Examination of Witnesses (Questions 380-399)
MS HELEN
WATSON, MR
GRAHAM FRENCH,
DR JONATHAN
BAILEY AND
MR GEOFF
MUIRHEAD CBE
27 FEBRUARY 2008
Q380 Chairman: Are you saying that
those other airports, the ones which were mentioned by Mr Stringer,
are being subsidised in some way by the Government?
Mr Muirhead: Not necessarily by
Government but I know the EU has particular funds which it puts
into airport development.
Q381 Chairman: Charles de Gaulle
or Schiphol, or Frankfurt? Which are we talking about?
Mr Muirhead: None of those, but
I think Madrid had a big investment from the EU recently and there
is a whole range of issues always about subsidisation and illegal
subsidies. What do I think? I think aviation, whether it likes
it or not, is going to have to compete by funding its own investment.
Whether that is fair or not, that is the reality we are going
to have to live with, and the industry has lived with that reality
for a while and I see no reason why it cannot live with it in
the future. My worry is that we are going beyond just living with
our own investment to also paying for general taxation on top
of it.
Q382 Graham Stringer: What are the
barriers to growing the airports industry?
Mr Muirhead: The barriers to growth
are about always changing noise climates around airports. There
is always a great reluctance to see that. Developing new capacity
brings with it many, many problems. Changing air space always
brings lots of complaints. There are many sorts of barriers to
entry of that nature in terms of developing new capacity, but
fundamentally outside of the South East there is capacity to see
the air freight industry grow.
Q383 Graham Stringer: Has de-designation
of Manchester Airport helped the freight industry?
Mr Muirhead: It is too early to
say.
Q384 Graham Stringer: Do you expect
it to then?
Mr Muirhead: I expect de-designation
to help our competitiveness in the medium and long-term.
Q385 Graham Stringer: How?
Mr Muirhead: Economic regulation
has some unintended consequences, not least of which is that you
start acting as though you can put your prices up relative to
whatever you want to spend in the business. Really regulation
sets you against your customers. It is a confrontational process
that you go through and customers and suppliers should actually
be trying to develop partnerships where there is mutual benefit.
So I think the big benefit that Manchester would have, apart from
the obvious direct costs savings which come from de-designation—for
example, next year that allows us to avoid having to pay £2
million for the privilege of being economically regulated—it
is cultural change that I am really looking for that will take
the business forward. So we start acting like we are in competition.
Not that we haven't for a while, but endemic through the business
we will have people who know that they are in competition.
Q386 Graham Stringer: My final question.
You have said that whatever you would like, you would expect the
private sector to have to pay for most of the extra capacity that
air freight might need. What could the Government do which would
help the growth of air freight in this country?
Mr Muirhead: I think there are
issues around supporting access to airports.
Q387 Graham Stringer: The main roads
and trains?
Mr Muirhead: Yes, rail and road
access would be helpful. More than that, the real thing which
worries me is that are competing on an ever more tilted field
against us. What the Government could do, regardless of whether
it was more taxation or less taxation, would be to seek to have
a European-wide framework for the regulation of aviation industry
in terms of taxation. That will allow us to compete effectively
and I think if we were allowed that, our track record is such
that we would compete very, very effectively indeed.
Q388 Chairman: The difficulty we
face, Mr Muirhead, is that you say the playing field is getting
tilted but we actually need evidence of that. You are saying in
taxation, you are saying in subsidy? What are you saying precisely,
and where could we obtain those facts and figures to demonstrate
what it is you are talking about?
Mr Muirhead: There have been many
studies. Some of them are now out of date and I think they do
need to be revised. We will be working with the trade bodies,
the AOA in particular, to develop an analysis which would indicate
the impact of the proposals relative to that and I am quite happy
to say that we will be able to forward that to the Committee in
the fullness of time.
Chairman: That would be very helpful.
Q389 Mr Scott: How would the aviation
inclusion in the European Union Emissions Trading Scheme affect
the air freight industry?
Mr Muirhead: I think, from our
perspective, as long as it is not added to APD, the Airport Departure
Tax, so long as it replaced it and put the industry on a level
footing throughout Europe, it is where it is. The Manchester Airports
Group and I think aviation generally is supportive of its inclusion
in the Emissions Trading Scheme, so I do not think there is anybody
who would come before you, an airline or an airport, who would
argue that that wasn't something that was going to happen and
would be appropriate.
Ms Watson: I would agree with
that. The Emissions Trading Scheme seems a very good way to ensure
that aviation is meeting its environmental costs and under current
proposals pure freight aircraft would be treated the same way
as any other passenger craft, which seems to me to be right.
Q390 Mr Scott: So do you think the
measures would be enough to ensure that the air freight industry
pays for all its own external costs?
Ms Watson: I think that would
depend on the final form of the scheme, the final benchmark that
is decided, how allowances are allocated, whether they are auctioned
or given freely. It is quite difficult to balance the equation
until the final form of the scheme is known.
Mr Muirhead: On that, it is important
to recognise that aviation with its £2 billion current charge
for Airport Departure Tax more than covers its full external cost
in terms of environmental impact. I think the environmental impact
of UK aviation has been calculated at something less than £2
billion, so if you are only looking to cover the environmental
impact the UK aviation industry is already doing that.
Q391 Mr Scott: Manchester Airports
Group has said that it favours aviation inclusion on the EU Emissions
Trading Scheme and that the market rather than the Government's
incentive should be used to promote different transport modes.
What Government incentives are currently available to airports?
Mr Muirhead: Do you know of any,
Jonathan?
Dr Bailey: None to airports.
Mr Muirhead: Plenty of penalties,
but we do not know of any incentives!
Mr Scott: That is a nice simple answer
then. Thank you.
Q392 Chairman: It is very helpful
for us to know what is going on. Have you thought about the effects
of the Government's May 2006 announcement on noise quota at London
airports? Is that going to have any effect? Will it affect you
in any way by knock-on effect or by setting a precedent?
Mr Muirhead: There is always a
possibility that climates which are set around and affect one
airport will be used as leverage to clamp down the opportunity
at other airports, so in terms of that yes, it is a risk. It has
been a manageable risk up until now because these limits in terms
of movements and noise at London airports have been in effect
for many years.
Q393 Chairman: You did make the point
about the high cost, that air freight may be only 1% but the actual
value may be something like 30% you said, which is slightly higher
than the figure we have got. So are charges for freight aircraft
at designated airports appropriate in comparison with passenger
aircraft?
Mr Muirhead: Well, obviously we
think so because that is the framework which we have adopted in
our pricing policy.
Q394 Chairman: So the current arrangements
where you cannot at a designated airport charge more for cargo
aircraft than a passenger aircraft is going to continue, is it?
Mr Muirhead: Do we charge more
for a freight aircraft than a passenger aircraft?
Q395 Chairman: I understood that
designated airports cannot charge more for an all-cargo aircraft.
Mr Muirhead: We may charge less.
Q396 Chairman: Is that not right?
I am open to any kind of correction.
Ms Watson: That is correct. The
current condition is that at designated airport the airport charges
cannot be higher for an all-freight aircraft than for passenger
flights.
Dr Bailey: It can be lower.
Ms Watson: Yes, it can be lower.
Q397 Chairman: You are a born trader,
Mr Muirhead. It always encourages me.
Mr Muirhead: If you look at freighter
use of infrastructure, freighters use the runway just like aeroplanes
carrying passengers do, but they park remote and they have freight
facilities. They do not require terminals and they do not provide
the same sort of burden on the ground transport infrastructure,
so I think there is a very strong case to say that on a cost recovery
type of basis freighters should indeed be charged less than passenger
aircraft.
Q398 Chairman: Would Stansted Airport
benefit from a similar decision? De-designation at Manchester
must have affected its freight movements?
Mr Muirhead: I think that is a
matter for Stansted. Stansted does not have a huge freight operation.
Q399 Chairman: What kind of proportions
are we talking about? Do you know, approximately?
Mr Muirhead: I think Stansted
is around about 200,000 tonnes or so freight a year, something
of that order.
Dr Bailey: That is right.
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