a result of this agreement. There
is relatively little price differential between the transatlantic fares
from different airports across Europe to the US, even where no
regulatory restrictions apply. The expectations is that savings will
come in business class and that they will amount to maybe as little as
5 per cent. in some cases. What detailed assessment have the Government
carried out about the implications of the agreement for fare levels? In
particular, will the Minister confirm that it is business class
flights, rather than economy flights, that are likely to be the ones
that see a price change? Also, does she believe that it is worthwhile
making that concession to business travellers in return for giving up,
basically, access to Heathrow or agreeing to limitations on access to
Heathrow in an agreement that does not appear to be entirely
balanced?
Gillian
Merron:
The agreement is not about giving up entire access
to Heathrow in the way that has been described. Perhaps the hon.
Gentleman will come on to this issue when we have the debate, but if
there is criticism of the deal, I would like to know what he would have
done. It is quite clear that doing nothing was not an option. Our
interest and the Secretary of State’s assurance on this matter
were about getting the best deal for the UK.
The Civil
Aviation Authority has estimated that the net direct benefits to the UK
could be in the order of£1 billion over the next 20
years. It has also been estimated that the benefits to passengers,
mainly through lower fares, are in the order of £250 million a
year. I am sure that the hon. Gentleman agrees that more competition
undoubtedly brings lower fares—one has only to compare ticket
prices, and I am happy to refer to premium class travel as well as
economy fares. The fare for London to New York costs £200 more
than that for Heathrow to Bangkok, which is twice the distance, and
£300 more than that for Heathrow to Auckland, which is more than
twice the distance. That does not seem to be a fair deal for
consumers.
The hon.
Gentleman also knows that although having more choice is important, if
one travels at peak times on economy fares they cost three times as
much as off-peak fares. There are savings, whether they are for
business or not, but I would have thought that the hon. Gentleman would
agree that making business travel more attractive and making the UK a
more attractive place to do business is an attractive option and the
right way to go. We also must compete with every other airport,
particularly if we are talking about Heathrow as a transit
hub.
Chris
Grayling:
So why does the Minister think that the
agreement will be a benefit—she has highlighted the benefits for
business travel in particular? Why is it beneficial to British business
and British airlines that a British Airways plane flying to New York
will not be able to fly further within the United States, but that an
American Airlines plane flying to Heathrow will be perfectly capable of
flying on to Paris under this agreement? Does that not undermine
British business? That explains why the deal is, as yet, completely
unbalanced and not in the interests of British
business.
Gillian
Merron:
We are talking about geography. The reason for the
difference is because the United Kingdom is a country and France is a
country, whereas the whole of the EU is not one country. The United
States is one country, so we are where we are in terms of not only
geography, but international definitions and agreements as well as US
domestic law. The hon. Gentleman may think that that should be changed
in the long term, but the definition of a country will doubtless remain
as it
is.
Ms
Dawn Butler (Brent, South) (Lab): The Minister has made it
clear that doing nothing and keeping the status quo was not an option.
Would it have been possible simply to reject this agreement
completely?
Gillian
Merron:
That is an interesting thought,
but as I said in my opening remarks, there was no opportunity to revert
to the status quo. The job in hand was to work with the other member
states to get the best deal possible that would be in the interest of
this country. Had negotiations broken down, which is what I presume
that my hon. Friend is referring to, we would have been back in the
courts. It is likely that we would have had to scrap the existing
agreements and gone straight back to negotiating a new agreement, which
we have been trying to do over many years. It was after four years of
talks that we arrived at a position where all member states
and the Council were unanimous on this. We concluded that we should sign
the agreement, as the best first stage of the deal possible at that
point, with a view to moving on. This is about work in progress and
looking to the future to achieve our ultimate
goal.
Mr.
Carmichael:
The Minister seems to anticipate that the
agreement will result in an increase in the volume of transatlantic
traffic. What assessment has her Department made of the consequences of
that increase for carbon
emissions?
Gillian
Merron:
We are talking about a commercial and economic
agreement. Obviously, all the usual rules such as inclusion in the EU
emissions trading schemes, the caps on movements, noise levels and so
on will all still apply. This is about what airlines commercially
decide to do within that. That is a separate issue to be
considered.
Mrs.
Dunwoody:
How many domestic feeder services can get into
Heathrow, and what is the existing price of the sale of a pair of
slots?
Gillian
Merron:
I regret to say that I shall have to come back to
my hon. Friend on that, but would I be in order to refer back to the
issue of the timetable, which she raised
earlier?
Gillian
Merron:
Negotiations on the second-stage deal must
commence by the end of May 2008, and we will review progress towards a
second-stage deal by November 2009. If no deal has been agreed by
November 2010, both parties have the right to give notice of suspension
of rights, which, if it were to take place, would occur from March
2012.
Chris
Grayling:
May I ask the Minister,
further to the points made by the hon. Member for Orkney and Shetland,
about the European emission trading scheme? In terms of the timetable,
the negotiating process for this agreement fits in timetable terms
alongside the next stages for the emission trading scheme. Will she
give a clear and unequivocal commitment to the Committee that the
emission trading scheme will not become a part of the negotiations of a
further stage of the open skies agreement, and that we will not
consider making concessions on that front in order to secure a second
stage of open
skies?
Gillian
Merron:
As I have said, those are entirely separate
matters.
Chris
Grayling:
I must press the Minister: it
is very likely that there will be pressure from the United States to
make a linkage between the two. She has said that the matters are
separate, but that is not the question. Will she give an undertaking to
the Committee that the Government will not permit a linkage between the
two to become a feature of the second stage of negotiations?
Gillian
Merron:
The EU ETS is not related to discussions between
the EU and the United States. The EU ETS is a matter for the European
Union, and that is the clarity that we should be putting on
record.
Mr.
Watson:
I understand why the Opposition Front-Bench
spokesman wants to press the Minister, because he does not think that a
5 per cent. reduction in business travel costs is a good thing for the
UK—he wants to put air fares up. For clarity, the Minister has
said that the consequences of rejecting this treaty would be a
fall-back to a huge mess in the courts. The Tory Front-Bench spokesman
has said that business travel will reduce by at least 5 per cent. and
that there is likely to be a benefit for consumers. Will my hon. Friend
the Minister confirm that we are making progress with the Bill, and has
she received representations from business saying that this a good
thing in terms of their business costs and that it might help the UK
economy?
Gillian
Merron:
For example, the chief executive of Virgin
Atlantic—somebody who will have to compete more—has said
that
“liberalisation is
very important for this industry... this is the key one...
This is the very industry that has enabled globalisation, and yet it is
one that remains
restricted”.
The
other point in which my hon. Friend might be interested is that the
Government are keen to remove red tape and to deregulate. That is not
being well received by the Opposition, which is perhaps worth noting.
Perhaps Opposition Members will be clear when they speak about whether
they think that we should simply have blocked the agreement. If we had
done so, however, we would have denied travellers more choice of
service and cheaper fares, and it would not have been realistic. This
is the best achievable first stage of a deal, leading on to a second
one. A delay would have brought disbenefits, not only to the consumer
but to the UK industry. It would certainly have blocked carriers from
development in terms of jobs and services. In particular, there are
tremendous opportunities in respect of freight and for the UK to allow
business travel to take place at the right price rather than at an
artificially restricted one. My hon. Friend has made an important
point.
Mr.
Carmichael:
The last time that the Minister and I were in
this Room, we were discussing the implementation of the EU emissions
trading scheme by in this very Committee. She will recall that that
scheme is intended to apply to flights to and from points outwith the
EU. Will she confirm my recollection that the working details of that
have not been resolved? In that context, will she readdress herself to
the pertinent question asked by the hon. Member for Epsom and Ewell and
give the Committee some assurance that implementation of the emissions
trading scheme will not be played off against a second stage
agreement?
Gillian
Merron:
The hon. Gentleman will recall
from our earlier debate that this Government have always made it clear
that the best way to make environmental improvements in respect of
aviation emissions is by including aviation in the EU ETS. That
guarantees a specific environmental outcome, which nothing else does.
Clearly, aviation has limited opportunities for
abatement. Trading produces the most effective environmental outcome
most cost-effectively. I do not anticipate that a commercial and
economic deal will impact on our appetite for keeping aviation and for
having it included as soon as possible. The UK has pushed for that, and
we remain committed to
it.
Mrs.
Dunwoody:
Does the agreement contain a commitment from the
United States that community airlines will be able to apply for
anti-trust immunity?
Mrs.
Dunwoody:
Are we reserving the right to introduce new
limits on US investment in community airlines, and will we reach
agreement in this longed-for second
stage?
Gillian
Merron:
There are already limits in that
respect.
Mrs.
Dunwoody:
But is it our intention to ensure that they will
be applied according to the timetable, provided that we are not
progressing in the second stage
agreement?
Gillian
Merron:
I can give that assurance to my hon.
Friend.
Mrs.
Dunwoody:
Does the agreement change our ability to own
third-country airlines? Will the Minister outline what we asked for in
relation to the rights of community investors to own US
airlines?
Gillian
Merron:
Perhaps I could refer to that later in the debate.
Before I continue, Mrs. Dean, would it be in order for the
sake of clarity to refer to an earlier question from my hon.
Friend?
Gillian
Merron:
Thank you, Mrs. Dean. My hon. Friend
asked about the price of slots for domestic services. Slots are not
charged for by the airport authorities. We understand that there is a
secondary market in slots, which is what my hon. Friend was asking
about, and I am going to risk saying that, according to press reports,
a pair of slots trades for £10 million to £15
million, depending on the time of day.
Mrs.
Dunwoody:
Will the Minister answer the question about
domestic feeder
slots?
Gillian
Merron:
I am happy to return to that when I have the
information in front of
me.
Chris
Grayling:
It is disappointing that the
Minister did not have that information prepared prior to the debate.
However, she is correct. Will she not accept that slots at Heathrow
command a substantial premium? The reality of the agreement is that
some airlines currently using Heathrow for domestic flights in and
around the UK and western Europe are likely to pass those slots on
through the secondary market to international carriers looking to open
up the transatlantic market. As a result, does the Minister accept the
inevitability that
some destinations are bound to lose those links in the next few years?
Many have already lost their links into and out of
Heathrow.
Gillian
Merron:
I have given the information about the likely
effects on UK regional services and the Government’s intention
to protect them. There is no reason why we would wish deregulation and
the opening up of markets and benefits to consumers in the UK to
disadvantage regional services. I have spoken about the opportunity for
PSOs on routes, where they are
necessary.
On slots, I
understand that the hon. Gentleman has a strong view on how things will
proceed, but that is his opinion. The point about this deal is that it
will benefit consumers and industry. I hope that the hon. Gentleman is
asking himself what he would have done in the same situation. It is
worth re-emphasising that the UK Government ensured the locking-in on
the second stage in order to have some means of bringing the US to talk
directly to the EU, which was a major
contribution.
The
situation that the hon. Gentleman has described is speculation, which
suggests that it could not possibly happen at present. He is aware of
the current
situation.
Mrs.
Dunwoody:
Does the proposal contain any agreement about
the “fly America” conditions that are applied by United
States legislators?
Gillian
Merron:
The honest answer to that question is that we are
aware of the difficulties, and that is one of the areas in which we are
continuing to work to seek a better agreement. I will not deny the
difficulty of the issue to my hon. Friend, who knows, as I do, that it
is one of our greater
challenges.
Mrs.
Dunwoody:
Are any other controls raised by the agreement?
How will Britain and other European nations benefit from the
restrictions being
removed?
Gillian
Merron:
For me, the agreement is important for not
only the consumer but other airlines because they can participate,
which they cannot do at present. For example, it was nonsense that
there was an age-old agreement meaning that it was not possible to fly
from Heathrow to Texas, but one could do so from Gatwick, which did not
seem to make much sense. The benefit is allowing airlines to make the
right commercial decisions to maximise the use of their slots, as well
as providing a service to passengers. The issue concerns jobs and
services and allowing airports to maximise their
opportunities.
To
return to a previous point, it is true that we would require the US to
pass legislation to change ownership restrictions, which is another
area of immense concern as it would not be the most positive outcome
for the future. We are at the first stage, and we are seeking to move
forward with the other EU member
states.
Mrs.
Dunwoody:
As the Minister has assured us that the matter
is about commercial decisions, particularly slots at Heathrow, will she
tell me what work the Government have done on the difficulties in
protecting domestic feeder flights, if the slots are sold by the
member airlines for transatlantic travel? Will slots for flights from
Birmingham, Manchester, Scotland and Liverpool, and the slots of other
airlines that use Heathrow, be sold to be used for transatlantic
traffic or removed from
Heathrow?
Gillian
Merron:
I refer again to PSOs which, if necessary, would
be the way to go. As we speak, however, commercial decisions are being
made about feeder flights. Regardless of the agreement, airlines are
currently making such decisions. Imposing a PSO on a route would enable
slots to be reserved for a service, which seems a useful way to deal
with the matter. It is done in other countries, and I hope that it
would be done here, if
necessary.
Mrs.
Dunwoody:
Are there any PSOs on Heathrow at present? As
the Minister has said, there are many PSOs at French airports and
Italian airports. Will she tell us about any PSO at Heathrow? How many
PSOs does she expect to be imposed, and what work has been done by the
Department on the cost, on the need to negotiate with commercial
airlines and on possible effects on the economics of transatlantic
traffic?
Gillian
Merron:
As I said earlier, there have been no applications
for PSOs. I will be happy to make available to any member of the
Committee the cost-benefit analysis and commercial viability analysis
produced by the
Department.
Mr.
Carmichael:
Will the Minister tell the Committee how long
it takes from the point of application to put a PSO in
place?
Gillian
Merron:
I am sure that I shall be able to come back to the
hon. Gentleman on that
point.
Mrs.
Dunwoody:
Is there anything in the agreement that will
make it easier for airlines to acquire other European airlines and
their existing slots in America for transatlantic
flights?
Gillian
Merron:
There are benefits for EU airlines—for
example, the right to fly to the US from other European destinations
and the possibility of merging with or acquiring other EU carriers
without the loss of transatlantic traffic rights. The deal gives
greater potential for alliances with US carriers and greater clarity on
rights to own US carriers, although I accept that there are still very
restrictive bounds in US law. The agreement provides possibilities for
setting up franchising deals with airlines operating in the US and, as
hon. Members may be aware, a permanent forum for closer working on
matters relating to security, safety, competition and subsidy, all of
which will be difficult issues. We have worked on those issues to
varying degrees with the US in recent
years.
Chris
Grayling:
The Minister was quick to say that the nature of
countries made it impossible to have an agreement that provided for
ongoing flights within the European Union, mirroring the debate about
ongoing
flights within the United States. If that is the case, why did the
Government decide to allow the European Union to negotiate on their
behalf? Why was the agreement not a bilateral one between us and the
US?
Gillian
Merron:
I thought that I had already covered that.
Clearly, the original situation was deemed as not being legal. The
myriad bilateral agreements were not acceptable under EU law, and
therefore there was a need for an EU-wide agreement. Quite simply, it
was not legally possible, as I have explained, which is why the status
quo was not an
option.
Chris
Grayling:
Does the Minister agree that it is absurd that
we are unable to negotiate a bilateral agreement with the United
States? On an EU-wide basis, under EU law, we cannot have
country-to-country agreements. We are in an odd situation: we cannot
negotiate with the United States because it is one country, but at the
same time there cannot be a bilateral negotiation between one country
and another. The result is a poor outcome in terms of genuine
reciprocity. Does the Minister not agree that that is an unsatisfactory
situation?
Gillian
Merron:
No, I do not accept that. Unless one wishes to
withdraw from the European Union, it seems to me that working with EU
member states to get the right agreement between two of the largest
markets in the world is a strong position and the right way forward.
Our goal is an open aviation area, which is what we want to get. The
right way to achieve it is through the EU, which is how we will do it.
The status quo of myriad bilateral agreements between individual
countries was not an option, as had been made clear in law. Any
competent Government would have been unlikely to do anything other than
work correctly in the interests of the
country.
Chris
Grayling:
Since the EU has failed to negotiate a genuine
bilateral agreement—there are many examples of the agreement not
offering genuine reciprocity—why should we be confident that it
is capable as an institution of negotiating an adequate second-phase
agreement?
Gillian
Merron:
Because the goal, an open aviation area, is there.
That is where we want to get to. How to get there, which involves the
negotiating timetables and the milestones, is a matter of extreme
complexity to be agreed upon. The hon. Gentleman’s difficulty is
perhaps in seeing that the status quo was not an option. In a few
minutes, we will perhaps have the opportunity to hear the alternative,
but confidence should be provided by the locking-in, which was a point
made by the UK.
It is
important to emphasise that the problem is EU-wide and requires an EU
solution. We cannot reach that solution alone, and we must find a way
to reduce red tape and open up benefits for both the UK economy and
passengers. The agreement is the most liberal open skies deal ever
agreed with the US. Of course, we would like to go further—there
is no doubt about that—but it is a two-stage process and we have
just got to the end of the first stage.
Mrs.
Dunwoody:
Is there an agreed list of priorities for the
second-stage negotiations—things that have not yet been agreed?
What is the agreed date for the implementation of the agreement, which
affects the home base of British airlines but not that of any other
European
airline?
Gillian
Merron:
On the timing, stage 1 could take effect by March
2008. If things were to go well, it could be even sooner, and stage 2
could be by 2009-10. I mentioned earlier the timetable if things do not
go as they should. As I have said, our full intention is to move
towards the goal of an open aviation area, and our best efforts should
be in that
regard.
Gillian
Merron:
As the hon. Gentleman might be aware, in 2004 we
rejected a deal on a draft agreement that was not fully worked out but
was a set of propositions. There have been further concessions, and my
hon. Friend the Member for Crewe and Nantwich mentioned the “fly
America” policy. The US has made some effort to begin opening up
Government traffic to EU carriers, but that is very limited and
therefore not as we would
like.
In other areas,
we have made further progress. For example, there are further rights
for EU freight operators that are not available to US carriers,
provision to allow the franchising and branding of US carriers by EU
companies and the strengthening and clarification of commitments to a
second stage, which we have not had
before.
The
Chairman:
Order. If no more hon. Members wish to ask
questions, we will proceed to the debate on the motion.
Motion made, and Question
proposed,
That the
Committee takes note of European Union Document No. 8656/06, Draft
Decisions on the signature and provisional application and conclusion
of the air transport agreement between the European Community and its
Member States, on the one hand, and the United States of America, on
the other hand; and endorses the Government’s approach to
discussions on this document.—[Gillian
Merron.]
5.25
pm
Chris
Grayling:
I think that everyone in this Room, from
whatever party, agrees with the long-term objective of a proper
open-skies area and free trade in aviation across the Atlantic. The
Minister, the Liberal Democrats and I agree on that
point.
The question is
whether the agreement will help genuinely to establish such an open
area. The truth is that there has been little progress until recently,
and the progress that has been made is extremely small. The Minister
listed what has changed since last time, which I think represents a
pretty low price for securing access
to Heathrow airport. I do not think that the agreement has changed
greatly in the past two or three years. Nothing has happened radically
to change the positions adopted in the past by Labour and Conservative
Governments. If, as the Minister has said, we had no option but to
agree and provide greater access to Heathrow with precious little
coming the other way, we ought to have been looking at the arrangements
within the EU. Is she actually saying that we could not say no? If so,
that is an unacceptable, lamentable state of affairs and a failing on
the part of the
Government.
The truth
is that the agreement represents virtually no change in the US position
from the previous30 years of bilateral negotiations. Having
given away our best bargaining chip—access to Heathrow
airport—it is difficult to envisage any real progress in the
next round of negotiations, not only because the US has received most
of what it wants from the EU-US agreement, but because the rest of
Europe has as well. Continental airlines have a lot to gain from the
opening up of Heathrow and little interest in the domestic US market.
What incentive do they have to push the agreement any further? I have
already been told that people in Washington are disinterested in
pursuing further serious discussions on opening up at the next stage of
any agreement. Britain accounts for 40 per cent. of the transatlantic
market, but the Minister has failed to provide an adequate explanation
how the agreement will truly serve British interests. After all, the
British Government’s job, first and foremost, is to represent
British interests.
The
Minister quoted Virgin Atlantic. Of course, Virgin Atlantic, British
Airways and others want a true, open-skies agreement. I do not blame
them—they are among the best airlines in the world and would
have everything to gain from such an agreement. However, if the
Minister is praying in aid our major transatlantic airlines, Virgin and
BA, in saying that this is a great agreement, I am afraid that she is
wrong. Virgin does not think that this is the best possible deal, and
it is extremely concerned about what happens next. She would not find
Virgin and BA unequivocally supportive of progress to
date.
In the
Minister’s winding-up remarks, I would like her to address a
further point about the Government’s strategy for building a
third runway at Heathrow. How will slots be allocated? And what
proportion will be allocated to British carriers? She talked about PSOs
and regional feeders, but while she has a moment to think about the
issue, will she mention what will happen if the Government pursue their
stated strategy for handling Heathrow? How will she ensure that the
regions of the United Kingdom are not squeezed out in the face of a
transatlantic and global battle to secure routes into and out of
Heathrow? In recent years, of course, many parts of the United Kingdom
have lost out owing to the focus on Heathrow and transatlantic traffic.
Places such as Jersey, for example, no longer have regular links to
Heathrow. The same is true of many other smaller airports in the United
Kingdom. It is important that when we consider aviation in future, we
do not forget the links to places that are not otherwise served by
public transport but which, none the less, have an economic need to
feed into our international hubs.
It is a great shame that the
Government and the EU have so far failed to secure the ability of our
airlines to expand within the US. Under the agreement, the options are
pretty limited. The US has gained substantial access to the EU market;
in return, the EU has not gained anything like comparable rights. As
for the third-party rights that the Minister has discussed, the truth
is that the value of flying from New York to Heathrow to Frankfurt is
vastly greater than the value of flying from New York to Miami to
central America. The agreement does not feel like a good deal for
British business in that
respect.
I have some
sympathy for the Minister—I have a lot of regard for her and
think that she has been dropped in it by the Secretary of State. The
Secretary of State went to Brussels to negotiate the agreement and was
originally going to be on the Committee. It is a shame that he has
chosen not to be here today, because this issue is of such importance
that he should have been here. I have a lot of respect for him, but he
has made a misjudgment in this instance. He has also made a misjudgment
in assenting to an agreement without being able to provide evidence of
a detailed assessment of its impact on the country.
The Minister has talked about
benefits for consumers, but we have also to look after the interests of
British industry. I am not sure that a deal that offers a US airline
the opportunity to take a 49 per cent. stake in a British airline, but
offers a British airline no more than a 25 per cent. stake in an
American airline is balanced and reciprocal. We have heard about the
difficulties in Congress and elsewhere, but I am not satisfied that it
is acceptable to sign up for that reason to an agreement that is so
unbalanced. If this is a fight worth fighting, we should say no and
force the US to a point where finally it accepts that.
Accepting a 25 per cent. stake
for our airlines and 49 per cent. for US airlines is one
example of why the matter has not been pushed to a satisfactory
conclusion. There is no earthly reason why an EU airline and a US
airline should not have the same rights of ownership. If we are to have
a situation in which majority ownership is not permitted, there should
none the less be mirror rights. Having 25 per cent. ownership on one
hand and 49 per cent. on the other is a clear example why the agreement
is unbalanced and unacceptable. The Government and the EU should have
done a better job in negotiating
it.
The Minister has
talked about the environment. The agreement poses a challenge in terms
of the environment and aviation policy. Last December, the
Secretary of State wrote in The
Guardian:
“There
is no question that combating climate change is the most serious
challenge we as a society face, and that aviation has a key role to
play.”
He went on to
defend the Government’s plan for the inclusion of aviation in
the emissions trading scheme as their way of addressing aviation
emissions. The consequences of this agreement, with the projections
that the Secretary of State and the Department have put forward about
the growth in transatlantic traffic that may arise as a result, negate
any benefits that we might gain from the emissions trading scheme. I
would be grateful if the Minister were to clarify the
Government’s strategy on carbon emissions and aviation.
Liberalisation, such as that outlined in the agreement, will have a
direct impact on other aspects of Government
policy.
Mr.
Watson:
I follow the logic of the hon. Gentleman’s
argument and understand the dilemma that he is portraying—I
think that he is saying that the agreement might increase transatlantic
air travel because of the reduction in costs. We have talked about the
reduction in costs to business: will he say on the record whether he is
against reducing air fares for business travellers, which will be the
result of signing the
agreement?
Chris
Grayling:
The hon. Gentleman has misunderstood my point. I
am not against taking steps that support British business and the doing
of business in the UK. The Government have said that aviation is an
environmental problem and are subsequently signing a liberalisation
agreement. If he were in opposition and I were in government, I would
expect him to expect me to be accountable on the same point. The
Minister needs to explain how the Government intend to change their
strategy following the agreement, given the Secretary of State’s
comments about aviation and the
environment.
Mr.
Watson:
I understand the point that the hon. Gentleman is
trying to make, and I am sure that he understands the question that I
am trying to get him to answer, which is whether reducing business
travel costs on transatlantic flights is a good or a bad thing for UK
industry.
Chris
Grayling:
I am sceptical whether a 5 per cent. reduction
in business fares for flights across the Atlantic is an adequate
benefit from an agreement that opens up our main domestic airports to
competition for the first time in half a century and does so on a basis
that is far less balanced than it should be. Were I sitting in the
Secretary of State’s chair, which I hope to be in due course and
certainly by the end of the process that takes us up to the 2012 limit,
my goal would be to secure a better deal for the UK, UK business and
the UK
consumer.
I
appreciate that we all want liberalisation of the transatlantic route,
and we face a dilemma. I am not challenging the Minister or saying that
there are rights and wrongs, but I would appreciate it if she were to
discuss in her closing remarks how the Government intend to approach
aviation policy, given the conflicting pressures of liberalisation and
growth on the one hand and the need to tackle rising carbon emissions
on the other. I should be grateful for clarification of the
Government’s thinking in that
respect.
Finally,
I turn to stage 2. The Minister has argued that we need a phase 1
agreement to get things going and that a phase 2 agreement will follow.
I challenge her, however, over what is left to negotiate from a US
perspective. The Government have said that we need to be pragmatic and
that we have achieved all that we can at the moment, but that is not
what has happened—we have given away all our cards at this stage
of the negotiations. The Minister has not explained—her answer
on this was pretty woolly—why the Government believe that the US
position will change between now and 2010 and why she expects the EU to
improve its performance in the negotiations, given the rather
disappointing job that it has done over the past few years.
On the announcement of phase 1,
James Oberstar, the Chairman of the House of Representatives
Transportation and Infrastructure Committee, who successfully opposed
the much weaker ownership reforms that the Administration proposed for
phase 1, said that he would work to ensure that the deal did not lead
to foreign control of US airlines. John Byerly, the chief US negotiator
on the open skies treaty, has
said:
“we have not agreed
on either side the content of a second stage. There is no endorsement
or presumption of change in US or European
laws.”
What do the
Government think they can do to change that position over the next
three years? Without convincing reassurances from the Minister on the
issue, I fail to see the point of going ahead in such an open way with
phase 1. We all want liberalisation, but there is a real danger that we
are giving away all our aces without taking anything in return and that
phase 2 will struggle to get off the ground.
In that respect, I want to send
a clear message from this debate. The agreement does not balance the
interests of the EU and the United States or those of the United States
and the United Kingdom. The EU has not done a good job for Britain in
the negotiations. However, to give credit where it is due, I applaud
the Secretary of State on securing the provision to suspend the rights
that the agreement establishes, if there isno further progress
towards a genuine open skies agreement. I want to make it absolutely
clear to those listening in this room and outside and to those reading
the transcript that if and when my party comes to power after 2009 or
2010, we intend to keep the option to suspend the rights in the
agreement clearly open to us.
5.39
pm
Mr.
Alistair Carmichael (Orkney and Shetland) (LD): I will not
detain the Committee long, because most of what has to be said has
already been said in questions to the Minister. However, she and the
Government have placed me in some difficulty, because, as the hon.
Member for Epsom and Ewell fairly indicated at the start of his
contribution, we all support opening up the aviation market across the
Atlantic, and we can all see that such a move will have a substantial
benefit. The difficulty that I have is that the deal that has been
struck leaves so many unresolved issues that will operate to our
disadvantage. What the Minister is saying to us today is that we have
to see the agreement as part of the process—a staging
point—and that all will be fine at the conclusion of the deal,
when we eventually get to stage 2. I wish that that were the case, but
I regret that reality dictates that wewill probably never
reach a satisfactory conclusion on stage
2.
If the application
of stage 1 brings with it the benefits postulated by the Minister and
the hon. Members for West Bromwich, East and for Epsom and Ewell in
terms of introducing competition and driving down the cost of fares, I
cannot in all sincerity see the Minister, on the one hand, or even, on
the other, the
hon. Member for Epsom and Ewell, turning round in three, four or five
years’ time and saying that in order to promote the interests of
British aviation within the United States of America, they were going
to remove the benefits of reduced fares and increased competition that
the industry had enjoyed for the past two, three, four or five
years—however many years it might be. That is why I think that,
willingly or unwillingly, the Government have sold the pass in the
deal, and in their desperation to reach a liberalised market, they have
simply failed to understand the way in which such things work in
commercial reality.
There will be no locking-in
from the locking-in provisions, and I see absolutely nothing to make me
think that a US Government of any hue would take a different view of
the matter in any number of years’ time to that which they have
already done. To look at the matter objectively, one must ask: why
should they? They have got want what they want—in particular,
increased access to Heathrow—for their aviation interests. They
have got what they want in terms of intra-EU travel, and they know that
we have a sanction that, bluntly, we are never going to be able, for
reasons of realpolitik, to enforce. I can see that there is absolutely
no reason at all why the US should change their position, and
everything that the Minister has said today in answer to questions
would indicate that there is absolutely no intention or impetus in US
politics for such a
change.
There are two
unintended consequences which are potentially within our grasp—I
am not going to talk about the intra-US situation because, frankly,
that is now beyond our grasp. The first point is the question of carbon
emissions. I was a little surprised, and not a little disappointed,
when the Minister said that this was a commercial and economic
agreement, and that somehow, it has nothing to do with the environment.
I rather thought that, post-Stern, we had moved on from that sort of
silo-based thinking. Those matters are surely not entirely separate, as
the Minister has said.
The hon. Member for Epsom and Ewell
and I have both asked for a guarantee that the negotiations in relation
to stage 2 will not be linked in some way to the evolution of the
emissions trading scheme as it applies to flights coming from the
United States. Again, I have to say that if the Minister is not going
to link the negotiations in that way, I do not see how she will ever
reach stage
2.
We
have left ourselves no other meaningful bargaining
counter.
The other
point, which is potentially of massive significance, relates to the
working and the transfer of landing slots, particularly at Heathrow,
that are currently used by airlines in relation to domestic aviation.
That has concerned me throughout my time in the House, particularly in
relation to the flights between Inverness airport and Gatwick and
Heathrow in London. On that issue, the Minister has referred to slots
to London being protected by PSOs. However, there is no such thing as a
slot to London. There are slots at Heathrow, there are slots at
Gatwick, and there are slots at Stansted. What we want to protect, and
what we want the Minister to protect, is the slots at Heathrow and at
Gatwick in particular, because those are the ones that offer our people
and our business men the opportunities for onward travel.
I am keen for the Government to
make much greater use of PSOs. I have made no secret of that in the
past, but if, post the implementation of this agreement, the Government
continue to approach the question of PSOs as they have done hitherto,
frankly that will be meaningless, because the Government have always
seen their policy on PSOs as something that is implemented in response
to commercial moves. That is to say, they will wait for a commercial
decision to be taken that a route will operate no longer and then they
will act. That has not caused any major calamity, because of the great
health within domestic aviation at the moment. However, post the
implementation of the agreement, when the pressure is that much greater
on airlines to discontinue less profitable domestic routes in favour of
long-haul routes across the Atlantic, that approach will be
meaningless.
It takes
an age to put a PSO in place. One has to go through the procedure of
application, advertisement in the Official Journal of the EU,
consultation and lord knows what else, by which time the slot will
simply have been removed by the commercial operator. What will be
required is a much more proactive approach by the Department to PSOs,
anticipating when change will come and acting to preserve the position.
What discussions has the Department had in recent times, particularly
in relation to the operation of this measure, with organisations such
as Highlands and Islands Airports Ltd, Inverness chambers of commerce
and other stakeholders who have a particular concern for aviation
services in the highlands and islands and, indeed, at other regional
hubs throughout the United
Kingdom?
It seems to
me that the Government are seeking to replace something that will
ultimately be illegal with something that is ultimately illogical,
which is not a great achievement to boast
about.
5.49
pm
Mrs.
Dunwoody:
I will not impose on your good will,
Mrs. Dean, not only because you are a very talented and
charming Chairman, but because you have been very tolerant this
afternoon. However, this is a very important matter. It is not just a
simple discussion of the odd disorientated and badly based directive.
This is a major change in an aviation treaty that affects not only the
economic but the political and environmental future of the United
Kingdom.
I do not take
the attitude of Her Majesty’s official Opposition seriously
because to my mind this is such an important subject that, if they were
serious about their opposition, they would have come here today with a
carefully crafted amendment. It would have been presented to the
Committee and it would have been possible for us to vote on it. The
fact that they have not done so is revealing of their classification of
the debate.
We must
not run away from the fact that this amendment to an existing
treaty—that is what it is—is the abandonment of a
specific aviation policy. Whether we like it or not, Heathrow is the
home domestic airport of British Airways, and the main airport of other
powerful British carriers. If we allow them to be treated as though
they are simply one part of a large
pot of disorientated airline carriers capable of going in and out
wherever they like we affect their domestic and international traffic.
No one, at any point, has given us accurate figures on what the
agreement will cost the United Kingdom economy. I am not too concerned
about British Airways, which has shown by its recent abandonment of
Manchester, Belfast and Glasgow that it does not see itself as an air
carrier with involvement in the regions—it has made that
painfully clear. However, I am concerned about the UK economy, which
will lose a great deal of
work.
For many years,
American carriers have been trying very hard to get into Heathrow. Six
of them wanted not just to be there but to get the most powerful and
economically viable slots, and under this agreement they will do so.
British travellers may indeed benefit for a short time from lower
fares, but the cost to the United Kingdom economy will be very great.
Over and above that, the loss of feeder routes into the main airport
will affect every region in the United Kingdom.
It is not just a
question of individual airlines; we do not have PSOs. My Committee
asked the Department many years ago to do a great deal of work on the
matter but it chose to make it clear that it had no intention of
creating PSOs, and I see no evidence that that situation has
changed.
It is also
clear that in future there will be a politically difficult situation
for this Government because when the regions wake up to the fact that
their direct connections—whether they are Newcastle-London,
Manchester-London, Liverpool-London, links to Scottish airports or,
worst of all, Northern Ireland-London—are at risk there will be
a considerable price to pay.
I made it clear from the
beginning of the negotiation that the Commission was incapable of
negotiating. It was inexperienced and disinterested, and it has got
exactly what it wanted for European airlines at the expense of a
British base. This is a very bad agreement and I am sorry to have to
say that it will cost us dear. I would have preferred the Secretary of
State, if he was in such a difficult situation in these negotiations,
to abstain, because that would have been the most honourable thing to
do.
In
the event, this agreement, which has no timetable for sanctions,
suggests various methods that might be applied, all of which, we know,
are completely unrealistic. It has given the pass away and it will cost
us extremely dear, in political, economic and environmental
terms.
I am deeply
affronted that the matter should have been dealt with in an anonymous
manner in a Committee in which we cannot vote on the outcome, and that
hardly anyone in the House of Commons, apart from my Committee and the
European Scrutiny Committee, has taken part in the
debate.
5.53
pm
Gillian
Merron:
As I stated at the beginning of our deliberations,
this subject has generated a lot of debate, media attention and
interest in recent weeks, some of which has been well informed and some
of which has not. Much of it has been informed by the strong views of
interested parties, both for and
against.
I shall make
some general points and then come to the specific points that have been
raised today. I hope that hon. Members will agree that the case is
clear for
putting aside and into retirement the rather arcane, protectionist and
outdated Bermuda II agreement. The fact that the mechanism for doing so
is a European-level agreement has indeed complicated matters, but it
has also added some new opportunities. Overall, it is our view that the
results show that we achieve more through the Community and its member
states acting together in this sort of negotiation, especially when we
are dealing with a country of the type and market of the United
States.
We have heard
claims that the deal is unbalanced. I would say in response that, in
negotiations, judgments are just that; they are a matter of judgment.
As my hon. Friend the Member for Crewe and Nantwich pointed out, we
have heard nothing from the Opposition about how they would have
approached this matter and what the outcome would have been under them.
Nobody, including myself, has sought to claim that this deal is
perfect.
Chris
Grayling:
I do not think that I would have done what the
Secretary of State did.
The Minister
has talked about the benefits that the EU has brought. However, I have
the impression that the Secretary of State thinks that this is a bad
deal. Can the Minister not just say that it is a bad deal? The amount
of progress that she claims to have made is so negligible for the price
that is being paid by us, which is giving up Heathrow, that I find her
comments inexplicable. Can she not just accept that this is a pretty
poor deal but that the Government could not get any
more?
Gillian
Merron:
My right hon. Friend the Secretary of State has
made it absolutely clear that he would not have signed up to any deal
that was not in the best interests of the UK, and that is indeed the
case.
As I said,
nobody would argue that this deal is perfect; in reality, it is rarely
the case in international negotiations that a deal is perfect. However,
I believe that it takes us beyond where we were previously and some way
towards our ultimate objective. We have a clear commitment to further
liberalisation in further stages, with all the matters of concern
specifically listed as priorities for stage 2 negotiations. It is
because of the UK’s intervention that we have ensured that there
are mechanisms in place to provide every incentive for the next round
of negotiations to deliver a productive and timely outcome, which I
hope we would all agree is what we want.
Should we have delayed a deal
until the US was prepared to move on ownership and control, or cabotage
rights? Change in either of those areas requires amendments to US
legislation; that is not realistic at present and it is important that
we are aware of that. As I have already said, we took the view that
maintaining the status quo was no longer a realistic or defensible
option and that UK passengers and UK airlines should no longer be
denied the benefits that will come from opening up transatlantic
aviation.
We have
also come to believe that the holding up of key rights for US
interests, a policy that we have maintained for many years so as to
encourage real liberalisation in the US, was beginning to impose
unacceptable costs on UK consumers. There was some prospect that
unlocking new rights would create pressure for yet further
change.
I would like to refer to some of
the specific points that have been made. There was an inquiry earlier
from the hon. Member for Epsom and Ewell about Government policy on
aviation and our aviation strategy. Nothing has changed in that area,
and I refer the hon. Gentleman back to both the air transport White
Paper and the most recent progress update.
The fact is that aviation
brings real benefits to the economy as well as to the lives of ordinary
people. Of course, a balance must be struck—this observation
applies to other comments that have been made—between tackling
environmental challenges, enabling people to fly and allowing industry
to compete internationally. Our commitment as a Government, which is
well documented, is to try to ensure that aviation meets its
environmental costs, in particular the cost of its impact on the
climate. Our priority—I would also say this to the hon. Member
for Orkney and Shetland—has been to push our European colleagues
hard to include aviation in an EU emissions trading scheme as soon as
possible, and to encourage the industry to play its part in reducing
emissions.
The hon.
Member for Epsom and Ewell asked me whether the Government intend to
change their strategy in respect of the environment. The answer is no.
As I have said, that strategy is clearly set out in the White Paper and
nothing changes that.
There have also been questions
about whether we should have held out for more, and indeed questions
about why we did a deal at all. As I have said—I cannot
emphasise this enough—maintaining the status quo indefinitely
was simply not an option. The courts ruled more than four years ago
that the current bilateral deals with the US were illegal and had to be
replaced. Plenty of interested parties in the UK and elsewhere in
Europe had, for various good reasons, long pressed for an agreement.
Bearing in mind the economic and consumer benefits that would have been
forgone had we delayed still further, our judgment was and still is
that the deal is in the overall best interests of the UK. We have heard
nothing this afternoon to suggest that another deal would have been
better.
Points have
been made about the economic impact of the deal. An extensive economic
assessment by the Civil Aviation Authority which was sent to the
Transport Committee is available to hon. Members.
The hon. Gentleman asked about
Virgin Atlantic. Let me quote the comments that it made after the
Transport
Council:
“It’s
a good day for the traveller as consumers should benefit from fully
open skies between the EU and US by 2010. Virgin Atlantic is actively
looking at expanding in Europe, offering flights from key European hubs
such as Paris, Frankfurt, Amsterdam and Madrid to New York. Such a move
would create 500 jobs and operations would begin within two
years.”
Virgin Atlantic
also wrote to the Secretary of State for Transport, saying that
although the deal
“fell
well short of the genuine ‘open skies’ agreement that we
would have liked...in the circumstances it was undoubtedly the
best that could be
achieved.”
I hope that
that clarifies the position.
It has been
alleged during today’s debate that we have simply given the
United States everything that it wanted. It was always going to be part
of any agreement that what I would describe as the convoluted
restrictions of Bermuda II, which included very artificial restrictions
on services between Heathrow and the USA, might be removed. I would find
it nigh-on impossible to explain why some carriers but not others are
allowed to operate services out of Heathrow, and why it should be legal
to operate services from Heathrow to New York or California, but not to
Atlanta or Texas. How that can be justified escapes me. A deal that
left the status quo at Heathrow would not have addressed the legal
judgment by the European Court of Justice that was hanging over us, and
there would have been little point in doing any deal that did not
include some reference to Heathrow.
Hon. Members have asked what
guarantees have been given about the second-stage deal. The draft
agreement with the United States sets out a clear road map towards the
second stage. Of course, the Council of Ministers has decided that if
no second stage is agreed within the timetable, the EU will set in
motion the process for suspending rights, unless the Council decides
unanimously not to do so. That came about as a result of the United
Kingdom’s efforts to ensure that the second stage would happen.
I hope that hon. Members will give us credit for that.
The hon. Member for Orkney and
Shetland asked about the environment. I can reassure him that the draft
agreement does not adversely affect the ability of either the UK or the
EU to take measures to address the impact of aviation on the
environment. Our position on environmental obligations and the best way
of tackling CO2 emissions is unchanged. The best way to
tackle CO2 emissions is certainly not to maintain closed
markets or to give privileged status to particular carriers under
outdated bilateral air service agreements. That would be rather like
trying to tackle lorry emissions by restricting the use of motorways to
one or two road haulage companies. I hope that no hon. Member would
wish to do that.
I
assure the hon. Gentleman that the PSO rules are under review at the EU
level, and that stakeholders from all parts of the UK, including the
Scottish Executive and the highlands and islands transport
forum, have been and will continue to be fully involved. We have issued
guidelines that set out the procedures in respect of PSO agreements,
and we will keep them under review as and when applications go
forward.
My hon.
Friend the Member for Crewe and Nantwich asked about the cost of the
agreement for the UK economy. The CAA analysis has already been made
available in full to the Transport Committee. It estimates that the
benefit to the economy will be about £1 billion over 20 years,
which is not to be
dismissed.
In response
to my hon. Friend’s comments that the Commission was
inexperienced, I say that the Secretary of State would not have signed
up to an agreement if he did not believe that it was in the UK’s
best interests. The fact is that Bermuda II was illegal, and standing
still was not an option. This deal sweeps away the outdated and illegal
restrictions that stand very much at odds with our policy of air
services liberalisation.
There are real benefits for UK
consumers. Thedeal provides an open, deregulated transatlantic
marketplace in which existing and new UK carriers are well placed to
compete, which I would hope all hon. Members welcome. It sets out a
clear and effective process for delivering our ultimate goal of having
a fully liberalised EU and US open aviation area. It will provide a
real impetus for the further deregulation and modernisation of the
international aviation industry around the globe. This is about
promoting the interests of Britain, the travelling public and the
aviation industry, as well as the economy as a whole, and I hope that
the Committee will support the motion.
Question put and agreed
to.
Resolved,
That
the Committee takes note of European Union Document No. 8656/06, Draft
Decisions on the signature and provisional application and conclusion
of the air transport agreement between the European Community and its
Member States, on the one hand, and the United States of America, on
the other hand; and endorses the Government's approach to discussions
on this
document.
Committee
rose at seven minutes past Six
o'clock.
