Select Committee on Transport, Local Government and the Regions Eleventh Report


IV. List of Conclusions and Recommendations

(a)  We expect to see firm proposals for the future of aviation in the forthcoming Aviation White Paper, which is due to be published in the autumn of 2002. We are concerned that the timetable for the White Paper has already slipped (paragraph 2).

(b)  The air transport industry is cyclical and susceptible to downturns in the economy. Since 2000, there have been signs of a general slowdown in the global economy that led to fewer passengers and less money for investment in the industry. Many sectors of the United Kingdom's air transport industry were, therefore, already experiencing a significant reduction in business even before the terrorist attacks in the United States. There has been a marked contrast in reaction by the various industry sectors in responding to that reduction in business. The low-cost sector appears to have been the most successful in generating traffic and improving profitability by exploiting new markets and, in some cases, use of secondary airports while restraining costs (paragraph 8).

(c)  We do not support long-term public assistance for the additional security costs incurred by the air transport industry as a result of 11 September (paragraph 11).

(d)  We condemn the hasty manner in which the insurance industry withdrew cover for aviation following the terrorist attacks and welcome the Government's prompt and appropriate action in implementing short-term measures to ensure continuity of essential insurance cover. The Department should provide a report on progress towards a return to a wholly commercial insurance market, and an indication of its view on long-term solutions to providing war risk and terrorism liability insurance cover for the air transport industry. We recommend that the Treasury publish figures on the amount of money it has received from the industry by way of premia and explain what it intends to do with the money (paragraph 14).

(e)  The immediate impact on airlines of the 11 September attacks was severe, particularly for those providing premium services to the United States. But there is no compelling evidence to suggest that there will be a medium to long-term reduction in passenger confidence in aircraft safety and security. In the past, passengers have adjusted to the imposition of more stringent security regulations and are unlikely to find difficulty in doing so again. We do not anticipate that the latest security requirements will have an adverse impact on the market for air travel (paragraph 19).

(f)  There is no doubt that, even though passenger confidence is recovering, times are tough for the air transport industry. We do not consider it appropriate to increase either the regulatory burden or the costs to any sector of the air transport industry now. We recommend that the CAA seek to postpone the introduction of any proposed increases in charges at regulated airports that may result from its recent review (paragraph 20).

(g)  The events of 11 September had implications throughout the air transport industry, including general aviation and ground service providers. We recommend that the Government bring forward firm proposals to guard against the permanent loss of highly skilled jobs and personnel in the industry (paragraph 21).

(h)  Without prejudice to the findings of our separate inquiry into NATS finances, we find it remarkable that the Department had not prepared a contingency plan for NATS going into administration or receivership (paragraph 23).

(i)  The evidence that we received at the beginning of this inquiry about the duration of the current downturn seems to have been pessimistic. We welcome signs of recovery that suggest that in the absence of another incident traffic levels could recover within the two years forecast by the more pessimistic analysts, although we do recognise that the recovery in traffic may have been achieved with some dilution of revenue (paragraph 25).

(j)  Although we accept the reationale for waiving the 'use it or lose it' rule, the Government should firmly resist implementing any further European Union directives on slot allocation that are inappropriate to the United Kingon's needs and circumstances (paragraph 29).

(k)  The Committee considers the United States compensation package to have provided an unfair advantage to US carriers. It is imperative that the United Kingdom Government ensure that the competitive balance between US and UK carriers is restored (paragraph 31).

(l)  The Government must ensure that any future international aviation agreements maintain the competitive position of United Kingdom carriers. However, the Government should not make concessions to United States airlines in receipt of US State Aid, merely to hasten the signing of a new US UK bilateral on open skies (paragraph 34).

(m)  This Committee believes that the bilateral agreements on open skies must include progress on the critical issues of open skies, cabotage, wet leasing and ownership. As we concluded in our July 2000 Report into Air Service Agreements between the United Kingdom and the United States, it is imperative that the Government maintain its efforts to agree beneficial aviation bilateral agreements with the United States (paragraph 34).

(n)  We remain to be convinced by arguments in favour of changes to the rules of ownership or that consolidation will bring benefits to the industry or consumers. The Government should be cautious about changes to the rules of ownership that would allow unfettered consolidation within the industry. We recommend that the relevant competition authorities give rigorous scrutiny to any further moves towards consolidation of the United Kingdom airline industry (paragraph 36).

(o)  The present situation has strengthened arguments in favour of Public Service Obligations to ensure the continuity of vital regional links with Heathrow and Gatwick. We recommend that the Government ensure that slot allocation at the main London airports be consistent with its aims of ensuring access to the United Kingdom's peripheral regions as regional air services are "socially and economically vital to the regions". Prior to the availability of any additional runways in the south east, we believe the Government must adopt Public Service Obligation protection for the most vital links to the United Kingdom regions. This is a widely established policy within the European Union. We do not see or anticipate any European regulatory impediment to securing such slot protection. We are aware that some airlines and airport operators may be against the use of such designation at congested hub airports but the needs of the United Kingdom regions should have priority (paragraph 40).

(p)  The Sub-Committee intends to consider aviation infrastructure and capacity requirements when it conducts its inquiry into the Aviation White Paper (paragraph 41).

(q)  The Committee is concerned that the Air Travel Reserve Fund should be maintained at a sufficient level and calls on the Minister to bring forward legislation providing for that at the earliest opportunity (paragraph 42).


 
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