Aviation Strategy

Written evidence from the UK Travel Retail Forum (AS 112)

1. What should be the objectives of Government policy on aviation?

· In the interest of UK air passengers, UK airports and the UK duty free industry, the UK Travel Retail Forum (UKTRF) calls on the British Government to safeguard passenger rights – in an evolving aviation market.

· The UKTRF wants the British Government to recognise, based upon established practice and normal passenger expectations, that passengers have a right to carry specified items on board a flight in addition to their hand baggage allowance.

· Legislation, at national or EU- level, must be put in place as soon as possible to enshrine in law a right which passengers have enjoyed for the past 60 years and which has enabled UK airports to fund themselves with out recourse to state aid.

1. The UKTRF is a national trade association whose members represent most sectors of the travel retail business. Non-aviation revenues, including the duty-free and travel retail businesses, are a crucial generator of income for airports of all sizes across the UK. The overall aim of our organisation is to secure a sustainable future and the most favourable operating environment for these companies.

2. The UKTRF’s number one issue is the refusal by certain airlines to allow their passengers to bring on board airport shopping in addition to the airline’s prescribed baggage allowance . This issue continues to impact consumer choice and regional airport revenue .

3. The UKTRF, supported by the Airport Operators Association (AOA), has noted the substantial impact this practice is having on the passenger experience and on airport retail sales a t UK airports that rely heavily on commercial revenue to fund infrastructure, keep airport charges low and attract airlines.

4. Passengers t ravell ing on these airlines are now required to cram all their personal belong ings into a single carry-on bag with absolutely no exceptions. Otherwise they are forced to pay an exorbitant ‘fine’, throw the goods away or worse still, be denied travel. This runs contrary to established practice, is inconsistently applied and has led to enormous passenger confusion.

5. The practice is being implemented in at least 1 1 UK airports, with one Low Cost Carrier (LCC) enforcing it in nine airports.

6. Airlines who practice this policy maintain that this is a necessary measure for safety and efficiency. We dispute this claim entirely. If this were the case, the airlines operating this policy would do so on a consistent basis. Moreover the airline then sells items on board from their own duty free and travel retail selection , which has to be stored by the passenger until they arrive at their destination. Indeed, UK passengers have been enjoying airport shopping for over 60 years now without any operational difficulties for airlines.

7. Instead it appears that the practice stems from a desire to create additional revenue streams, as passengers are then encouraged to shop onboard from a very narrow product offe r ing compared to that at airports. One low cost carrier experienced a 64% growth in ancillary revenue between 2005 and 2010 .

8. The dominant market position of some airlines has made it difficult to find a commercial solution to this problem at many airports in the UK .

9. In general such airports are very reluctant to challenge the airlines in question for fear of losing vital traffic and routes . For the same reason, it would be very difficult for airports to make a complaint to the Office of Fair Trading, as that would risk retaliatory measures - c ertain low cost airlines have proven themselves very adept at withdrawing services at short notice, when an airport takes a policy stance they are not in agreement with.

b ) What are the benefits of aviation to the UK economy?

· Airport shopping in the UK is worth almost £ 1.5 billion per annum . These revenues are crucial to the continued development and well being of UK airports.

· It is estimated that over 20,000 people in the UK are employed directly in airport retail serving 220 million passengers each year.

· For m ost regional airports over 50% of their income comes from non-aeronautical activity, of which retail income is a hugely significant part.

10. Shopping is an important means of generating revenue for the development of a vibrant and attractive retail space, which is considered to be a critical element of new infrastructure development. Airports use this revenue to finance these upgrades and to reduce their aeronautical charges. Airlines pass-on these reductions to passengers through lower ticket prices. Indeed airport charges in the UK are among the most competitive in Europe due largely to income from airport retail.

11. The practice, of not allowing a bag of duty free and travel retail or food and beverage purchases – unless it is crammed into a passenger’s one piece of hand luggage, threatens in the long run the viability of using retail income to finance airport operations. It also calls into question the justification for some airports to reduce aeronautical charges to below cost in exchange for a guarantee that a minimum number of passengers will pass through the airport in the hope that they can recoup their losses from retail sales.

· UK airports are losing conservatively over £3 million in annual revenue as a result of this practice.

· The clearest way to see the negative impact is in spend per head (SPH). Typically SPH by a passenger on an airline with a ‘one bag’ policy is between 35% and 60% less than passenger SPH on an airline where this policy is not applied .

12. Further evidence of customer confusion is clear from recent airport research that shows that passengers travelling on airlines who do not apply this policy are no longer confident that they can take their airport shopping on-board .

13. Airport retailers are already impacted by the general economic downturn, increased security costs and procedures, which reduce airside dwell time. With online check-in now the norm, people are arriving at the airport later and have less time to shop – statistics show that one minute less dwell time is equal to a decrease of 1% in retail sales.

14. Until recently the possibility of a regional airport being forced to close was limited as they were mainly state-run facilities. Today most airports in the UK are privately owned, and in recent years both Coventry and Sheffield City airports have been forced to close. In short, the commercial impact of this rule could have serious ramifications well beyond airport retail.

d) How should improving the passenger experience be reflected in the Government’s aviation strategy?

· 39% of all passengers say that uncertainty about cabin baggage allowances prevents them from shopping at the airport .

15. The practice is inconsistently applied in the UK and in other EU countries, with the result that passengers never know whether they can take their shopping on board or not, even when travelling on the same airline. The confusion is so great that even on legacy carriers significant numbers of passengers think that they cannot take their airport shopping on board in addition to their cabin baggage. The UKTRF remains convinced that the only solution to this issue is EU-wide legislation , which will prevent this market abuse.

16. A recent study at a major regional airport revealed that 39% of all passengers, irrespective of airline, are now not shopping at the airport for fear of confiscation and conflict with airline staff during the boarding process.

17. The UKTRF and AOA believe this practice to be grossly unfair to both passengers and airports. On boarding, passengers find that the airline is offering similar goods for sale, albeit with a fraction of the choice available at the airport.

18. Unlike airport shops, airlines only carry a very limited range of goods on board for sale. By effectively preventing passengers from buying at the airport, airlines are denying consumer choice.

3. What constraints are there on increasing UK aviation capacity?

c) What is the relationship between the Government’s strategy and EU aviation policies?

· The UKTRF is supported by the AOA and more than 30 cross-party UK MPs .

· There is g rowing momentum across Europe for new EU legislation.

19. The British Government has a strong record of taking leadership positions on international civil aviation matters, and it has an opportunity to continue this by taking action on this arguably restrictive practice, which is bad for passengers and bad for airports .

20. The UKTRF, AOA and Mike Crockart MP met with Theresa Villiers, in April this year – as a direct result of the strong political support pledged by more than 30 cross-party politicians including the Transport Select Committee Chair, Aviation APPG Chair and MPs with airports in or neighbouring their constituencies. Minister Villiers assured us that the government would take a fresh look at its position on this matter.

21. Mark Prisk , in his position as Better Regulation Minister, also agreed that action is required at an EU-level and designated one of his senior officials to work with us on this issue.

22. The forthcoming review of the Air Passenger Rights Regulation will give us a unique opportunity to solve this problem once and for all. We understand that a proposal will be forthcoming from the European Commission as early as December this year.

23. Across the EU, our position has received the full support of many governments including France, with others such as Italy and Portugal looking at it further. The European Parliament has now voted three times for legislation to solve this problem.

24. In May 2012, the European Parliament adopted Philip Bradbourn MEP’s report (The future of regional airports and air services in the EU), with an overwhelming majority. The adoption of this report reaffirms the European Parliament position, which had already been established in an earlier report by Keith Taylor MEP, which references the right of passengers to carry their airport purchases on board in addition to their baggage allowance. 

25. We have now written to the new Aviation Minister asking him to outline the government’s position and to invite his team to play a crucial role in the evolution of this legislation.

Concluding remarks

· The only solution to this issue would be to introduce legislation, at national or EU-level, which will alleviate passenger confusion and prevent this market abuse.

· The forthcoming review of the Air Passenger Rights Regulation will give us a unique opportunity to solve this problem once and for all, and to give passengers the certainty they need to buy with confidence.

· Across the EU our position has received the full support of governments including France.

· On behalf of the British public, the travel retail industry and our airport partners, we urge the British Government to follow suit.

30 October 2012