Airports Slot Allocation (Alleviation of Usage Requirements) Regulations 2022
Viscount Younger of Leckie
That the Grand Committee do consider the Airports Slot Allocation (Alleviation of Usage Requirements) Regulations 2022.
Relevant document: 29th Report from the Secondary Legislation Scrutiny Committee
Viscount Younger of Leckie (Con)
My Lords, I beg to move that the regulations be considered.
Slots are a means of managing scarce capacity at the busiest airports. Ordinarily, airlines must operate slots 80% of the time to retain rights to them the following year. This is known as the 80:20 rule or the “use it or lose it” rule. In normal times, this rule helps ensure capacity is used efficiently and prevents airlines from hoarding valuable slots without using them.
The Committee will be aware that Covid-19 has caused exceptional challenges for the travel industry. One way in which the Government have supported the sector over the past four seasons has been with generous alleviation of these rules. On 11 February this year, we lifted most remaining travel restrictions, which means that people can now travel abroad and visitors can come to the UK more easily, whether for a holiday, for work or to visit loved ones. We have reopened the country, and our slot alleviation plans for the summer season are designed to support this process.
This package was developed following consultation with industry. We received 48 responses from air carriers, airports and industry bodies, which supported a wide range of different measures. Views ranged from calls for a full waiver to support for full reinstatement of the 80:20 rule, with most responses somewhere in between. We have carefully considered these views, alongside the available data, to develop this package of measures.
I shall give some brief background to this. When the pandemic initially struck, the 80:20 rule was fully waived to avoid expensive and environmentally damaging flights with few or even no passengers on board. Following the UK’s departure from the EU, the UK Government chose to extend the European Commission’s waiver of the 80:20 rule to cover the summer 2021 season, which lasted until 30 October 2021, through the Airports Slot Allocation (Alleviation of Usage Requirements) Regulations 2021. Taking the opportunity of our departure from the European Union, we then used the Air Traffic Management and Unmanned Aircraft Act 2021,or ATMUA, to create a more flexible set of powers that could adapt to the specific circumstances of the sector. That legislation was recognised as an essential tool to help to manage the impacts of the pandemic, and received cross-party support.
For the winter 2021 season, we used these powers for the first time. As recovery remained uncertain, our focus was on supporting the sector. Our measures were generous and exceeded the alleviation package provided by the EU. By allowing airlines to hand back full series of slots, we gave them certainty that they could retain their slots, even if not operated, which helped to mitigate some of the commercial impacts of the pandemic. This is because otherwise airlines might have chosen to incur the cost of operating near-empty flights merely to retain slots. This also reduced the likelihood of needless emissions from near-empty aircraft. We are proud that, thanks to these measures, we are not aware of any flights that have taken place solely to retain an airline’s slots.
As required by the ATMUA Act, we have determined that there is a continued reduction in demand, which is likely to persist. We consider that further alleviation measures are justified for the summer 2022 season, which runs from the 27 March to 29 October 2022. On 24 January, we therefore published this statutory instrument, setting out the package of alleviation measures that we propose to put in place for this coming summer. The draft instrument applies to England, Scotland and Wales. Aerodromes are a devolved matter in relation to Northern Ireland and, as there are currently no slot co-ordinated airports in Northern Ireland, the Northern Ireland Executive agreed that it was not necessary for the powers in the Act to extend to, or apply in relation to, Northern Ireland.
In the draft instrument we are considering, our measures aim to encourage recovery, while protecting carriers where severe international travel restrictions remain. This includes changing the minimum usage ratio to 70:30. This means that airlines are required to use their slots at least 70% of the time to retain the right to operate them the following year. This is lower than the 80% in normal times but higher than the 50% ratio adopted for the winter season, thereby reflecting progress towards recovery.
The draft regulations include stronger provisions to avoid low-volume flying, by expanding the reasons which airlines may use to justify not using slots to include existing Covid-19-related restrictions. This will apply where measures, including flight bans and quarantine or self-isolation requirements, are applied at either end of a route and have a severe impact on demand for the route or on the viability of the route. Unlike during the winter season, this will also apply when restrictions could reasonably have been foreseen, so as to protect carriers in markets with long-term restrictions in place. There will be a three-week recovery period during which the provisions may still apply following the end of the Covid restrictions.
In addition, we will allow earlier applications for justified non-utilisation of slots. By this I mean that, where there is an official government announcement, either domestic or overseas, about the duration of the Covid restrictions, at that point the carrier will be able to ask the slot co-ordinator for justified non-use to cover the whole period. This can be done in advance and will mean that the carrier will not have to reapply every three weeks, as at present. This will allow earlier hand-back of slots, so that other carriers will have an opportunity to use them, and it will remove some of the administrative burden on airlines.
In the winter 2021 season we made provision for “full-series hand-back”—in other words, allowing an airline to retain rights to a series of slots for the following year if it returned the complete series to the slot co-ordinator for reallocation prior to the season’s start. We have decided not to continue full-series hand-back this season. It was a generous measure that reflected the uncertainty around the winter season.
Given the success of the vaccine rollout, the relaxation of travel restrictions and the more positive demand outlook for the coming summer, I believe that it is now time to move towards a normal usage ratio, but with a strengthened justified non-utilisation provision to provide protection in case of severe restrictions or the emergence of new variants of concern. These measures will cover the summer 2022 scheduling period. and we are currently considering alleviation for winter 2022. I reassure the Committee that we will consult on this later in the year.
I will say a final word about so-called “ghost flights”. Carriers in restricted markets will still be protected by our justified non-utilisation provision. For open markets, the decision to operate flights is ultimately a commercial one for airlines, but carriers will be subject to a lower than normal usage ratio of 70%. The alternative of providing unlimited relief would allow incumbent airlines to retain unused slots at airports while preventing other carriers from using them, restricting competition and ultimately harming consumers.
Through this package of measures, we aim to strike a balance between supporting the sector and encouraging recovery and the efficient use of slots. The regulations that we are considering today make use of time-limited powers designed specifically to respond to the impact of Covid. However, the Government are focused on supporting the industry not just in the short term. As the UK’s aviation sector grows, we will review the slot allocation process as a whole to ensure that it is well equipped to encourage competition, consumer choice and efficiency. I commend the instrument to the Committee.
Baroness Foster of Oxton (Con)
My Lords, I thank my noble friend the Minister for his comprehensive update on the adjustment from 80:20 to 70:30. It is a reasonable and practical way forward. Could he also take into account that, although there are fewer long-haul flights to east Asia due to the impact of Covid, the closure of Russian and Siberian airspace will also have serious long-term repercussions, as the traffic from the UK naturally increases for our long-haul carriers?
Although a side issue, the knock-on effects of these airspace closures on the reduced frequency of operations will include increased fuel burn, which in turn will affect ticket prices on what are normally extremely lucrative routes. As of Sunday, carriers such as China Eastern, Air China, Cathay Pacific, Korean Air and some others with bilateral air service agreements with the UK were still flying over Russian and Siberian airspace to the UK. Some of those countries actually abstained in the vote on the invasion of Ukraine at the Security Council meeting, and will no doubt continue to fly when possible. That brings in a competition issue. I would be grateful if the Minister could take on board these points for further consideration.
Baroness Randerson (LD)
My Lords, I welcome this SI and thank the Minister for his explanation. It provides stability for the aviation sector and, importantly, removes much of the incentive for airlines to operate environmentally damaging ghost flights or flights with very few passengers just to keep their slots.
The Secondary Legislation Scrutiny Committee questioned the Government’s decision to opt for 70%, which was the preferred option of airports, over 60%, the preferred option of airlines. This is a finely balanced decision based on data that is not available to me but which I hope the Government have analysed. I tend to side with the airports and hence endorse the Government’s decision, because airports have a much less flexible business model than airlines. You cannot just park up an airport; you have to keep it functioning, for certain safety reasons, even if you no longer have any commercial income.
I also welcome the Government’s additional reasons for non-utilisation of slots. The Explanatory Memorandum refers in paragraph 12.2 to what I call the game of slots played by certain airlines. It explains how attempts to consolidate valuable Heathrow slots have an impact way down the line on smaller airports—and, it is worth pointing out, on the availability and choice of flights and their price for passengers. This emphasises to me that the airlines have the upper hand here. That is another reason to endorse the Government’s decision.
However, I have one important question for the Minister, which echoes the points made by the noble Baroness, Lady Foster, with whom I fully agree. All these decisions were made prior to the recent awful war in Ukraine and its impact on many long-distance routes. There is likely to be a deterrent effect on travel to eastern Europe, which is generally regarded as being potentially affected by political instability. A vast range of frequent short-distance flights for leisure travel, as well as for business travel, to eastern Europe may be affected by this.
The noble Baroness pointed out an important loophole in the rules on overflying Russia and accepting flights in this country that have in practice flown over Russia. It is important that the Government clarify their position and amend their decisions in that regard. Can the Minister tell us what discussions the Government have had with the aviation industry about the impact of the war in Ukraine on it and what trends are emerging from what they can see so far? This is already being described as a second major challenge to our assumption that we can rely on easy international travel.
Lord Rosser (Lab)
We are in agreement with the statutory instrument so I do not intend to speak at any great length. However, I have one or two questions and queries, which may display the fact that I have not fully understood the SI rather than anything else.
The reality is, as the Minister said, that we have slots because of lack of runway capacity and, indeed, airports. Presumably, if we had sufficient runway capacity and airports, we would not need slots. Do the Government accept that that is the case? If so, is that issue of runway capacity and airports, or lack of runway capacity and airports, one that the Government intend to address, since it appears that slots are related to that situation?
There is also a reference in paragraph 6.1 of the Explanatory Memorandum to the
“allocation of slots to air carriers at congested airports”.
I almost certainly ought to know the answer to this but I cannot think of it offhand. Which UK airports are deemed congested and therefore have the slots? Is it just the obvious ones that we can probably think of, or is it rather more extensive?
I believe the Minister said in his comments that, as a result of the measures that had been taken, the Government were not aware of any flights that had taken place just to retain the slot—that is, ghost flights. I may not have understood correctly what the Minister said but, if I did, how have the Government got this information and how would they define a flight that has taken place just to retain slots? As I understand it, during the waiver period, there were a substantial number of flights at very low capacity. I know that there may be an argument that they were carrying cargo, or they may have been repatriation flights, but does that mean that the Government really have kept tabs on all those flights and have satisfied themselves that none of them was flying purely to retain a slot? Admittedly, with a waiver rule, one wonders why they would have been doing that in any case, but it would be helpful if the Minister could comment on what I believe he said about the Government not being aware of any flights just to retain the slot.
Before the pandemic, can I take it that we were in a situation whereby no flights took place just to retain slots? In other words, in the summer of 2019, how many empty or near-empty ghost flights were operated? Perhaps the answer is none at all, in order to retain an airline’s historic rights to its slots. Is it anticipated that, with the 70:30 ratio, on which there has been a lot of consultation, as the Minister said, there will be no need for any airlines to start to operate ghost flights to retain that ratio? Is that how the figure has been determined as the appropriate one for this summer?
Finally, I come back to a point to which the noble Baroness, Lady Randerson, referred, on the response of the airlines. As I understand it from the Explanatory Memorandum, there were rather more airlines in favour of the 60% usage ratio, and most airports preferred 70%. The Government have decided on 70%. I am certainly in no position to say that they have got that wrong, but the noble Baroness referred to the data on which that assessment was made. I know that I am repeating a question she has already asked, but what data led the Government to decide that the 70:30 ratio was appropriate, bearing in mind that they apparently had airlines more likely to go for 60% and airports more likely to go for 70%? Was it a case for the Government of tossing a coin, or is there some hard data and evidence that led them to go down the road of 70%?
Viscount Younger of Leckie (Con)
I start by thanking noble Lords for their consideration of these draft regulations. I appreciate the comments that have been made and the questions that have been asked. Before I respond, I shall say a few words about the challenges that our aviation industry has been tackling and take this opportunity to pay tribute to its efforts.
At the height of the pandemic, in April 2020, passenger numbers fell by 99% compared with the same month in 2019. Only 330,000 passengers passed through airport terminals. During the summer of 2020, passenger numbers increased as travel corridors were introduced but remained 80% below the equivalent 2019 levels. Following the introduction of the traffic light system on 17 May 2021, flight and passenger numbers rose at a steady pace between May and October 2021. In December 2021, 9.1 million passengers used UK airports but that was still 57% down on the same month in 2019.
I move on to answering the questions that were asked, if I can, in no particular order. I will start with the basic but important question asked by the noble Lord, Lord Rosser, about which UK airports we consider to be congested and which ones fall within the remit of these draft regulations. There are eight of them in the UK, including Heathrow, Gatwick, Birmingham, Bristol, London City, Stansted and Manchester. Of course, there are a lot of other airports around the UK, but they are not considered part of this.
The noble Lord, Lord Rosser, also asked about engagement; that ties in with some of the points made by the noble Baroness, Lady Randerson. I have a bit to say about this. In November and December, we held a targeted, four-week consultation in which we asked airports, airlines and industry bodies for their views on alleviation measures and invited supporting evidence. This takes account of the noble Lord’s point about the 70:30 or 80:20 split. We received 48 responses from 36 carriers, seven airports and five industry bodies, which we carefully considered alongside the available data. I say “the available data” but, as I said in my opening speech, we took account of them all and decided to take a middle line. As ever, in a consultation, you have to take account of all views.
On the impact of these measures, I want to go a little further in answering a question asked by the noble Baroness, Lady Randerson. The impacts were carefully considered—the noble Baroness mentioned the Secondary Legislation Scrutiny Committee, which is a fair point—as they were developed. We sought feedback and evidence from across the aviation sector and an impacts note was prepared to inform the advice to Ministers following the consultation. A formal impact assessment has not been prepared for this instrument because it makes provisions that are to have effect for a period of less than 12 months. That is my understanding of how the process works, which the noble Baroness may know more about than me.
I want to say some more about ghost flights in response to a question from the noble Lord, Lord Rosser. There have been reports, particularly in the press, of up to 15,000 ghost flights; I think that is what the noble Lord was alluding to. The figures reported in one newspaper—it happened to be the Guardian—covered departing flights from 32 airports between March 2020 and September 2021. During this period, there was full alleviation of the slot usage rules in place. One of the purposes of this was to prevent airlines needing to operate environmentally damaging ghost flights during the Covid-19 pandemic. We do not hold data on why flights may have taken place but, given the financial pressure that the Covid pandemic has put on the aviation sector, I know that airlines will not have wanted to operate flights unless they had to. As well as maintenance and training, we believe that many of these passenger flights will have been for reasons such as carrying cargo, as the noble Lord alluded to, or returning UK citizens home when Covid restrictions were introduced or changed at short notice. I am not sure that the data one can get is an exact science but I hope that that goes some way to offering a response; it is certainly as far as I can go.
Baroness Foster of Oxton (Con)
Just before my noble friend’s final comments, can he address another point of concern that I made? Notwithstanding that some airlines such as those I outlined are still coming into the UK—China Airlines and so on, which are obviously using Russian airspace to come here—I emphasised that if that continues we will end up with predominantly a competition issue, apart from other issues, whereby we are building our traffic flying to east Asia but it has to go the long way round, which obviously adds cost, while the airlines I mentioned may continue to use Russian airspace, thereby using a shorter route and burning less fuel. It therefore becomes a competition issue. Will the Minister take that away, too, for his colleagues to look at?
Viscount Younger of Leckie (Con)
My noble friend makes a good point on incoming flights being cheaper to operate than other flights. I have got that message. All that I can do is take that back to the department; I am sure that the officials will do so.
Lord Rosser (Lab)
I ask this more as a matter of interest than anything else. Was it the case in the summer of 2019—that is, before Covid—that the 80:20 ratio meant that there were no ghost flights and there was no need for them? Is it the Government’s view that with the 70:30 ratio in operation this summer there ought to be no need for ghost flights?
Viscount Younger of Leckie (Con)
On the first point, yes, my understanding is that there were no ghost flights during the operation of the 80:20 rule. I wanted to make that clear but I will double-check and write to the noble Lord if I am wrong. I made that clear in my opening statement but just to be sure I will write to him. With the introduction of the 70:30 rule, the idea is that there should be no need for ghost flights. That has come about as a result of the consultation that has taken place.
Baroness Randerson (LD)
Finally and briefly, when the noble Viscount looks at the issue that the noble Baroness, Lady Foster, raised, will he undertake to write to all of us who have taken part in this debate and set out an explanation of the Government’s view on the matter?
Viscount Younger of Leckie (Con)
Indeed. I thank the noble Baroness for that point. Actually, I was saying to myself—this goes much wider than these draft regulations—that I imagine that an enormous amount of work is going on within the airline sector, the Government and particularly within the Department for Transport as regards discussing quickly and on a timely basis how to address these demanding issues. I undertake to write to the Committee on these matters.