Select Committee on Transport Fourth Report


Formal Minutes

Wednesday 27 February 2008

Members present:
Clive Efford
Mrs Louise Ellman
Mr Philip Hollobone
Mr John Leech
Mr Eric Martlew
Mr Lee Scott
Mr Graham Stringer
Mr David Wilshire


Draft Report (The future of BAA), proposed by the Chairman, brought up and read.

Ordered, That the Chairman's draft Report be read a second time, paragraph by paragraph.

Paragraphs 1 to 4 read and agreed to.

Paragraph 5 read, amended and agreed to.

Paragraph 6 read and agreed to.

Paragraph 7 read, amended and agreed to.

Paragraphs 8 to 15 read and agreed to.

Paragraph 16 read, amended and agreed to.

Paragraph 17 read and agreed to.

Paragraph 18 read, as follows:

"The main issues identified by the Competition Commission as relevant to their investigation are the regulatory framework, the common ownership of airports by BAA and the restrictions on development and capacity. These issues are central to our own inquiry, and while we hope that the Commission will take our conclusions and recommendations into account, we do not believe our report will prejudice whatever conclusions it may come to. As at February 2008, the Commission hoped to publish its emerging thinking in around April 2008, with provisional findings and remedies following in August 2008 and a final report to be made in December 2008."

Amendment proposed, in line 4, to leave out from "inquiry," to the "As" in line 6.—(Mr David Wilshire.)

Question put, That the Amendment be made.

The Committee divided.

Ayes, 3

Mr Philip Hollobone

Mr Lee Scott

Mr David Wilshire

Noes, 3

Mrs Louise Ellman

Mr John Leech

Mr Graham Stringer

Whereupon the Chairman declared herself with the Noes.

Paragraph agreed to.

Paragraphs 19 to 28 read and agreed to.

Paragraph 29 read, as follows:

"We agree with the CAA that economic regulation should only apply where there is a need for it, and therefore welcome the Department's decision to de-designate Manchester airport. Although Stansted will remain a designated airport for the immediate future, we are confident that the circumstances of BAA's common ownership will change in the foreseeable future, either through the actions of the Competition Commission or BAA."

Amendment proposed, in line 3, to leave out from first "airport" to the end of the paragraph and add "We also agree that it makes sense for Stansted to remain a designated airport at least until the Competition Commission has completed its review".—(Mr David Wilshire.)

Question put, That the Amendment be made.

The Committee divided.

Ayes, 3

Mr Philip Hollobone

Mr Lee Scott

Mr David Wilshire

Noes, 4

Clive Efford

Mrs Louise Ellman

Mr John Leech

Mr Graham Stringer


Paragraph agreed to.

Paragraphs 30 to 34 read and agreed to.

Paragraph 35 read, amended and agreed to.

Paragraph 36 to 46 read and agreed to.

Paragraph 47 read, as follows:

"We believe that the percentage of revenue subject to rebates should be higher, as suggested by the Competition Commission. The comparison of the regulation of BAA to an anti-trust regime lends further weight to our view that BAA's market position is fundamentally anti-competitive."

Amendment proposed, in line 2, to leave out from "Commission" to the end of the paragraph.—(Mr David Wilshire.)

Question put, That the Amendment be made.

The Committee divided.

Ayes, 3

Mr Philip Hollobone

Mr Lee Scott

Mr David Wilshire

Noes, 4

Clive Efford

Mrs Louise Ellman

Mr John Leech

Mr Graham Stringer


Paragraph agreed to.

Paragraph 48 read, as follows:

"Both BAA and the trade unions asserted that common ownership of the London airports is a necessary condition of effective investment. We disagree, and set out our reasons for doing so below. We believe a competitive airports sector would be better than the current state of affairs, where in our opinion competition is stifled by common ownership of several major airports. Airports under separate ownership would have to compete for traffic. This would also have positive consequences for passengers. BAA's common ownership is holding back the natural development of the market, where discrete passenger markets are less well-defined."

Amendment proposed, in line 3, to leave out from "below" to the end of the paragraph.—(Mr David Wilshire.)

Question put, That the Amendment be made.

The Committee divided.

Ayes, 2

Mr Philip Hollobone

Mr David Wilshire

Noes, 4

Clive Efford

Mrs Louise Ellman

Mr John Leech

Mr Graham Stringer


Paragraph agreed to.

Paragraph 49 read, as follows:

"It is important to stress that competition in the airports sector is subject to several major limiting factors. When a competitive airports sector is referred to, it should be qualified by an awareness of these limitations. The problem is one of supply and demand. The demand for air transport is not evenly spread, or even all of the same type. There is more demand for capacity in the South East of England, and that demand can be split in several ways, short vs. long haul and business vs. leisure being the two most obvious. The problem with supply is also complicated in that different airports can also be categorised as (predominantly) serving different modes of transport. 'Hub-and-spoke' model works with large airports through which flights are directed, even if that airport is not the final destination. A lot of Heathrow's traffic is 'hub-and-spoke', and it is thus referred to as a hub airport. In 'point-to-point' flying, the passenger boards a plane and flies directly to his final destination, which might be a large hub airport or a smaller regional airport. While it is possible to build a small airport capable of flying a modest number of point-to-point flights with relative ease, the current economic demand is for an extension of Heathrow's hub-and-spoke operation. The economic case for expansion at Heathrow is considered in Chapter 5."

Amendment proposed, in line 3, after first "demand." to insert "It is also important to understand that effective competition will take place between similar types of service (e.g. point-to-point services) rather than between airports offering different services."—(Mr David Wilshire.)

Question put, That the Amendment be made.

The Committee divided.

Ayes, 3

Mr Philip Hollobone

Mr Lee Scott

Mr David Wilshire

Noes, 4

Clive Efford

Mrs Louise Ellman

Mr John Leech

Mr Graham Stringer


An Amendment made.

Paragraph, as amended, agreed to.

Paragraphs 50 to 54 read and agreed to.

Paragraph 55 read, amended and agreed to.

Paragraph 56 read and agreed to.

Paragraph 57 read, as follows:

"There is limited competition between UK airports. With the demarcation between different types of airports becoming ever less clear, the theoretical restrictions on competition decrease and the old argument against divestment—which denied the possibility of competition altogether—loses force. We feel that there is room for more competition (especially between BAA's London airports) and that ending the current situation of common ownership would go a long way to realising this."

Amendment proposed, in line 1, to leave out from "airports" to the end of the paragraph and add "and significant and increasing competition from foreign airports. The decreasing demarcation between different types of airport will lead to airlines offering more competing services and routes from different airports. We hope this trend will gather pace.".—(Mr David Wilshire.)

Question put, That the Amendment be made.

The Committee divided.

Ayes, 3

Mr Philip Hollobone

Mr Lee Scott

Mr David Wilshire

Noes, 4

Clive Efford

Mrs Louise Ellman

Mr John Leech

Mr Graham Stringer


Paragraph agreed to.

Paragraph 58 read, as follows:

"We have already described the connection between service quality and economic regulation. Although BAA is responsible for the operation of its airports, there are some things that it does not control. One very important area is security, where standards are set by the Transport Security and Contingencies section of the Department for Transport (Transec). BAA is responsible for meeting these standards. We received evidence that it had met difficulties on two fronts: contingency planning and recruiting enough security staff, particularly female search officers. Stephen Nelson of BAA admitted that before the security crisis which started on 10 August 2006, BAA "had insufficient staff for a steady state operation". He described the problems BAA experienced with recruiting security staff, which can take up to 20 weeks. Following the security crisis, BAA took on 2,000 extra staff out of 35,000 applicants, which doubled the size of their force."

Amendment proposed, in line 2, to leave out "some" and insert "many".—(Mr David Wilshire.)

Question put, That the Amendment be made.

The Committee divided.

Ayes, 3

Mr Philip Hollobone

Mr Lee Scott

Mr David Wilshire

Noes, 3

Clive Efford

Mrs Louise Ellman

Mr John Leech


Whereupon the Chairman declared herself with the Noes.

Paragraph agreed to.

Paragraphs 59 to 61 read and agreed to.

Paragraph 62 read, as follows:

"BAA may feel as though it is taking a lot of the flak for things that are not part of its day to day responsibility, but this does not detract from the serious questions raised over mismanagement of resources and failure to plan adequately for contingencies which were far from unexpected, let alone inconceivable. With the ever-present possibility of extraordinary circumstances such as strikes or terrorist incidents, queues at airports are almost inevitable from time to time. Our criticism of BAA is that it should have predicted the predictable, and planned accordingly."

Amendment proposed, in line 6, to leave out from "time to time" to the end of the paragraph and add "especially when fundamental changes to a security regime are made with nil notice.".—(Mr David Wilshire.)

Question put, That the Amendment be made.

The Committee divided.

Ayes, 2

Mr Philip Hollobone

Mr David Wilshire

Noes, 5

Clive Efford

Mrs Louise Ellman

Mr John Leech

Mr Lee Scott

Mr Graham Stringer


Paragraph agreed to.

Paragraph 63 read, amended and agreed to.

Paragraph 64 read, as follows:

"The main benefits arising from T5 will be for passengers, not airlines. The increase in capacity that a fifth terminal provides has given BAA the opportunity to move airlines around and improve the condition of the other terminals, but it is regrettable that BAA ever allowed the position to get as bad as it did."

Amendments made.

Another Amendment proposed, in line 3, to leave out ", but it is regrettable that BAA ever allowed the position to get as bad as it did".—(Mr David Wilshire.)

Question put, That the Amendment be made.

The Committee divided.

Ayes, 2

Mr Philip Hollobone

Mr David Wilshire

Noes, 4

Clive Efford

Mrs Louise Ellman

Mr John Leech

Mr Graham Stringer


Paragraph, as amended, agreed to.

Paragraph 65 read, as follows:

"As many aircraft are taking off from UK airports as current capacity will allow. The Government's position on new runways was set out in the 2003 White Paper: that two more runways should be built in the south east, one at Stansted and the other at Heathrow. Further development at Gatwick was ruled out until at least 2019. 'Mixed mode' operations—where runways are used for both take-offs and landings—are a way of extending capacity, but can only be introduced after a public consultation. BAA's plans to introduce mixed mode at Heathrow are now being proposed as a 'stepping stone' between the current level of traffic and the level of traffic that a third runway would allow. It is to the plans for expansion at Heathrow that we now turn."

Amendment proposed, in line 8, after "allow." insert "We hope that runway alternation will be reintroduced when the new runway is opened."—(Mr David Wilshire.)

Question put, That the Amendment be made.

The Committee divided.

Ayes, 2

Mr Philip Hollobone

Mr David Wilshire

Noes, 4

Clive Efford

Mrs Louise Ellman

Mr John Leech

Mr Graham Stringer


Paragraph agreed to.

Paragraphs 66 to 74 read and postponed.

Paragraphs 75 to 77 read and agreed to.

Paragraph 78 read, as follows:

"Competition between terminals at Heathrow could have been a radical solution to the problem of competition at Heathrow. If neither the Government nor BAA believe that inter-terminal competition is an option at Heathrow, then it makes the prospect of divestment even more likely."

Amendment proposed, in line 1, to leave out "have been" and insert "be".—(Mr David Wilshire.)

Question put, That the Amendment be made.

The Committee divided.

Ayes, 3

Mr Philip Hollobone

Mr Lee Scott

Mr David Wilshire

Noes, 5

Clive Efford

Mrs Louise Ellman

Mr John Leech

Mr Eric Martlew

Mr Graham Stringer


Another Amendment proposed, in line 2, to leave out from "Heathrow." to the end of the paragraph.—(Mr David Wilshire.)

Question put, That the Amendment be made.

The Committee divided.

Ayes, 2

Mr Philip Hollobone

Mr David Wilshire

Noes, 5

Clive Efford

Mrs Louise Ellman

Mr John Leech

Mr Eric Martlew

Mr Graham Stringer


Paragraph agreed to.

Paragraph 79 read and agreed to.

Paragraph 80 read, as follows:

"This gives us the opportunity to set out a few key points in response. Any airport that were sold off would not be price-controlled, as it would be in a position of market power, and thus would be free to compete on price. Two of the things BAA does not have a monopoly on are skills and experience, and we are not persuaded that it would necessarily deliver new capacity faster than any other potential owner. We are confident that any new owner would have (at the very least) the financial strength of BAA, and might well be stronger."

Amendment proposed, in line 5, to leave out "We are confident that".—(Mr David Wilshire.)

Question put, That the Amendment be made.

The Committee divided.

Ayes, 2

Mr Philip Hollobone

Mr David Wilshire

Noes, 4

Clive Efford

Mrs Louise Ellman

Mr John Leech

Mr Eric Martlew

Another Amendment proposed, in line 6, to leave out ", and might well be stronger".—(Mr David Wilshire.)

Question put, That the Amendment be made.

The Committee divided.

Ayes, 3

Mr Philip Hollobone

Mr Lee Scott

Mr David Wilshire

Noes, 4

Clive Efford

Mrs Louise Ellman

Mr Eric Martlew

Mr Graham Stringer


Paragraph agreed to.

Paragraphs 81 to 84 read and agreed to.

Paragraph 85 read, as follows:

"BAA's monopoly position in the UK airports sector is unnecessary. Indeed, it is bad for passengers and bad for the aviation industry. We do not agree that the status quo is a necessary condition of sustained investment and development. We are firmly of the view that increased competition is possible and could have huge benefits for both airlines and passengers. We look forward to the Competition Commission's analysis of all the issues, and hope that it undertakes detailed cost-benefit analyses of all the possible outcomes."

Question put, That the paragraph stand part of the Report.

The Committee divided.

Ayes, 6

Clive Efford

Mrs Louise Ellman

Mr John Leech

Mr Eric Martlew

Mr Lee Scott

Mr Graham Stringer

Noes, 2

Mr Philip Hollobone

Mr David Wilshire


Paragraph 86 read and agreed to.

Paragraph 87 read, as follows:

"However, the evidence we have received over the course of this inquiry and our previous inquiries into aviation leads us to a different conclusion. It is our view that the drawbacks of common ownership outweigh the advantages, and that there is much to be gained from a state of affairs where BAA did not enjoy such substantial market power. The extent to which BAA needs chivvying along by the regulator reflects poorly on their avowed commitment to service quality. We are sceptical of arguments which deny the possibility of increased competition: our evidence from the CAA indicates that this simply is not the case. We hope that the Competition Commission will take the steps necessary to ensure a healthy, competitive airports sector for the years to come."

Question put, That the paragraph stand part of the Report.

The Committee divided.

Ayes, 5

Clive Efford

Mrs Louise Ellman

Mr John Leech

Mr Eric Martlew

Mr Graham Stringer

Noes, 3

Mr Philip Hollobone

Mr Lee Scott

Mr David Wilshire

A paragraph—(Mr David Wilshire)—brought up and read, as follows:

"The evidence we have received over the course of this inquiry seeks to make the case for and against maintaining the status quo. We hope the Competition Commission will consider our evidence alongside all the other evidence it obtains and then comes forward with proposals that will maintain a prosperous British airports sector which is robust enough to maintain its leading role in Europe."—(Mr David Wilshire.)

Question put, That the paragraph be read a second time.

The Committee divided.

Ayes, 3

Mr Philip Hollobone

Mr Lee Scott

Mr David Wilshire

Noes, 5

Clive Efford

Mrs Louise Ellman

Mr John Leech

Mr Eric Martlew

Mr Graham Stringer

Ordered, That consideration of the Chairman's draft Report be now adjourned.— (The Chairman.)

Report to be further considered on Wednesday 5 March.

WEDNESDAY 5 MARCH 2008

Members present:

Mr David Clelland

Mrs Gwyneth Dunwoody Clive Efford

Mrs Louise Ellman

Mr Philip Hollobone

Mr John Leech

Mr Eric Martlew

David Simpson

Mr Graham Stringer

Mr David Wilshire


In the temporary absence of the Chairman, Mr Graham Stringer was called to the Chair for part of the meeting.

Consideration of the Chairman's draft Report resumed.

Postponed paragraph 66 again read as follows:

"In 2003, our predecessor committee concluded that the future of airport development in the United Kingdom would be centred on targeted expansion of existing sites, but that

'a third runway at Heathrow would mean the destruction and relocation of a number of existing communities. Such a decision cannot be taken lightly.'"

Amendment proposed, in line 2, to leave out from "sites" to the end of the paragraph.—(Mr David Wilshire.)

Question put, That the Amendment be made.

The Committee divided.

Ayes, 3

Mr Philip Hollobone

David Simpson

Mr David Wilshire

Noes, 3

Clive Efford

Mrs Louise Ellman

Mr John Leech


Whereupon the Chairman declared himself with the Noes.

Question put, That the paragraph stand part of the Report.

The Committee divided.

Ayes, 4

Mr David Clelland

Clive Efford

Mrs Louise Ellman

Mr John Leech

Noes, 2

Mr Philip Hollobone

Mr David Wilshire

Postponed paragraphs 67 and 68 again read.

Question put, That the paragraphs stand part of the Report.

The Committee divided.

Ayes, 4

Mr David Clelland

Clive Efford

Mrs Louise Ellman

Mr John Leech

Noes, 2

Mr Philip Hollobone

Mr David Wilshire


Postponed paragraph 69 again read as follows:

"The current consultation document sets out three scenarios for development at Heathrow and invites members of the public to 'register their views', not on whether expansion should or should not go ahead, but rather on the three critical tests that expansion must pass:

  • "A noise limit - no increase in the size of the area significantly affected by aircraft noise (as measured by the 57dBA noise contour in 2002);
  • "Air quality limits - being confident of meeting European air quality limits around the airport, in particular for nitrogen dioxide (NO2) which is the critical pollutant around Heathrow; and
  • "Improving public transport access to the airport."

Amendment proposed, in line 2, to leave out from "views'" to "on" in line 3.—(Mr David Wilshire.)

Question put, That the Amendment be made.

The Committee divided.

Ayes, 2

Mr Philip Hollobone

Mr David Wilshire

Noes, 4

Clive Efford

Mrs Louise Ellman

Mr John Leech

David Simpson


Question put, That the paragraph stand part of the Report.

The Committee divided.

Ayes, 4

Mr David Clelland

Clive Efford

Mrs Louise Ellman

Mr John Leech

Noes, 2

Mr Philip Hollobone

Mr David Wilshire


Postponed paragraphs 70 to 74 again read.

Question put, That the paragraphs stand part of the Report.

The Committee divided.

Ayes, 5

Mr David Clelland

Mrs Gwyneth Dunwoody Clive Efford

Mrs Louise Ellman

Mr John Leech

Noes, 2

Mr Philip Hollobone

Mr David Wilshire


Motion made, and Question put, That the Report, as amended, be the Fourth Report of the Committee to the House.

The Committee divided.

Ayes, 6

Mr David Clelland

Mrs Gwyneth Dunwoody Clive Efford

Mrs Louise Ellman

Mr Eric Martlew

David Simpson

Noes, 3

Mr John Leech

Mr Philip Hollobone

Mr David Wilshire

Ordered, That the Chairman make the Report to the House.

Ordered, That embargoed copies of the Report be made available, in accordance with the provisions of Standing Order No. 134.

Written evidence was ordered to be reported to the House for printing with the Report.

[Adjourned till Wednesday 19 March at 2.30 pm.


 
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