Examination of Witnesses (Questions 20
WEDNESDAY 19 DECEMBER 2001
20. You would not suggest either British Airways
or American Airlines was small in terms of transatlantic traffic,
(Mr Cahn) No, certainly we are very large. Rather
in the same way that Lufthansa and United who have got anti-trust
immunity are large airlines, in the same way that Air France and
Delta are just about to get anti-trust immunity are large airlines.
I think people recognise the benefits that flow from the anti-trust
immunity which has been given to alliances and the open skies
which have been given to other European countries.
21. You see one of the difficulties we have
is that according to information we have, British Airways did
carry before September 11th some 69 per cent of UK scheduled airline
passengers, 47 per cent of total UK air passengers, and yet you
make losses. In the United States seven airlines control 81 per
cent of the market, six of those major airlines make losses. Now
all of these have consolidated. It does not seem to have done
the trick. Would you like to comment on that?
(Mr Cahn) I would simply comment that if you were
to look at the German/American market or the French/American market
you would find even higher levels of concentration. In fact, because
of Government policies of having a multi-airline policy, we have
strong and very effective competition from the likes of Virgin
Atlantic Airways, an excellent airline, and we welcome that. It
is simply not true to say it is an uncompetitive area, certainly
on the ground it feels highly competitive, and I am sure Mr Humphreys
22. I did not use the word "uncompetitive"
I simply quoted the statistics which you may or may not recognise,
Mr Cahn, but it does indicate that BA are in a dominant position
in terms of UK air passengers and certainly it indicates that
the consolidation that has taken place in the United States has
not delivered profits.
(Mr Cahn) It will be for the competition regulators
on both sides of the Atlantic to judge whether we are or would
be in a dominant position. I have every confidence they will conclude
that we will not be in a dominant position. I do not believe we
are, certainly it does not feel that way, it feels that we have
23. Luckily feelings are very subjective. Mr
(Mr Humphreys) May I just say, Chairman, I think there
is some quite lazy thinking going on, particularly in Europe,
about what people mean by consolidation. I do not believe it should
be the objective of Government policy to have a smaller number
of competitors in the marketplace. What should happen is that
those airlines that are unable to compete on their own as effective
competitors ought to be allowed to disappear, and we all know
that there are airlines in Europe that fall into that category.
I would hope that the policy makers would not see it as their
duty to have an objective of reducing the number of airlines.
The more smaller dynamic carriers there are in the marketplace
the more the benefits for consumers will follow.
24. Final question, particularly for British
Airways. Mr Cahn, has your company been buying/stockpiling Heathrow
slots in advance of a US/UK bilateral deal? If so, how have you
(Mr Cahn) We have not been stockpiling slots. We would
never wish to stockpile slots. We seek to increase our Heathrow
slot holding whenever we can, just as I am sure other airlines
do, in order to introduce service from Heathrow. One of the things
we always want to do is to serve destinations from Heathrow but,
no, we have not been stockpiling slots.
25. Have you acquired slots from North Africa
or East European airlines?
(Mr Cahn) We acquire slots from time to time.
26. Did you buy them?
(Mr Cahn) We trade slots as is permitted under
Chairman: For money?
27. How much per slot have you been paying?
(Mr Cahn) That is commercially confidential information
which I would not want to give.
Helen Jackson: Can I ask a supplementary on
the slots at Heathrow. You relinquished the Heathrow flight on
your short haul programme to Belfast. When did you take that decision,
was it before or after 11 September and why in terms of relinquishing
that very regular slot?
28. While you are on the question perhaps you
can answer, you do seem to have taken over rather a lot of airlines
recently. How many extra slots have you acquired?
(Mr Cahn) When we took over BRAL we acquired three
Heathrow slots. We have not been acquiring slots by takeover elsewhere.
To answer the question from Ms Jackson, we took the decision to
withdraw from the Heathrow-Belfast route after the events of 11
29. Because there was a connection?
(Mr Cahn) Because we had been losing money on the
route for a number of years. In fact, we had lost £38 million
over the previous four years. Clearly that was troubling us prior
to the events but afterwards, when we found ourselves in a financially
very difficult position, like all the other airlines, we had to
take tough decisions. That was a decision which was tough in the
sense that we did not like doing it in particular for our staff,
it was not tough in the sense that it was the only thing to do.
Chairman: It was one you decided on earlier
30. That was why I asked the question when was
the decision taken or thought about?
(Mr Cahn) The decision was taken after September 11,
pretty soon afterwards. The Chairman asked earlier on did we act
swiftly and the answer is, yes, we did act swiftly, within days.
We did a number of things. One of the things we did was to stem
losses, to stem the money, we grounded aircraft and we withdrew
from this most loss making of routes. What we did try to do was
to ensure that all our staff were looked after and I am glad to
say that we were able to redeploy 40 per cent of the staff who
worked for us at Belfast.
31. Forty per cent?
(Mr Cahn) Forty per cent.
32. It is not very good.
(Mr Cahn) I think in the circumstances it was quite
33. Mr Nicol, is your Belfast route profitable?
(Mr Nicol) Yes, highly profitable. It is one of the
most profitable ones we have got. It is a route that we have been
operating coincidentally for about four years or so, which Mr
Cahn mentioned earlier. We now operate up to six flights a day
on that route and other low cost airlines serve it as well, certainly
Go serve it from Stansted.
34. You had not noticed that there had been
a change? Was there an immediate dip after September 11?
(Mr Nicol) I think in line with most other airlines
there was a dip. To tell you what happened at easyJet, because
it is a slightly different experience from any of my other colleagues
here at the table although we are not part of BATA, we saw immediately
a drop off of around 26 per cent of our traffic on September 12.
In terms of normal bookings we were 26 per cent down. Over the
next few days that slowly recovered at a couple of percentage
points a day for the next few weeks or so. One of the reasons
why that has happened is we are actually carrying more passengers
now than we would ordinarily have expected to because the low
cost airlines went out within about 10 days and as a group made
around 1.5 million seats available in terms of promotions. No-one
had any idea how the market was going to respond and people, needless
to say, were unsure, would people want to get back on an aeroplane.
What we have proved is that people are prepared to travel if the
price is right.
35. Has there been a direct fall off on the
(Mr Nicol) No. We are 25 per cent up on last year
on that particular route. We have added roughly 25 per cent capacity
year on year and we are seeing roughly a 25 per cent passenger
increase in volume.
36. So people are only afraid of flying in expensive
(Mr Nicol) The people are flying because the price
is cheaper. When we try to put the prices up it is interesting.
Chairman: So we may not be talking about the
fear factor at all.
37. Could I just pursue the question of the
slots. How many slots have British Airways now got that they are
not using at the moment at Heathrow?
(Mr Cahn) None.
38. They are all being used?
(Mr Cahn) Yes.
(Mr Parker-Eaton) May I make a point. EasyJet are
talking about low cost airlines as though that was one part of
the market only. Can I stress that charter airlines were the original
low cost airlines, and still are, and really they are talking
about a no frills sector, not a low cost sector. To explain some
of what happened after 11 September, with our tour operators what
we have experienced is that short city flights, Amsterdam, places
like this, where bookings are in the short term, have continued
very well up. What we have experienced is that the longer term
bookings have been the problem. On short term bookings this winter
the traffic has been up well and, like easyJet, our tour operators
have cut our prices to keep the business up. We have flown at
high load factors. Next summer is another issue altogether for
39. Mr Nicol, I should have asked you could
you tell us what has been the average cost of your tickets over
the last year?
(Mr Nicol) £48 one way.