Civil Aviation Bill

Lord Smith of Leigh Excerpts

Wednesday 13th June 2012 Lords Chamber

[Lord Smith of Leigh]

My Lords, I declare my interest as a former director of Manchester Airport, and currently a member of the shareholder committee of that airport. I have, perhaps, a different perspective to some Members who have already spoken here.

Manchester Airport serves 200 of the 400 destinations the Minister mentioned, which is, I regret to tell my noble friend, more than Heathrow. However, my different perspective does not stop me from giving general support to this legislation. I think it will enhance civil aviation overall. I am particularly glad that the Minister, in his introduction, mentioned the change in governance to the CAA, as I think that could be equally important to some of the other parts.

Until we managed to get ourselves de-designated, Manchester was also covered by the 1986 acts of designation, and I remember those times as being ones of great expense for the airport, and a lot of time-wasting, though we did manage to provide employment for a great number of very highly paid lawyers. Essentially, the results of the quinquennial reviews, when we had them, were probably less onerous on us than the market conditions forced us to implement. So of course, we were pleased to be de-designated, and I am sure the same will be true for other airports.

I wonder whether we ought to reflect the new role the CAA has, and change its name to Ofair. The CAA, in exercising its role in economic regulation, needs to bear in mind two points. First is the relationship between airports and airlines. I think that relationship may best be categorised as that of an elderly married couple, who realise they need to stay together but constantly bicker about who causes the most difficulties. I think we need to recognise that that will go on, under the new regulation scheme.

Secondly, I think we should recognise—as many other noble Lords have mentioned—the importance of aviation in terms of the wealth and employment opportunities it creates in this country. It facilitates trade, as the Minister said, and acts as an international gateway for people coming into the country, and for us getting away. Manchester contributes some £3 billion to the UK economy, and supports around 100,000 jobs. However, the sector is very sensitive to the economic climate, and in yesterday’s Times I saw two reports about this. The first was about how the domestic aviation market has reduced by 20% in five years, and the second was a report that European airlines’ losses are expected to double during the current year—not profits, but losses. The competition that the aviation industry faces is not bound by our national borders, and we need to recognise that the competition that many of our airports face is not just between Gatwick and Heathrow and Manchester, but rather within the European aviation industry.

Unfortunately, I do not think we have a level playing field in this country, because of the air passenger duty. Research that we commissioned in Manchester demonstrates both the damage to UK aviation that that does, and that it particularly damages regional airports. We have evidence that a flight that was planned from Kuala Lumpur into Manchester was diverted into Paris-Orly because they do not have to pay APD there. Also, the price sensitivity of customers at regional airports tends to be higher than in the London region, where there is a high proportion of business traffic. Hopefully, with the greater independence of the CAA, it will actually think about how aviation can develop, and look at the APD as an issue for aviation.

Security is clearly an important part, and I think we all respect that aviation is in the front line of the war against terrorism. It is important, therefore, that the Secretary of State retains the important role of responsibility for this. Airports have co-ordinated with and co-operated with the Government in implementing security matters, and in fact have gone beyond what was required by the Government. Manchester is running a pilot of whole-body screening, which may be an important way forward. To be effective, security needs full co-operation between partners and a proper exchange of information about objectives. I wonder whether some of the problems that we have experienced with border control, mainly at Heathrow but also at other airports, are evidence that we do not always get that co-operation and co-ordination. We can see the consequences. In passing over security to the CAA, we should ensure that we can demonstrate that this will not create more bureaucracy but will improve the situation. When it was responsible, the DfT listened carefully to the expert views of airport staff. Presumably the CAA will continue to do that in future.

The changes in the Bill will obviously involve increased costs for airports. Briefings I have read put the figure at up to 4p per passenger. That may sound a relatively trivial amount, but currently the charge is less than 1p, so from 1p to 4p is quite a large increase. For an airport, it will be a sizeable amount of money to pay. The Minister may want to consider whether it will be appropriate to bring in those charges all at once. I ask him to think in particular about the impact that the charges might have on some of the smallest airports in the country, which are struggling at the moment and should perhaps be considered as a special case.

The Bill also assumes that regulatory charges on airlines will be met through airports. Perhaps that seems logical to the Government and the CAA, but why should airports become responsible for those charges? I am not sure about the assumption that in the current age they will be able to pass them on to airlines. Why does the Bill not simply give powers to the CAA to charge the levies directly to airlines, rather than going through the middlemen of airports?

Will the Minister explain—if not tonight then some other time—the thinking behind Clause 7, which gives market powers in relation to airport areas. “Areas” is an interesting word. Perhaps most of us would have thought that it meant “terminals”. I am not sure that competition between terminals will produce a more effective or efficient use of resources than the current planning system. Airports have invested in their facilities and want the maximum return.

Finally, I agree with the comments of the Transport Select Committee on publications from airports. The powers are too widely drawn and risk creating bureaucracy and additional costs to the aviation industry, while the benefits are less tangible. Airports should be open and transparent, and most are. After our earlier discussions I checked on the websites of Manchester and Gatwick airports. Both already publish substantial amounts on environmental policies. We should be very careful that we do not simply expect airports to do things that the CAA thinks are helpful but which do not really mean anything.

The CAA briefing on this matter gives an interesting analogy. It quotes a number of things, such as the publication of documents about the fuel efficiency of cars, which have affected consumer behaviour. That is probably the case, because consumers pay the costs of running their cars. However, in this case, if the consumers are passengers, they do not benefit from environmental information, even though it may be important and interesting to some of them. The reason that there is much more interest now in carbon reduction measures in aviation is that reducing carbon is not only seen to be a good thing but is cost effective. Airports spend less on energy and save a lot of money.

This is an interesting and important Bill. It needs to be improved in Committee, but in general I welcome it.