Civil Aviation Bill


The Committee consisted of the following Members:

Chairs: Sir Roger Gale  , Mrs Linda Riordan 

Bruce, Fiona (Congleton) (Con) 

Dakin, Nic (Scunthorpe) (Lab) 

Fitzpatrick, Jim (Poplar and Limehouse) (Lab) 

Freer, Mike (Finchley and Golders Green) (Con) 

Glass, Pat (North West Durham) (Lab) 

Harris, Mr Tom (Glasgow South) (Lab) 

Heaton-Harris, Chris (Daventry) (Con) 

Hilling, Julie (Bolton West) (Lab) 

Huppert, Dr Julian (Cambridge) (LD) 

Kwarteng, Kwasi (Spelthorne) (Con) 

Malhotra, Seema (Feltham and Heston) (Lab/Co-op) 

Mills, Nigel (Amber Valley) (Con) 

O'Donnell, Fiona (East Lothian) (Lab) 

Patel, Priti (Witham) (Con) 

Reckless, Mark (Rochester and Strood) (Con) 

Shannon, Jim (Strangford) (DUP) 

Shelbrooke, Alec (Elmet and Rothwell) (Con) 

Shuker, Gavin (Luton South) (Lab/Co-op) 

Smith, Henry (Crawley) (Con) 

Stewart, Iain (Milton Keynes South) (Con) 

Stringer, Graham (Blackley and Broughton) (Lab) 

Villiers, Mrs Theresa (Minister of State, Department for Transport)  

Wiggin, Bill (North Herefordshire) (Con) 

Woodcock, John (Barrow and Furness) (Lab/Co-op) 

Wright, Simon (Norwich South) (LD) 

Sarah Thatcher, Judith Boyce, Committee Clerks

† attended the Committee

Witnesses

Andrew Haines, Chief Executive, Civil Aviation Authority

Iain Osborne, Group Director, Regulatory Policy, Civil Aviation Authority

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Public Bill Committee 

Thursday 23 February 2012  

(Morning)  

[Sir Roger Gale in the Chair] 

Civil Aviation Bill

Written evidence to be reported to the House 

CA 04 Civil Aviation Authority 

CA 10 British Airways 

CA 11 General Aviation Alliance 

CA 12 Chris JR Lowe 

9.30 am 

The Committee deliberated in private.  

Examination of Witnesses

Andrew Haines and Iain Osborne gave evidence.  

9.32 am 

Q 6464 The Chair:  We will now hear oral evidence from the Civil Aviation Authority. Good morning, gentlemen, thank you for joining us. Please introduce yourselves for the sake of the record. 

Andrew Haines: I am Andrew Haines, the chief executive. 

Iain Osborne: My name is Iain Osborne. I am the group director of regulatory policy at the CAA. 

The Chair:  It is good of you to give up your time this morning. Minister. 

Q 65 The Minister of State, Department for Transport (Mrs Theresa Villiers):  I would like to echo the Chairman’s words and thank you for coming along. 

One of the main improvements I see the Bill delivering is the ability for the Civil Aviation Authority to regulate in real time, rather than being so dependent just on a big exercise on price controls every five years. Perhaps you could explain how that flexibility will help you serve the interests of people using UK airports. 

Andrew Haines: Absolutely. The existing legislation dates back to 1986 and it is very clear: we set a price cap every five years—full stop. We cannot not set a price cap, and we cannot do it in four, seven or eight years. It is very narrow. The new regime is fundamentally based on two things. It gives a primary duty to the user: that is, the passenger or the person shipping cargo. Then, it allows us to introduce that via a licence. 

The benefit of a licensing regime is to give significant flexibility. If there is emerging competition in a market, we can use a relatively light touch to regulation and, ultimately in certain circumstances, just supervise commercial negotiations. If there is clearly heavy dominance of an operator, we could have a much more intrusive price control regime. A licence also allows us to modify

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it as emerging situations arise. It allows us to put other, broader obligations for service quality on operators, provided they are fully justified. 

The classic example in the press recently has been snow disruption at Heathrow. The current legislative regime gives us no oversight: there are no requirements on Heathrow to run an efficient service and there are no penalties for not doing so. Given that they have a dominant position, that has been seen as a gap by successive Governments. Those are the principal points. The licence is at the heart of the flexibility that the Bill will provide. 

The Chair:  Mr Osborne, do you want to add to that? 

Iain Osborne: No. 

Q 66 Mrs Villiers:  In the Committee’s discussion so far, there has been a focus on some environmental matters. It would be useful to know whether you are confident that the Bill will enable you to authorise and encourage investment by airports in projects designed to mitigate their environmental impact. 

Andrew Haines: It is important to remember that, frankly, the Bill has two parts. There is the core economic regulation part, which will apply only to designated airports. It will apply only to a subset, which at the moment is Heathrow, Gatwick and Stansted. We are quite confident that the absence of any specific environmental reference does not prevent us from looking at efficient environmental investment as part of our price control. We are also rather nervous about having an environmental duty that might apply to those airports, but not to other airports, because that could cause a distortion in the marketplace. The second part of the Bill provides a range of powers and obligations to the CAA across all our activity. One of those, which is quite significant, is the publication duty: a specific duty to publish guidance and information on the environment. That duty will apply across the aviation sector. 

So, in the very narrow case, we believe that we have sufficient powers already, without reference; in the broader case, we think that it is properly addressed through the information powers regime. 

Iain Osborne: Specifically on an airport’s environmental measures, as regulators we try to ensure that an airport is well run. If you visit more or less any airport in the developed world, you will find that it is taking sensible measures to mitigate environmental impacts, reduce its carbon footprint and address noise issues. Of course, we would expect regulated airports to do such things; we always have under the old regime, and we will continue to do so. What the Bill does not allow us to do is to become some kind of tax-raising body that uses aeronautical charges for redistribution, and I do not think it would be appropriate for us to do that. 

Q 67 Jim Fitzpatrick (Poplar and Limehouse) (Lab):  Good morning, gentlemen. May I follow up the Minister’s inquiries on duties? The Bill is broadly welcomed, and it is accepted that your reporting and publishing expectations will mean greater clarity and consistency in information from across the industry. However, do you not think that a statutory duty on environmental matters would strengthen your hand and make airports comply more with best practice? While I am on duties, do you have an

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opinion on whether, as the airlines in particular have suggested, you should have a secondary duty to look at the airlines, not just a primary duty for the passenger or the consumer? 

Andrew Haines: We would not be averse to an environmental duty, but we would be nervous if one were imposed without proper consideration of our broad duties. When the previous Government consulted on a broader reform of the Civil Aviation Authority back in 2009-10, there were mixed views, which is why that broader review was not confirmed. 

We have significant environmental responsibilities already. We are currently consulting on a comprehensive plan, which is getting broad stakeholder and industry support, and we think the environmental information provisions are an important addition to that. Because of our very clear safety responsibilities, any broader statutory environmental duty would need to be taken in that wider consideration, not simply tacked on to existing duties. 

We have thought long and hard about a secondary duty to airlines, and we are very much opposed to that provision for four reasons. First, we think such a duty is wholly unnecessary. There are about a dozen places in the Bill that require us to consult airlines and then demonstrate how we have taken their views into account. We and parliamentary counsel believe that that fulfils the suggestions of, for example, the Competition Commission, which suggested we should have that role. 

Secondly, we think such a duty might cause confusion. We have a clear primary duty in the legislation to the end user: the passenger or the person wanting to ship cargo. If there were ever any doubt between the primary duty and the secondary duty, the primary duty should prevail, so what purpose would the secondary duty fulfil? 

Thirdly, there is a risk of confusion, because if the situation is finely balanced and we need to take the airlines into consideration, why do we give greater strength to an airline position than the position of an investor or other parties at an airport? 

Fourthly, such a duty would be quite a significant step away from successive Governments’ policy. If you think about a parallel with Ofcom, it would be the equivalent of requiring Ofcom to have a secondary duty to Sky in the provision of broadband services—where they regulate BT—which it does not currently have. For Ofgem, it would mean Ofgem having a secondary duty to British Gas Centrica in its regulation of National Grid Transco. There has been a clear, long-standing tradition, from successive Governments, of the primary duty’s focus being on the end user and not intermediaries in the value chain. 

Now, none of that is to say that we do not put great store by airlines’ views. We have already published a view that says that our rebuttable presumption is that airlines are a good proxy for consumers in the vast majority of cases, but a secondary duty would have few benefits to airlines and would cause considerable confusion both to regulatory policy and to decision making. 

Q 68 Fiona Bruce (Congleton) (Con):  The Bill provides for the transfer of new functions to the CAA, and I am thinking of aviation security compliance in particular. How will the CAA ensure that it has the competence and capacity to carry out those new functions? 

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Andrew Haines: In two ways: first, there will be a transfer scheme that will transfer the necessary staff to the CAA, along with the other powers we will have; secondly, we will clearly need to build our competency in this area. We believe that there are some synergies through safety, and we obviously have extensive experience of auditing safety and of developing safety management systems, but we are not in any sense complacent. This is an issue of national security, and we will need to build our own resource and resilience to do that. We have two years from now to do it. That is a tight time scale, but we are confident we can do it. 

Q 69 Fiona Bruce:  Can I just probe you a little about how you actually propose to tackle that in practice? 

Andrew Haines: We have not yet finalised those arrangements, not least because the Bill is only just in Committee and it would be presumptuous of us to assume that it will receive Royal Assent at such an early stage. We have, however, set up a joint project team with the existing people in aviation security within the Department for Transport. We will ensure that we have good external advice, and we will want a clear memorandum of understanding with the Government on the flow of information, because it is absolutely critical that we have access to the right information flows if we are to make the right decisions on compliance management. 

Q 70 Fiona Bruce:  Thank you. Just one more question, if I may, Mr Chairman. The CAA is currently both the economic regulator and the aviation safety regulator. It is now to become the security regulator, and concerns have been expressed that there is perhaps a danger of a conflict of interest between your economic and security regulation functions, as proposed. What you do think about that? 

Andrew Haines: Generally, those concerns have been a reflection of a misunderstanding of our various duties. The issue was raised yesterday in the Transport Committee that we have an economic duty to airlines, but we do not. We have a very narrow economic duty to airports. The Transport Committee looked at this in 2006 and said that, while you might not have created the CAA these days as it has been, historically it has managed its duties successfully. There is little evidence that those conflicts actually arise. We have clear governance arrangements within the CAA that mean we simply do not have that issue. 

The Chair:  Mr Osborne, do you want to add anything to any of that? 

Iain Osborne: No. 

Q 71 Gavin Shuker (Luton South) (Lab/Co-op):  Just coming back, Mr Haines, you mentioned the licensing regime and that flexibility is helpful in resolving high-profile incidents. You mentioned, for example, the snow at Heathrow in December 2010. As I recall, BAA measured something like 70 different conditions and only breached four during that period. In moving to a more flexible licensing regime, can you outline how that would be more effective for the CAA’s role in sorting out problems such as snow at Heathrow? 

Andrew Haines: Certainly. At the moment, BAA has some service quality conditions that are effectively determined by the Competition Commission, because it has that role and we do not. There is no overarching provision. We have published an indicative licence, which

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gives an approach to this, and it is a policy where you give an overall responsibility to the operator to run an efficient operation and to develop resilience, which has been used by numerous other regulators with pretty high levels of success. 

You do not second-guess what that means because there is a significant risk of incurring risk transfer away from the operator to the regulator in those cases. But you put a high level of provision in and then you require them to produce plans. So in our indicative licence, for instance, there is that generic obligation to run an efficient operation. 

Then there is the requirement to produce a resilience plan, which we will review and consult industry on, and then there are specific obligations—for example, to keep operators and passengers informed. It is up for consultation, but that is the preferred approach to those things. You set high level objectives and then measures to monitor their effectiveness before the event occurs. Mr Osborne has some experience of this in previous regimes. 

Iain Osborne: We have been very clear with the sector that what we really want is that it is operating well without the need for regulatory intervention. For us to have to intervene in this is in some sense a failure. So the next year or so is quite important in that if we see effective collaboration then the licence conditions can be much more high-level and light-touch rather than detailed. In other sectors you quite frequently have codes of practice; the company owns the code of practice but the regulator makes sure that it delivers against it. It will work something like that, depending on how much the industry itself picks up. 

Q 72 Gavin Shuker:  You also have the ability to lay financial penalties when those conditions are breached. Can you outline the nature of those financial penalties for us? 

Iain Osborne: They are related to the turnover of the company. The Bill will give us two kinds of power, either to fine per day for a breach, which we expect to be remedied quite quickly, or quite often if it is after the event and then you do a lump sum fine. It is up to 10% of turnover. 

In practice, it is unheard of for fines either by regulators or competition authorities to be 10%; it is more like half that and down. But it is enough to hurt a company. Often it is the reputational effect of having been fined by the regulator that really stings management teams and gets them to change their behaviour. 

Q 73 Gavin Shuker:  You mentioned that the penalty could go up to 10% of annual turnover, but the daily rate is only 0.1%. Is that of that day’s turnover? 

Iain Osborne: Indeed. 

Gavin Shuker:  So that strikes me— 

Andrew Haines: It is 0.1% of the total annual turnover. 

Iain Osborne: To give you the numbers to illustrate it: for Heathrow, a 10% fixed fine would be £185 million, whereas a daily fine of 0.1% would be £1.85 million. 

Q 74 Gavin Shuker:  So off the top of my head, that is about a third of the daily turnover of an airport’s operation? 

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Iain Osborne: I suppose, yes, arithmetically it is. 

Q 75 Gavin Shuker:  Do you feel that that is a sufficient level of daily fine to be able to give you the powers to enforce the licensing conditions? 

Iain Osborne: Yes, I honestly do. If you got to the level of £185 million or if you got nearly £2 million a day clocking up day by day, that is enough to be on the radar screen of any shareholder team, even of quite a big business. But my experience in other jobs has been that the reputational effect stings management teams very badly—they are on the naughty step. It does have an effect. 

Q 76 Mike Freer (Finchley and Golders Green) (Con):  There are two areas that I should like you to comment on. First, if we look at dominant airports, and we have been talking about Heathrow and how you could intervene, it seems to be related to their dominance in the UK market. If you are looking to intervene on Heathrow, how would you balance the impact of your intervention on the UK market against Heathrow’s competitors—Paris, Schiphol, Madrid and so on? How do you balance the impact across Europe, not just on the UK market? 

Iain Osborne: In accessing the market power that an airport has, we look at the markets it operates in. Sometimes those will be relatively local; on the passenger side, that is often the case. It is about surface access. But sometimes they will be quite wide. Last month, we published a summary document of initial views on what market power the three big airports have—we will shortly be publishing a fuller statement on that—and we are looking at the extent to which Heathrow competes against those other markets, so that it absolutely part of our view. 

To the extent that there is effective competition, which actually constrains the airport, we would not seek to impose regulatory interventions. There is no need and we do not want to distort markets that are effectively competitive. But the big question is, although there may be some competition, is there enough? The “dominance test” or “significant market power” is the language in the Bill, and they come to the same thing. It is about whether competitive constraints are in reality enough to prevent abusive behaviour. 

Q 77 Mike Freer:  I turn to the second point on publication of information. You talked a lot about your primary duties—the end user. My view is that you are able to publish information about the customer experience for about 90% of the customer journey, but when they get to the arrivals hall, there is a black hole of information. How would you feel about your duties being extended to publication of information on the performance of the UK Border Agency on things such as queue times in terminals? 

Andrew Haines: We recognise that that is increasingly a consumer issue. I understand that there are some discussions and I recognise the sensitivities. They are not parties that we regulate in any sense, but it is undoubtedly part of the consumer experience. I know that, of their own volition, airlines have entered into service quality regimes with UKBA and are looking where possible to publish that voluntarily. The whole point about our publication powers is to do things that

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the industry is not doing of its own volition. If we had the ability to do that and it was not available elsewhere, we would welcome it. 

Q 78 Fiona O'Donnell (East Lothian) (Lab):  Good morning, gentlemen. Returning to the duty for providers of air transport services to publish information about their environmental performance, how do you think customers would access that information? What information would be there, and what format would it be in? 

Andrew Haines: We are obliged by the Bill to consult widely on such things, so I am not going to be definitive about that because we would need to do some robust investigation and then consult on the extent to which that information is already available. Looking at what has happened in other industries, white goods labelling, for example, has changed consumer behaviour considerably, and I think a number of people were sceptical about the impact it might have. 

Some airlines are already beginning to do it. A number of airlines talk already about their environmental performance, but they almost inevitably use the statistics that suit their performance, so it is very difficult as a consumer to compare, for example, the environmental footprint of a low-cost carrier with a long-haul carrier or a regional, small operator. The key for us is to provide information on a basis on which consumers can make comparisons and informed choices. 

We are not into the territory of telling people what they should buy or restricting people’s choice, but we think that people should be able to make an informed choice, and we have done a little bit of that, in the areas we can, on the back of European legislation just in the past few weeks. We have published a table of fees and charges for all airlines, so now people can access on our website a summary of the fees and charges of all major airlines in the UK. It is not only the headline price that matters to people; it is the bottom line price. For the first time there is a one-stop shop where people can look at that. We can do that because Europe has already given us that information power on pricing transparency, and we think that sort of thing would be helpful in our broader duties, but only where the industry is not already providing it. There is a very clear responsibility on us to ensure that the benefits outweigh the cost. 

Q 79 Fiona O'Donnell:  Perhaps I might push you just a bit further. I realise that the consultation needs to take place, but do you think that the accessibility of such information should be the same as with white goods labelling, which you mentioned? Should that information be available before someone chooses to use the service? 

Andrew Haines: Absolutely, I think that the principle— 

Q 80 Fiona O'Donnell:  So you could not proceed to booking a flight until you had that information in front of you? 

Andrew Haines: Again, I think we need to consult on how it is presented, but the principle of an informed choice is that you need to have the information before you pay your money, so the highest levels of visibility are important. The good thing these days is that communication through social media and good web access means that many people can access information very successfully. No doubt by the time the Bill reaches

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Royal Assent and we can implement it, there will be other technological solutions as well, but wide information access is certainly critical. 

Iain Osborne: Could I just add that we are very much learning how to do this? One thing I am very conscious of is that there are already a number of things that airlines are required to provide customers with, and they do, but you have to read about 12 pages of very small print in order to get it. For us just to add other things to that list would not achieve anything. 

Andrew Haines: Absolutely. 

Iain Osborne: We are very keen to do this in a considered way, based on research into how people actually make buying decisions and process information. I suspect that most people cannot integrate more than a relatively small number of things into a buying decision, so we need to understand how people actually take decisions and to learn more about using new technology. We put this information about rights on our website, and I was very struck by the fact that, when we had the bad weekend with the snow a few weeks back, we got a few thousand hits on the site, but by re-tweeting it, we reached a quarter of a million people and had a third of a million impressions. 

Andrew Haines: Through other people’s Twitter accounts. 

Iain Osborne: As a middle-aged fogey, I was rather struck by that. It made me think that I do not fully understand how you achieve this, but we want to learn in order to do it effectively. 

Q 81 Kwasi Kwarteng (Spelthorne) (Con):  In this whole process, I am concerned about the governance issue, which you may have heard about. It seems odd that you are the only economic regulator that is not subject to the National Audit Office. What are your thoughts about that? Do you feel that that is anomalous? Is it something you might want to change? 

Andrew Haines: We have had absolutely no contact from the NAO on this subject. I think there is quite a history to it. When the CAA was originally set up in 1972, it was under the auspices of the NAO. In 1984, Parliament decided to take it out because we are not publicly funded; all our income comes from industry. In 2006, the Select Committee on Transport conducted a review. In 2008, Sir Joseph Pilling was appointed by the Department for Transport to conduct a review, and he decided not to bring it in. 

We are very welcoming of transparency; we are not opposed to it. We would like to understand what the costs would be. I believe that it is ultimately a matter for Parliament and the Department for Transport, and we are in no way resistant to that. It would be good to know what was intended and the value added. As I have said, we have had no dialogue whatsoever on the issue, but we are in no sense resisting that measure. 

Q 82 Julie Hilling (Bolton West) (Lab):  May I just pick up on two areas? First, following on from Ms Bruce’s points about the transfer of security duties, the trade unions expressed a great deal of concern when they came before the Transport Committee about the flight of staff who would choose to stay within the civil service and look for other opportunities, rather than transfer across to the CAA. Is that a concern to you? 

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Andrew Haines: It is undoubtedly on the risk register, because we cannot force that transfer to happen if people choose to leave their posts in the meantime. We are talking to the Department for Transport about mechanisms to deal with that. For example, perhaps some people will transfer as soon as Royal Assent has been granted, to try to give certainty, and there would be transition arrangements so that individuals are not left with a high level of uncertainty right the way up to April 2014, which is the ultimate transfer date. We would look to give people much more security as soon as the provisions receive Royal Assent in order to minimise that risk, but it would be wrong to say that there is no risk, because it is bound to be there. 

Q 83 Julie Hilling:  One thing the trade unions raised with us was the issue of pensions. I know we will be talking to the trade unions, but do you see any resolution in that area? 

Andrew Haines: I understand that the principal issue there is the extent to which the Government were taking a view on the fair deal. I believe that the Chief Secretary to the Treasury has now said that the fair deal, which basically gives some guarantees and certainties to people transferring, is close to resolution. That is what is driving the time scale on that issue. 

Q 84 Julie Hilling:  Thank you. On inter-terminal competition, when do you think transferring terminals would be a good thing to do? 

Iain Osborne: It is not particularly on our radar screen at the moment, and I do not hear any airlines pressing strongly for it. If you could create it in building new facilities, that would be rather different from breaking up. My understanding is that we do not have—and the Bill will not give us—a role to break up an airport. It does give us the power to make a market investigation reference to the Competition Commission, which is the way it has always been done in the UK system. It is the Competition Commission that does an investigation. 

As to whether it would be a good idea or not, I do not have an a priori view. There are things you would need to look at. There clearly are some potential benefits from competition, but the US experience has been that, by locking down a particular terminal as belonging to a particular airport, you can create entry barriers and reduce competition in the long run. That would be a particular worry where you have alliances in different terminals, as at Heathrow, and airlines move around between alliances. It could be quite difficult to get that movement. Particularly on a relatively congested campus, you could hit some quite serious operational issues that would need to be looked at hard, if you had different bits of the campus under different ownership. 

Andrew Haines: Perhaps I could I say for the avoidance of any doubt that we do not desire powers to force inter-terminal competition, and we do not believe that the Bill transfers them to us. We do not believe that would be an appropriate decision for us, as the CAA, to take. While we might in due course have a view on it, we are not seeking a role to make that happen. 

Q 85 Julie Hilling:  Therefore, do you think it is good to have it in the Bill? 

Andrew Haines: The Bill is future-proofing to allow us to regulate, should that happen. If it should—because the market determines it or because the Competition

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Commission imposes it—this means we would not need to come back to Parliament for further powers to regulate in that scenario. We do not believe it is the Bill’s intention to allow us to influence the outcome of that decision making. 

Q 86 Nigel Mills (Amber Valley) (Con):  At the risk of asking you to put the cart before the horse again, how many airports do you think you would need to issue a licence to? Will it just be Heathrow? Do you think that, now Gatwick has been sold, it might not need to be company-regulated? What about the position for Stansted? 

Iain Osborne: One of the advantages of the Bill is that it does not impose a solution; it imposes a process. Take the current situation we are in the process of working through. We are just publishing our views on who has market power and other tests concerning regulation—whether it is worth a candle and achieves what you want. In what we have published we are pretty clear that Heathrow does have significant market power. 

At the moment—early 2012—we do not think there are strong grounds to believe that we will be seeking to deregulate fully either of the other two. It is fairly clear that at Stansted the extent of market power is much less, so we would probably regulate there differently. Gatwick is still quite ambiguous. We still have a couple of years before we use these powers for real—as acknowledged by your comment about putting the cart before the horse. It is quite a fast-moving market. 

The other point worth bearing in mind is that, if the sector continues to grow and resumes growing a bit faster, and we do not have lots more capacity, airports that do not have market power now could go back to having market power in future. It is good that we have a process, rather than a solution being imposed. 

Q 87 Nigel Mills:  Not everything that goes wrong for the passenger is the fault of the airport operator. Quite often it could be the airline that has not got the plane there, or gets the baggage handling completely messed up. Do you have the power to fine the airline directly if it is at fault for causing significant delay, or would you effectively have to fine the operator of the airport and have it pass it on somehow? 

Andrew Haines: No, we do not, in the vast majority of circumstances, because it is a very liberalised market. People have enormous choice. It is one of the great strengths of UK aviation that people have such a wide range of choice. 

The view of successive Governments has been that it is a liberalised sector that does not need such regulation. There are specific measures in European legislation that address people with very specific needs, particularly passengers with reduced mobility where there may not be a strong commercial driver on the operator, but that is quite narrow. We have responsibilities to ensure that European regulations are enforced for compensation, and things like that, but that is quite narrow and we would not want to be in the territory of fining airlines when, actually, passengers can choose with their credit card. 

Q 88 John Woodcock (Barrow and Furness) (Lab/Co-op):  May I briefly take you back to security? What level of concern, if any, do you have on the prospect of taking on a risk-based security approach, given that it is a critically important area that has the potential to be highly unpredictable? 

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Andrew Haines: The Bill makes no provision whatever for risk-based security. There are two things going on in parallel: the Bill addresses the transfer of activity to the CAA; and, separately, the Government have been consulting on outcome-focused, risk-based regulation. 

We are keen supporters of the principle of outcome-focused, risk-based regulation because it deals with good lessons learned from safety practice, which is that rules, of themselves, are not sufficient to get the right output. You actually need to say, “Are the rules working?” Where significant step changes have been made in safety across all sectors in the past 10 or 15 years is where safety management systems have put much more onus on operators to say, “Are the rules sufficient? Are they delivering the intended outcome?” 

I believe that the principle behind the Department for Transport’s consultation is to move in that direction, which is why it has been broadly supported by the industry. There is a long way to go before that happens. Much European regulation is extremely prescriptive at present, and there would need to be extensive discussion with Europe to relax that regulation. We believe that it is the right direction, but it is not in any sense inextricably linked to the transfer in the Bill. 

Q 89 John Woodcock:  That is very helpful. May I ask a brief supplementary? You say that there is a long way to go, and the reason why I raised risk base is that there is a question of whether you could couple the two. Could you transfer only when you have risk base? Is your view, given what you have said about that, that a coupling would not be an effective way to go? 

Andrew Haines: Coupling would mean delay; moreover, my personal view is that coupling would be a riskier strategy. This is an issue of national security—in preparation for this, I was castigated for being particularly insensitive by referring to a “big bang” approach—and having a step-change approach where you have all the change on one date does not seem to me to be the most appropriate way to manage such tricky material. 

I would welcome some space between the transfer of responsibility, the development of security management systems and the rolling out of outcome-focused, risk-based security regulation in due course. I would not be in favour of bunching everything together for a single, one-hit implementation, which would be a riskier strategy. 

Q 90 John Woodcock:  You said in answer to the first question that you are not averse to some kind of environmental obligation, but that we would need to be careful about how it was given to you. How do you think it could work? 

Andrew Haines: Other regulators have sustainability objectives. I am ambivalent about it because we have various pieces of legislation, such as the Transport Act 2000, that give us considerable environmental responsibilities, and we have the Civil Aviation Acts that give us our safety responsibilities. For sustainability objectives to work effectively, the breadth of our existing legislation would need to be considered. There is experience elsewhere that a sustainability objective might have some influence, but we would want to work through the interface, particularly with safety. 

The biggest thing that civil aviation can do on the environmental front is to help the redesign of airspace. Flight efficiency alone could take 10% off the CO

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emissions of aviation in this country, and we have a critical role to play there. We already have the statutory responsibilities that we need for that activity. On the environmental part, we will help drive people in the right direction as well. We have a pretty full work load, which is why I am not wildly enthusiastic. I could not say to you that it could not be made to work, but it would need quite a lot of unpicking of existing legislation to be implemented effectively. 

Q 91 Mark Reckless (Rochester and Strood) (Con):  I have a question for Mr Haines on governance. It is proposed that the CAA be given significantly greater powers. Do you think that, to ensure proper parliamentary oversight of those powers, it would be appropriate for the chairman and/or the chief executive of the CAA to be subject to pre-appointment scrutiny by the Transport Committee? 

Andrew Haines: I have no view on that at all. It is largely a matter for the Department for Transport, but we would not be averse to it. I should offer the apologies of the chair, who was unwell overnight, which is why she is not able to be here today, but we are both committed to open transparency. I was appointed through an open process, and I replied to advert in a newspaper. We would be open to pre-appointment scrutiny if it was thought appropriate, but it is probably not a matter for the CAA to determine. 

Q 92 Seema Malhotra (Feltham and Heston) (Lab/Co-op):  Just building on the discussion around the environmental duty, one issue where the Bill could go further is a potential noise mitigation scheme for local residents and businesses that may be within the airport area—or possibly slightly outside, depending on where the noise impacts were greatest. What is your view on whether some form of compensation scheme could or should be part of the licensing arrangements and regulated as part of the overall changes? 

Andrew Haines: Could we perhaps deal with that in two sections? The principle of opening up a new debate with residents about noise mitigation is really quite central to the development of aviation policy. We have been responding to the Government’s consultation on the aviation policy framework with some suggestions about how we would do that, and we recognise that the first step in that is to build credibility about the existing regimes. 

Unless local residents feel that the existing regimes are credible, you cannot move on to new schemes. It is simply too early in that dialogue to have something in the Bill; that really would be the cart before the horse. In any case, we probably do not need provisions in the Bill to do it, but we would welcome the dialogue, which we know the Government intend to continue, about how you put better incentives on the aviation community to respond to local concerns and then build a better dialogue at that level. I do not know whether we would need anything in the licence to make that happen. 

Iain Osborne: This is related to the discussion about the environmental duty. You can imagine a world where aeronautical charges are higher, which creates a pot of money that is distributed as largesse. This is the cutting edge of the environmental question. I do not think that the Bill gives us a remit to do that, which is probably a

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good thing, because tax and redistribution is not really the role of a regulator. We are also covered by international obligations that would make that difficult to do. 

The noise regime, which is not something that the CAA has primary responsibility for, has its own internal dynamic, and you need to be quite careful about transferring that into the airport licence, the main purpose of which is to prevent abuse of market power. 

Q 93 Iain Stewart (Milton Keynes South) (Con):  First, I draw attention to my entry in the Register of Members’ Financial Interests. 

Secondly, I want to return to the discussion about the provision of consumer information, which clause 83 deals with. Last month, the CAA announced the new consumer panel, and you are going to recruit a chairman in the spring. To what extent do you envisage that panel having a role in shaping the type of information provided and the format in which it is presented? 

Andrew Haines: We would see it having a key role in developing our thoughts on it, but the Bill is also clear that we need to consult widely on what we intend to do on that front. It would have a central role in helping us to shape our thoughts, but it would in no way have a determinative role, because of the need to do a lot of work to establish what is already available in the marketplace and to understand the costs of gathering data and the benefits of doing that. It would, however, be central. 

Q 94 Iain Stewart:  In respect of the type of information that consumers would find helpful, the services are provided by different suppliers: some by the airlines, some by the airports and some will relate to ease of access to airports—the whole public transport system nearby. Do you have a view on how you are going to pull all that together in an easily accessible format? 

Andrew Haines: We have not come to a final view on that, as I said, because the Bill is still at an early stage and it is going to take quite some time before we can implement it. I think one of the common misunderstandings for many aviation consumers, though, is about the key role of the airline in this. So, for example, the airline is responsible directly for the journey, but it is also responsible for checking and it delivers your bag, as well. It is not the airport that is responsible for getting your bag to you. 

You will see at certain airports that there are different delivery times for baggage. That is all about the contract the airline has with its ground handlers for how efficient those ground handlers are. We think it is useful for people to have that information, and they will know that if they travel with airline x from airport y, they may well expect to wait another 15 minutes. They may pay a little bit more and then they can decide whether they value the extra 15 minutes they get for not waiting for their bag, or not. 

We are very much about not trying to push people in any direction, but giving them choice for their information. Many people tell us—punctuality is a good example—that it is difficult at the moment to understand which airlines are most punctual. If getting to your destination on time is critical, which airlines have the best prospect of doing that for you? 

Q 95 Chris Heaton-Harris (Daventry) (Con):  I am returning to governance, I am afraid. Regulators occasionally make mistakes. If the people you regulate

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have an issue, whether individuals or businesses, what routes do they currently have available to them? Given the new powers that this Bill gives you, if there are any new routes out there, what are they—or should there be new routes? 

Andrew Haines: There is an extensive appeals mechanism in the Bill—I will let Mr Osborne talk to you—and one of the key areas of development has been to ensure that airlines in particular have strong rights of appeal at various stages in this process. 

Iain Osborne: The new regime is much better from the appeal point of view. At the moment the 1986 system is slightly odd, in that you kind of have the appeal before the decision. The CAA does some work, refers it to the Competition Commission and then, on the basis of that, sets the outcome. If the airlines do not like it or if the airport does not like it, the only remedy is judicial review. There was a judicial review of the existing controls. 

Under the new system, it will be much more logical. The regulator will set the rules and then there is the opportunity to appeal. Because of the many hooks in the licence that require us to consult and to operate transparently, there will be a good evidence base for assessing the basis of an appeal. 

The right to appeal will be not just the airport’s, but will also involve other interested parties in the question of whether an airport should be licensed at all—any other interested parties on particular licence conditions and any airline that is materially affected. And then you go through appeal mechanisms that are not aviation-specific and are well established and well understood—the Competition Appeal Tribunal and the Competition Commission. 

I think it is certainly much more modern and it meets the modern standards of human rights law, and I understand that the airlines believe it to be genuinely fairer. 

Andrew Haines: I think the impact assessment suggests that in the first few years we can expect about 50% of our decisions to be challenged. So I think that suggests pretty fair, reasonable access to people questioning the robustness of our decision-making processes. I think that we would hope that that would settle down in due course, because clearly there is a burden to do with that, but that access and right to appeal is well enshrined in this legislation. 

Q 96 The Chair:  Do any Committee members have further questions? 

Gentlemen, is there anything that you would like to add before we wrap up this morning’s session? 

All witnesses: No. 

The Chair:  In that case, if Committee members have no further questions, that brings us to the end of our business this morning. 

Mr Haines and Mr Osborne, I thank you very much indeed for helping us out. We are most grateful to you. The Committee will sit again to take evidence at 1pm this afternoon. 

Ordered, That further consideration be now adjourned. —(Bill Wiggin.)  

10.20 am 

Adjourned till this day at One o’clock.  

Prepared 24th February 2012