Airports (Amendment) Bill [HL]

Earl Attlee Excerpts

Friday 16th March 2012 Lords Chamber

[Earl Attlee]

My Lords, first, I offer my sincere congratulations to the noble Lord, Lord Empey, on securing a Second Reading for his Bill. We have had a fascinating and informative debate, and the noble Lord, Lord Clinton-Davis, is right to say that we should be discussing this matter today. I also commend the noble Lord, Lord Empey, for his detailed and thorough engagement with Members of the European Parliament and officials from the UK’s permanent representation in Brussels in pursuance of the Bill. He is a model of how to deal with problems of this nature.

The Bill’s aims are laudable in seeking to introduce powers that would allow the Secretary of State for Transport to ring-fence take-off and landing slots at congested London airports to ensure the future protection of regional air services, in particular to Northern Ireland and Scotland. The noble Lord, Lord Rogan, talked about the need for a level playing field between the centre and the periphery and the noble Lord, Lord Davies of Oldham, made some valid points about the regions.

We recognise that regional airports, including Luton, make a vital contribution to local economies and that regional connectivity is very important. For some remoter areas of the UK, regional air services are not a luxury but a vital means of connectivity, as many noble Lords have observed. I acknowledge too the concerns of the noble Lord, Lord Empey, that the provision of commercial air services is subject to market forces. Ultimately, airlines operate in a competitive commercial environment and it is for them to determine the routes that they operate.

It is possible, therefore, to imagine that at some future point airlines currently operating services from Northern Ireland and Scotland to Heathrow could decide to reduce or withdraw them and use the relevant Heathrow slots for alternative services. It has been suggested that we cannot leave this issue to the commercial market. However, the picture is not necessarily as bleak as the noble Lord fears, as at present there are many flights from Northern Ireland and Scotland into Heathrow and it is likely that many deliver a commercially attractive return in comparison to other potential routes; for example, as feeder flights for long-haul services.

The noble Lord, Lord Maginnis, talked about the need to meet all demand for air passenger services. Currently, more than 18,000 flights per year operate between the two Belfast airports and the five main London airports, of which nearly 7,000 are between Belfast and Heathrow. These routes are well used, with more than 2 million passenger journeys in 2010 between Belfast and London, of which more than 750,000 were between Belfast and Heathrow. My noble friend Lord Caithness mentioned some of the difficulties with the Bill and described the current situation with services. Scotland is also well connected, with more than 60,000 flights per year between Aberdeen, Edinburgh and Glasgow and London airports, carrying 5.8 million passengers in 2010. Of these, more than 27,000 were between Scotland and Heathrow, carrying 2.9 million passengers in 2010.

As the noble Lord, Lord Empey, correctly states, world slot guidelines determined by the International Air Transport Association are reflected in the European Union regulations that govern the allocation, transfer and exchange of slots at Heathrow and other slot co-ordinated airports in the UK. I note the warning from my noble friend Lord Caithness about government interference in these arrangements.

EU law provides some scope to protect regional air services by allowing member states to impose public service obligations—PSOs—to protect air services to airports serving a peripheral or development region, or on thin routes considered vital for a region’s economic and social development. It would be open to devolved Administrations in Northern Ireland and Scotland to apply to the Secretary of State to impose a PSO on an air route, should they feel that a case can be made that satisfies the EU regulation. If approved, this would permit ring-fencing of slots at a relevant London airport.

An important principle of PSOs is that they can be imposed only when it is necessary to ensure adequate services between two cities or regions, rather than to link individual airports, which is precisely the problem that we are dealing with. Importantly, this means that when judging whether a region has adequate services to London, it is necessary to take into account the level and nature of services to all five main London airports. I have to tell the House that there is currently no other mechanism for the Government to intervene in the allocation of slots at Heathrow or other London airports.

Under European law, the potential for ring-fencing slots at Heathrow to protect regional services is to be dealt with by reference to the PSO rules alone. Therefore, to create a parallel more wide-ranging set of rules would be incompatible with EU law. The Bill is therefore contrary to EU regulations because it would, in effect, override the strict criteria and processes by which European Governments can intervene on route operations. However, as already indicated in the Explanatory Memorandum submitted to Parliament on the European Commission’s Better Airports package, the proposal to amend the slot regulations provides an opportunity for the UK to highlight this issue with the Commission and explore measures to help secure, if necessary ongoing, provision of air services between UK regions and congested London airports.

That said, the prospect of securing such amendments will be challenging, and chances of success may be limited, because introducing a mechanism to protect routes that are at present well served by economically viable air services would necessitate a fundamental change to the existing applicable EU law.

My noble friend Lord Caithness also warned us about the impact on competition if the Bill were to be passed. We are currently considering what options are available that would achieve the connectivity objectives within the Bill, without having a serious detrimental effect on competition in the wider aviation market, which could affect UK aviation interests.

I am conscious that the proposed sale of BMI to the parent company of British Airways, IAG, has focused particular attention on regional air connectivity, prompting concerns about reduced flight frequency on routes on which BA and BMI currently compete, leaving BA as the sole operator on some routes from Heathrow—for example, to Aberdeen, Edinburgh and Manchester—with too much market dominance that could impact on air fares.

Any competition issues arising from the proposed sale are subject to investigation by the European Commission competition authority, which holds jurisdiction to consider whether airline acquisitions and mergers may lead to a substantial impediment to effective competition in a substantial part of the EU. IAG’s proposed acquisition of BMI was formally notified to the competition authority on 10 February. The Commission’s published provisional deadline for reaching a decision on its phase 1 investigation is Friday 30 March. The UK Office of Fair Trading is in contact with the Commission competition authority in relation to the proposed sale. Noble Lords will appreciate that the sale of BMI is a commercial matter for the companies involved. As the proposed sale is subject to competition inquiries, it would not be appropriate for me to comment further at this stage.

More generally, I assure noble Lords that a key part of the Government's approach to aviation is to seek to create the right conditions for regional airports, including those in Scotland and Northern Ireland, to flourish. We have committed to producing a sustainable framework for UK aviation which supports economic growth and addresses aviation’s environmental impacts. We intend to consult shortly on a new aviation policy framework, which will set out our overall aviation strategy. Alongside this, we plan to issue a call for evidence on maintaining the UK’s international connectivity.

The noble Lord, Lord Soley, in his interesting speech, suggested that our forthcoming aviation policy framework paper may leave a big hole in the middle of it. In the extremely unlikely case that that is proved to be correct, I am sure that the noble Lord, Lord Davies, will drop me in it at least once if not several times.

The noble Lord, Lord Laird, talked about tourism from the United States. He will be aware that there is a direct air service between Belfast International and Newark, New York with United Continental airlines. The noble Lord, Lord Clinton-Davis, touched on the Civil Aviation Bill. As drafted, it does not cover the third runway of Heathrow or slot allocation. The noble Lord made important observations about the technical improvement of aircraft, particularly in respect of noise. He also touched on the Thames estuary airport. As the Chancellor said in his Autumn Statement, the Government are committed to maintaining the UK’s hub aviation status. As part of that commitment, we will commission a call for evidence on the options for ensuring that the UK maintains its international air connectivity. We intend to publish a call for evidence alongside our consultation on the new aviation policy framework shortly.

The noble Lord, Lord McKenzie, talked about the attractions of Luton Airport. I have already visited Gatwick and Heathrow and am due to visit Manchester shortly. I visited Luton some time ago, but I will try to do so again.

My noble friend Lord Spicer asked me about the letter from 70 businessmen. I fear that he will have to wait for the consultation paper.

The noble Lord, Lord Rogan, talked about the lack of business connectivity through Heathrow. It is open to passengers using regional airports to utilise other hub airports to access worldwide airlines.

In conclusion, on the basis that the Bill would be incompatible with EU law, the Government will not be able to support the Bill’s passage into legislation, nor could we entertain a corresponding amendment to the Civil Aviation Bill. I am grateful for the very sensible position of the noble Lord, Lord Davies of Oldham, speaking from the opposition Front Bench, and his comments on the desirability of the Bill. However, as I have indicated, we are committed to highlighting the issue of regional connectivity in the context of the forthcoming reform of the EU slot regulations and intend to explore measures to help to secure the ongoing provision of air services between UK regions and congested London airports.