Select Committee on Transport, Local Government and the Regions Minutes of Evidence


Examination of Witnesses (Questions 180 - 188)

WEDNESDAY 19 DECEMBER 2001

MR ED ANDERSON, MR KEITH JOWETT AND MR MIKE TOMS

Mr Stevenson

  180. Three quick questions, if I might. One is about slots from Heathrow. We heard from Mr Cahn of British Airways that last year and this year British Airways had relinquished something like 300 slots at Gatwick. What has happened to those slots, Mr Toms?
  (Mr Toms) Those slots have gone into the pool for reallocation by the co-ordinator. We do not know yet who has got them because it is quite difficult to follow the line of individual slots. Some of them are still there to be allocated.

  181. I am very grateful. Are you able to advise the Committee which services were discontinued to provide those 300 slots?
  (Mr Toms) We can provide that information to you.

  182. That would be useful, if you could. When the expected recovery occurs, how will the slot allocation be restructured? Should it be restructured to account for the different scenario that the industry may be facing?
  (Mr Toms) It is worth just prefacing our response to that by saying through this period—

Chairman

  183. You are getting more confidential as you are going into difficult waters, Mr Toms, a little louder, please.
  (Mr Toms) My apologies. Through the current process one thing we have not seen is the emergence of a significant number of free slots. We see for the bids for next summer there is still great demand for slots at Heathrow and at Gatwick in peak periods. We are not actually seeing a pool of slots becoming available that can be reallocated when the recovery occurs. What will happen is when the recovery occurs there will be more internal trading amongst airlines of those slots which are there. There will not be a pool that we can suddenly distribute again to new users.

  184. Given that there is, as you say, likely to be rather more flexibility of slot allocation in terms of variability than there has been in previous years and given your charging policy, which is more expensive than it is at other airports, Stansted and others, are you considering at Gatwick, for example, restructuring your landing fees and your charges to recognise that if no frills airlines are going to be attracted they, by definition, because they use smaller aircraft, will require more slots? Is your present policy towards this not an obstacle? Are you not saying to no frills airlines "we do not want you" really?
  (Mr Toms) Firstly, I may not have made myself clear in relation to how many free slots there are. Our view at the moment is there are not a lot of free slots coming into the market.

  185. I am sorry to interrupt you but can I just clarify that. For my benefit, are there a lot of free slots coming into the market or not?
  (Mr Toms) No. Slots have come into the market but have all been taken up because the bids for slots are still higher than the number of slots which are available. We are not going to find ourselves in a situation at the beginning of the season where there are free slots. In relation to landing fees, for this year, for April 2002, because of the disruption faced by airlines, notwithstanding our price increase availability, what we have said is we are offering them a complete freeze on prices so that everyone can stabilise their operations. Our ability to change the structure of charges at Gatwick to favour one set of carriers over another is highly restricted both by the CAA through the Airports Act and by the British Government's international obligations. The current arrangement is that each airline, each landing, pays the same amount. There is a higher charge in the peak period than in the off-peak period. It is a runway rental per aircraft rather than per weight.

  186. These rules and regulations, of course, were agreed before we had the revolution in the industry that we have seen over the last five years. What I am asking is given that these restrictions are there, is it your view as an organisation that this issue should be looked at and you should have the ability to differentiate in your charging?
  (Mr Toms) We will keep it continuously under review. Every year as we set our charges we ask ourselves what are the industry conditions which relate to those charges. I have to say, notwithstanding 11 September, the rules under which we operate are quite specific and they do prohibit unreasonable discrimination which gives a significant limitation on our ability to target charges.

  187. I understand all that, but given the revolution that has occurred, which is likely to continue in the industry, and given that the charging regimes are now a little whiskery, they have been around a little while, is it BAA's view that this issue should be looked at, the regulations should be looked at, so that you have more flexibility to discriminate in your charging? That is the question I am asking, never mind about the regulations. Is it something that you would like to do if you had the opportunity?
  (Mr Toms) Would we like to discriminate? I think any organisation like ours has to be very careful before it jumps into discrimination because as soon as we do so we are put in a position where we are favouring one set of customers over another. I think our policy has always been even-handed. We will be reluctant to forego that.

  188. My last question is about even-handedness. As I understand it, your organisation has said that in terms of the waiver of grandfather rights, use it or lose, it in terms of the slots, the waiver, which I understand the European Commission has agreed to, should only apply to transatlantic routes, in other words those affected by 11 September. (a) is that not inconsistent with your even-handed approach and (b) would that not benefit the North Atlantic carriers, the smaller operators, the ones that you have been talking about?
  (Mr Toms) Our position as put to the European Commission and the schedulers is as you describe. In principle we do not wish to establish a general exemption for slot under-use over the current seasons. You are absolutely right that what we have said is the schedulers and the European Commission should consider especially those services which have been disproportionately hit by 11 September, but we have tried to avoid that being discriminatory by saying any operator in that situation who has suffered from severe business disruption because they are operating to a significantly hit location, North Atlantic and Middle East being the prime examples, should be given careful consideration on that. We are not saying that it should be one rather than another.

  Chairman: Gentlemen, I am sorry to have interrupted your evidence, I am sorry we had to make you wait. We will have some more questions and, if you will forgive us, we will submit those in writing. We would like a note from you quite quickly. Thank you very much.





 
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