Airports Slot Allocation (Alleviation of Usage Requirements) (No. 2) Regulations 2023

Tuesday 19th September 2023 Grand Committee

Considered in Grand Committee

16:37

Moved by

[Baroness Vere of Norbiton]

That the Grand Committee do consider the Airports Slot Allocation (Alleviation of Usage Requirements) (No. 2) Regulations 2023.

Relevant document: 49th Report from Secondary Legislation Scrutiny Committee

[The Parliamentary Under-Secretary of State, Department for Transport (Baroness Vere of Norbiton) (Con)]

My Lords, these draft regulations were laid before Parliament on 18 July, and noble Lords will recall that similar regulations have been debated previously on a number of occasions. The regulations seek to ensure minimal customer disruption as the aviation sector recovers from the pandemic. The regulations will be made under powers conferred by the Air Traffic Management and Unmanned Aircraft Act 2021, also known as ATMUA. Following the UK’s departure from the European Union, this legislation created a more flexible set of powers for Ministers to implement alleviation measures for airport slots related to the impacts of Covid-19, subject to a vote in both Houses. This allows the UK to adapt its approach to minimise disruption to consumers and best support the recovery of the aviation sector.

Ordinarily, airlines must operate their airport slots 80% of the time to retain the right to those same slots the following year—this is known as the 80:20 or “Use it or lose it” rule. This encourages efficient use of scarce airport capacity. As a result of the impact of Covid-19 on air travel demand, alleviation from current slots rules has been provided since summer 2020.

The department has seen a strong recovery in passenger demand during 2023, but there remains continued uncertainty and lack of resilience in the industry, and demand on some routes remains below the levels seen before the pandemic. These factors are affecting both demand, in terms of returning passengers, as well as supply-side factors, such as aircraft availability and staffing. These are adding to a “long Covid tail” in rebuilding resilience in the sector.

Aircraft that were out of service during the pandemic are spending much longer in maintenance and overhaul than would normally be the case. This is compounded by difficulties stemming from the pandemic in the wider supply chain affecting access to spare parts across the global supply chain. This is having a long-term impact on the resilience of the sector that is attributable to the pandemic. Although the industry has taken steps to address these challenges, they are expected to remain an issue during 2024.

The Government have therefore designed a package of measures for the winter 2023 season that sees the normal 80:20 rule on slots usage stay. However, it is combined with some limited flexibility through a small pre-season hand-back allowance and a continuation of the previously adopted justified non-utilisation of slots measures.

When the pandemic initially struck, the 80:20 rule was fully waived to avoid environmentally damaging and financially costly flights with few or no passengers— so called ghost flights. The Government then offered generous alleviation while travel restrictions remained and demand was uncertain. The Government re-established the normal 80:20 usage ratio for summer 2023 and this will continue for winter 2023.

As required by ATMUA, the Government have determined that there is a continued reduction in demand, which is likely to persist, and consider that further but limited alleviation measures are justified for the winter 2023 season; this runs from 29 October 2023 to 30 March 2024. This package was developed following consultation with the industry and, of course, careful consideration of its responses.

The instrument being considered today applies to England, Scotland and Wales. Aerodromes are a devolved matter in Northern Ireland. 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 this instrument, the Government have focused measures on a return to business as usual. The Government are mindful of the need to balance supporting the sector through sensible and proportionate measures to aid its recovery—and, indeed, to protect consumers from disruption—with offering excessive alleviation, which would potentially distort competition.

There are two key provisions. The enhanced justified non-utilisation of slots provisions were first introduced for winter 2022. These act as a safety net for airlines if new restrictions are introduced and they can justify not using those slots. The second provision is a limited slots hand-back. For this winter season, the Government will allow carriers to claim alleviation on up to 5% of their slots at any airport, handed back before the start of the season.

The Government have offered this opportunity in the expectation that industry will deliver a realistic schedule for winter 2023, thereby minimising last-minute cancellations and delays. These measures will cover the winter 2023 season only. My department is considering whether further alleviation is likely to be justified for future seasons. I beg to move.

[Baroness Randerson (LD)]

My Lords, I thank the Minister for her explanation. It is a pity that these regulations are now up against such a tight timescale for their introduction. That is, of course, due to delays. The Secondary Legislation Scrutiny Committee—from which the noble Baroness, Lady Ritchie, and I have just run to be here this afternoon—gave adverse reports on the previous presentation of the regulations, not for what they contained in respect of legislation but because they failed to explain it fully. There was a poor Explanatory Memorandum, especially in relation to the consultation responses and the policy background. As this now stands, it gives a clear explanation of a very complex policy; it is a situation with many factors at play.

16:45

The Minister will know that I have been supportive of the alleviation of the 80:20 rule in the face of Covid challenges. I will not argue with the need to continue, but the situation is now even more complex because the dysfunctions in the aviation industry are now as much about managerial capacity failings as they are about failings from the problems coming from the Covid overhang. I am therefore glad to see, from paragraph 7.4 of the Explanatory Memorandum onwards, a detailed explanation of the reasons an airline can give for the non-use of slots. There have been numerous tales of alleged abuse of the temporary rules by some airlines in order to flex their muscles in the marketplace. We must guard against anti-competitive practice, which makes it hard—even impossible—for new entrants to come into the market.

Similarly, I was pleased to see, from paragraphs 7.6 to 7.8 of the EM, the rules on the 5% hand-back. It is good to see that we as a country are to remain in line with the EU, because that is clearly sensible in such an innately international industry.

On the consultation, it was clear from the report that the airlines and airports did not all speak with one voice; they had varied opinions. So there is a real debate to be had; it is clear that this has to be the Government’s best estimate of how to deal with the issues fairly.

From the responses, it was also clear that the Government’s stats on the return of customers to the market—paragraph 7.2 of the EM talks about the market being at 88% of what it was in 2019—are affected by the recruitment issues in the industry and problems with NATS, both of which seriously deter potential customers. Noble Lords have only to talk to people, particularly those in business who are considering flights where they must get to where they are going on time, to know that the inefficiencies in the industry, such as the uncertainty around flights over the summer and the problems as a result of air traffic control issues, deter people and encourage people in business to go for Zoom meetings, which are a sensible and realistic alternative for them.

I know of two families who cancelled their international holidays this summer to take a holiday in Britain. That is good news for the British tourism industry, but it etches away on the number of people using the market and taking flights. All told, that is not necessarily a bad thing, is it? But it affects the statistics. I believe that the 12% drop is a reflection of airlines and airports in particular needing to accept that the drop in business travel is probably more or less permanent, because Zoom is here to stay. It will not replace all business travel—far from it—but it will replace a large part of it. My question for the Minister is this: at what point do the Government need to say to the industry, “You need to get on with things as they are and put an end to the alleviation of the rules on this”?

After all, the Government made that point in relation to trains and buses some time ago. They said to those industries that, although their markets remain changed and have not recovered, they have to cope with the situation as it is. They continue, just like the airlines and aviation in general, to face recruitment challenges. How many more of these can we reasonably expect to except? There is no justification for the Government to protect one particular industry from inefficiencies and uncertainties in the market when they do not protect other parts of the same broad sector.

[Lord Tunnicliffe (Lab)]

My Lords, I would like to make a declaration of interest, although it is not required within the rules. I am a British Airways pensioner, which is a significant part of my lifestyle after 20 years in the industry.

I thank the Minister for introducing this SI. I do not know whether it is something to do with my dying brain, but I found the Explanatory Memorandum somewhat difficult to follow, and I thank my associate, the noble Baroness, Lady Randerson, for giving the EM a good beating on my behalf. I had some difficulty understanding it, but I thank the Minister for ensuring that this time there was a telephone number in the document.

The concept divides into two parts. One is the tools available and the other is the need. As far as I could tell, the tools available are roughly the same tools as we had for this winter. If that is not true, I would be grateful if the Minister could put me right, but if they are not the same, I think they are substantially the same. Are the problems facing airlines sufficiently serious to resurrect this set of tools? Clearly, the department thinks the answer is yes. I am content with the reasoning for winter 2023-24 that this SI should succeed and the tools become available.

However, I think that creates some questions. The principal question is: is the exceptional becoming the norm? If it is, and if the Government concur with me that it is looking dangerously close to that, we need to move to a more permanent arrangement because the notice that operators will get under these systems continues to be very short. It would be much more satisfactory if the industry were able to plan further ahead against a more stable environment or regime. If there is an agreement that it should move ahead, there is a need for a more numerically supported case. For instance, an issue that is brought out is the availability of spares. I am sure that is a problem, but we need to know just what impact it is having.

The reason given for these rules is that the consumer needs stability, volume, frequency and all that. I am sure that is true, but it is important that we do not lose sight of the fact that the application of these rules and the extent to which they allow operators not to operate have an impact on the balance between established operators and potential new entrants. That has to enter the balance between the solution and the extent to which these tools are enhanced or diminished. The question then becomes: how do you determine the right balance? I argue that the right balance is the general good. Having faced the problem in transport of how you define the general good, it is an important question that deserves debate—well ahead of the introduction of the next set of rules. I hope that the Minister will agree that a more in-depth look at this problem, with the possibility of producing a more permanent set of rules, can be considered.

[Baroness Vere of Norbiton (Con)]

My Lords, I am grateful to both noble Lords for their contributions to this short debate and for welcoming the regulations in general. I will take a few minutes to go through some of the points raised.

The noble Baroness, Lady Randerson, started by noting the Explanatory Memorandum. I am now in a situation where I am not sure I will ever get an Explanatory Memorandum right, but we do try, and I hope she will appreciate that. We have them read by a senior civil servant not connected with the policy. The criticism of this one was that it was too light in certain elements, so we added more in. Sometimes they then become too hefty, particularly as noble Lords will have seen these regulations many times previously in different forms. We will continue to do our very best when it comes to the SLSC and keeping everybody happy and, more importantly, informed, both in your Lordships’ House and beyond, about what the Government are trying to do and explaining that position. That is incredibly important. It remains top of mind, and I will continue to try to do my best.

On the point the noble Baroness raised about the aviation industry in general, I do not think it is under- performing as much as she thinks it is. It had a very successful summer. Apart from the issue at the end of the summer, I was not made aware of any issues to make me feel that the industry was underperforming. The major airports were amazing, particularly when I travelled through. I found that there were no queues. Bar the NATS outage, which, as noble Lords know, the CAA is investigating, and the wildfires, which of course are a factor beyond the airlines’ control, the industry performed really well.

The noble Baroness mentioned recruitment. There is no recruitment problem. The aviation sector over- recruited on purpose to ensure that we did not see a repeat of what happened in summer 2022. I will hold the next Aviation Council in a couple of weeks and obviously I will reflect with it on how it felt the summer went, but in broad terms, bar one or two issues—there will always be one or two—it stood up pretty well.

[Lord Tunnicliffe (Lab)]

Does the Minister anticipate producing a report as a result of that meeting? If so, can we have it?

[Baroness Vere of Norbiton (Con)]

I do not believe that we will produce a report as a result of that meeting because, if we discuss performance, those meetings are very much ad hoc check-ins. We cover more substantive issues, such as airspace modernisation; I believe that the next one might be on slot reform, which might be interesting. The minutes of the meetings are published on GOV.UK, so the noble Lord might wish to look at that.

The noble Baroness, Lady Randerson, will know that slot oversight and enforcement are done by a third party, ACL, which is entirely separate from government. We do not have any involvement at all—rightly so—in the way in which it oversees and enforces slots. If the noble Baroness is aware of anomalies, I would be grateful if she could let me know; I will raise them with ACL, because that is how it is supposed to do its job. It does a very good job in many circumstances; indeed, it does slot oversight not only in the UK but in many other countries because it is that good.

17:00

I come on to the issues around the consultation and whether the decision was marginal. The noble Lord, Lord Tunnicliffe, asked how we reached the decision. The noble Baroness, Lady Randerson, suggested that the decision from the consultation was not necessarily a slam dunk; I absolutely agree. Last time I stood here to discuss alleviations with noble Lords, I probably implied in my closing speech that we were done and were not going to do any more; I was expecting that. It was a very marginal decision. The noble Baroness asked at what point we will say to the airlines, “That’s that”. We have already said it. The industry is well aware that we expect it not only to recover but to go beyond. In my view, some improvement in resilience is required; I will also discuss that with the airlines.

What became clear were the issues with the supply chain and how they may impact certain airlines. It is interesting that the two-week period during which the hand-back could take place has now closed; it closed on 14 September. Airlines were able to hand back 5% of their slots. The airlines handed back an average of 2.8% of their slots, so they did not reach 5%; I did not expect them to do so, but I am concerned about consumers, be they business or leisure travellers, getting the service they need. I hope that this will be helpful.

The noble Lord, Lord Tunnicliffe, asked what we did last winter. I had forgotten this: last winter, we were still on 70:30 slots alleviation with the “Use it or lose it” rule and we offered a 10% hand-back. We are boiling the frog quite quickly in getting the airlines back to where we want them to be, because I do not want this to become the norm. There is an opportunity, though, to look at slots more generally. The noble Lord will be delighted to know that I hope to publish a consultation on longer-term slots reform later this year; it will be a meaty document giving everyone in the industry and your Lordships’ House a lot to think about. It is within that consultation, I think, that we will have a conversation around what the general good is and how we want slots to work, making sure that we balance existing providers with legacy slots and new entrants, which we know can sometimes come in and shake things up very successfully.

I believe that I have covered all the issues raised.

Motion agreed.