Civil Aviation Bill

Lord Trefgarne Excerpts

Monday 2nd July 2012 Grand Committee

[Lord Davies of Oldham]

My Lords, the Minister made the best fist that he could of a fairly weak argument. Of course, I recognise the merits of the clauses, in that he made it clear that it is important to define the operator and to know whom we are talking about. Who could possibly gainsay that proposition?

In objecting to the clause, I am not objecting to the sense that lies behind the elements within the clause to which the Minister addressed some of his remarks. I indicated that in opposing the clause I recognised this to be a fairly blunderbuss approach and that we have not refined our opposition in amendments—something that we may do in due course, perhaps on Report. However, I say to the Minister that in this general debate anxieties have been expressed across the Committee, and he has not allayed those anxieties at all, apart from—

[Lord Trefgarne]

I am afraid that the noble Lord is mistaken. The Minister has very much allayed my anxieties about this matter. I see these clauses as facilitating competition between terminals at a particular airport. What is the matter with that? When the operator comes to choose the terminal from which he wishes to operate, he will select the one that offers him the best deal—maybe it has the best duty-free shops or is the cheapest—and these benefits will be passed on to the passengers. I am very much in favour of these clauses and I hope that the noble Lord will not press the question of whether they should stand part of the Bill.

[Lord Davies of Oldham]

I am delighted that the noble Lord had his anxieties allayed. They are obviously not as acute as those on this side of the Committee. In particular, if the noble Lord is all in favour of inter-terminal competition, perhaps he will ask the Minister to identify just where this is a raging success that we would want to encourage. The only specific example that we have so far is subject to considerable criticism. As the noble Lord indicated, airport operators are accurately defined in the legislation; I will not gainsay the necessity of that. None of them speaks well of future-proofing what they regard as a disadvantageous element of the Bill, which will introduce the possibility of inter-terminal competition. In particular, by putting it in the Bill in the way that they have, the Government limit parliamentary debate to secondary legislation. We know the limitations of that.

However, I seek to identify that this concept is a significant departure from how any British airport is run at present, and from how any successful airport is run elsewhere. Unless the Minister produces some evidence of how competition works to the benefit of the passenger—which he signally failed to do in his earlier contribution—the Committee will recognise that, far from my anxieties being allayed, they are more pronounced. Of course, I recognise that objecting to a clause standing part—or three clauses in this case, which is the first time that I have engaged in such an extensive operation—is something from which I shall have to resile fairly promptly. However, I do so to air a significant aspect of this debate. I say to the Minister that we are so dissatisfied with the response at this stage that he must assume that we will take this issue further on Report.

[Lord Davies of Oldham]

Of course, I recognise the role of the Competition Commission and we applaud a great deal of its work. However, when it makes recommendations, one must also consider the industry’s likely response to the proposal that is being put forward. All I say is that the noble Earl has not identified any aspect of British industry that considers this to be an intelligent and sensible development. Nor is he able to identify any example from elsewhere in the world where this form of competition has redounded to the benefit of the consumer.

[Lord Trefgarne]

With the noble Lord’s permission, I will cite an example. Many years ago, I landed my aeroplane at Miami International Airport. I had not chosen the terminal at which to land. I negotiated with three different terminals over the radio, found the cheapest and in I went—very good, too.

[Lord Davies of Oldham]

My Lords, that is a very good illustration. If the noble Lord had also indicated that hurricanes were raging at the time and he was able to put down with the help of the airport, I have no doubt that we would all regard that as an extreme benefit.

However, airports always adjust to emergencies, so if the noble Lord is saying that as the pilot of a private plane he can see stupendous advantages in inter-terminal competition, how many people do I have to count in order to introduce into legislation a very significant development? Is it is the number of people who own and fly private aircraft? Our consideration of government legislation ought to be undertaken on a wider perspective than that and the Government’s defence of it ought to be a jolly sight wider too. But, of course, I shall withdraw my opposition to the clause standing part.

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[Lord Trefgarne]

My Lords, while I am sympathetic to the noble Lord’s wish to ensure that there is no corruption through people buying their way through the airport, there are some people whom I would wish to have preferential treatment—for example, members of the Royal Family and the heads of state of other nations. How does the noble Lord think they should be accommodated if the restrictions that he proposes are put in place?

[Lord Davies of Oldham]

My Lords, I do not think that the issue of payment is likely to arise with members of the Royal Family or diplomatic staff because the arrangements for how they should be treated are agreed with the airport authorities. That is very different from saying that you can enhance the value of your ticket with extra money to get through the queue quickly. That is the practice to which I object. I am not saying that the Royal Family fit into that category. I imagine that it is also not the case for diplomats. We also have control over the process of entry to the country for air crews, but we do not expect them to take their turn in the queue because we recognise that special arrangements should be made for them. I do not want to exclude some special arrangements; I object to a scheme that enables those who are wealthy enough to purchase privilege.

[Lord Jenkin of Roding]

I should like to be reassured that the noble Lord, Lord Davies of Oldham, does not seek to insist that everyone must stand in the same queue for check-in. If you buy a first-class ticket, many airlines have special check-in counters for such travellers. That seems entirely appropriate and entirely different from going through immigration, either outwards or inwards. The amendment specifically mentions check-in. However, it seems entirely appropriate that if you buy a first-class ticket you can go to a first-class check-in desk and not wait as long as you would if you had bought a standard fare.

[Lord Trefgarne]

Perhaps the noble Lord will tell us how he proposes that disabled people should be handled. They often have special provision at airports, which is necessary and very proper.

[Lord Davies of Oldham]

On the latter category, we are shortly to debate the arrangements for the disabled, and I hope to provide reassurance. I accept what the noble Lord is saying; of course there are special arrangements for the disabled. We all know why it is necessary for the law to be strengthened in that area, and I shall be proposing an amendment to deal with that matter.

The situation that I have identified is not concerned with people going through different routes according to their ticket, but the question of how one goes through the state’s immigration controls. The contention that you are less of a security risk because you are wealthy is dubious. After all, I seem to remember Bin Laden did not come from a totally impecunious family. It is not the case that those who have a great deal of money are better security risks. Why on earth should everyone else, for the necessary security of the nation, be obliged to suffer some of the privations that occur from time to time? I fail to understand how one can market a package that guarantees that one is whisked through security.

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The noble Lords, Lord Berkeley and Lord Soley, said that they might add their names to the amendment, but unfortunately I missed the deadline and the amendment appeared on the Marshalled List only just before the weekend, so many people did not have the chance to see it. However, I know that they support it and I am very grateful for that. Now that my noble friend has heard the arguments at Second Reading and met the people who are expressing concern, is he in a position to give any sort of comfort and an indication that we might see some recognition and awareness of the problem, and a measure that would reduce or eliminate the risk? It has been impressed on me that it is very serious, however unlikely it may be. I beg to move.

[Lord Trefgarne]

My Lords, I shall not detain your Lordships for more than a moment. I very much support what my noble friend Lord Jenkin of Roding has been saying on this matter. There is a serious problem here. As my noble friend explained, it is a very unlikely circumstance but, if it did happen, it could be catastrophic, and I do not think that the Bill can be allowed to proceed to the statute book with this difficulty identified.

[Lord Soley]

I shall be similarly brief and just wish to add to what the noble Lord, Lord Jenkin, said. The figure involved for investment at Heathrow alone is £100 million a month. Putting that into context, you raise that on the bond market and you secure it against the airport in just the same way as someone buying a house secures a mortgage against the house. If there were appeals of the type indicated by the noble Lord, Lord Jenkin, they could have a very disruptive effect on the financial markets. I think that there is a question about whether the bankers entirely agree with BAA about the risk involved but the point is that, if the risk is there and we can deal with it fairly easily, then frankly we should. If there were an appeal, it would be a severe and difficult embarrassment, particularly if the fight became bitter. The risk of a challenge to £100 million a month investment at our major airport is not funny. I suspect that the CAA would not allow an appeal but, again, this is a case of being sure that we have the safeguards in place, as the noble Lord, Lord Jenkin, indicated, and I certainly support his amendment.

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[Earl Attlee]

I absolutely agree with the noble Lord, Lord Soley. It is my duty to point out a drafting error in case my noble friend wants to run the amendment on Report. If I had not identified the problem in Committee and suddenly jumped up on Report and said, “Actually, the amendment is defective”, I think I would be a little unpopular.

The Government remain of the opinion that the broad rights of appeal provide an effective means of improving the accountability of key regulatory decisions. The process enables the interests of both airport operators and materially affected airlines to be taken into account. We therefore believe it is correct that this right of appeal should extend to licence conditions that relate to financial arrangements. An airline seeking to appeal a financial resilience condition, or the absence of such a condition in the first licence granted to an operator, will need to satisfy the Competition Commission that it is, in this context, a person whose interests are “materially affected” by the decision.

Any dispute over whether a derogation would cause a breach of existing financial arrangements would be most likely to arise from legal questions about the true construction of the loan agreement and/or the licence condition. These could ultimately be resolved through judicial review and, in the mean time, an airport operator could seek an injunction to preserve the status quo. Further comfort may be drawn from the fact that, subject to a government amendment that has been tabled being agreed, the Competition Commission, in deciding an appeal, will be obliged to have regard to the duties imposed on the CAA. Markets should therefore be reassured that the risk of existing creditor protection in an airport operator’s funding structure being unintentionally removed and triggering an event of default is extremely small.

We acknowledge that there is a possibility that the uncertainty created by an airline making an appeal to the Competition Commission on a licence condition relating to financial arrangements could affect an airport operator’s ability to access capital markets to raise finance while the appeal is being considered. However, as the timing of an application for leave to appeal is predictable, we consider that this is something an airport operator could successfully manage by pre-funding its financing requirements. We remain of the opinion that the right of appeal for airlines would not have significant negative consequences for an airport operator’s ability to raise debt in the capital markets.

[Lord Trefgarne]

Will the noble Earl say how long the appeals will take? He said that they would be of no consequence and could be temporarily ignored while the appeal process continued, but how long would that take?

[Earl Attlee]

My Lords, it may be helpful to the Committee if I outline the process. The initial consultation stage is a reasonable period set by the CAA. The period to bring an appeal, and the earliest date that licence modifications could come into force, is six weeks. For regulated representations the length of time is eight weeks. The appeal period is 24 weeks. Therefore it could be quite a long period. However, the appeal can be rejected because it is frivolous, vexatious or unlikely to succeed. The Competition Commission can make that determination quickly—but if it thought that there were good grounds for an appeal, the process would take longer. Frivolous or vexatious appeals, or those unlikely to succeed, could be determined quickly.

While the government position is clear and we have already communicated it to BAA, I have listened very carefully to noble Lords’ concerns and will communicate them to my right honourable friend the Minister of State for Aviation. I do not see that it would be in the airlines’ interests to attempt to overturn financial derogations determined by the CAA to be in passengers’ interests, where to do so would cause an event of default. The appeals regime has been designed to deter frivolous or vexatious appeals, as I mentioned. Furthermore, where the CAA proposes to grant a licence, including a condition furthering a financial derogation, or proposes to modify a condition containing a financial derogation, special conditions will apply.

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[Earl Attlee]

My Lords, noble Lords suggested that the appeal process would take six months. I am suggesting that the Competition Commission will very quickly be able to determine whether the appeal is frivolous, vexatious or unlikely to succeed. I do not believe the CAA would grant a derogation unless it was absolutely certain that it would pass scrutiny from the Competition Commission. There is also the point that the licence condition does not come into effect until the appeal is heard.

I reiterate that I am not taking this away and I am not reflecting on it. I will, however, discuss the matter in detail with my right honourable friend.

[Lord Trefgarne]

I am bound to tell the noble Lord that his answer has been wholly unconvincing on this matter. I hope he will undertake to reconsider and bring forward amendments if he thinks fit at the next stage.

[Lord Jenkin of Roding]

When my noble friend started his reply by talking about the amendment being too extensive, I thought he was going to move on to say that a redrafted one that was not quite so widely drawn might meet with his approval. As my noble friend proceeded, however, that possibility seemed to disappear over the horizon until we got to the end when he said that he will continue to discuss this with his right honourable friend the Minister of State at the Department for Transport. I hope that will be a serious reconsideration. This is not a frivolous point and it is not covered by saying that the Competition Commission could dismiss appeals as being frivolous or pointless.

Of course, the financial markets would be totally spooked by the threat of an interruption which, as the noble Lord, Lord Soley, said, might last for more than six months. They would not be prepared to go on lending and the whole investment programme would be threatened. This could not be in the interest of passengers. I understand that my noble friend has to be cautious about what he says, but when he said at the end that he would not reconsider it but would discuss it with the Minister of State, I paid more attention to the second point than the first. Perhaps we are making progress. If it is a question of drafting something that removes the risk only so far as is necessary, I am sure that the lawyers working for BAA—perhaps with the department lawyers or parliamentary counsel—would be able to find a form of words. In the mean time, Ministers must be willing to recognise that this problem has to be dealt with and cannot be put off.