UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 1941-i

HOUSE OF COMMONS

ORAL EVIDENCE

TAKEN BEFORE THE

NORTHERN IRELAND AFFAIRS COMMITTEE

AIR TRANSPORT STRATEGY FOR NORTHERN IRELAND

MONDAY 23 APRIL 2012

(STORMONT)

MR JOHN DORAN

MR BRIAN AMBROSE

MR CLIVE COLEMAN, MR ALBERT HARRISON and MR DAMIEN TIERNEY

Evidence heard in Public

Questions 1 - 81

USE OF THE TRANSCRIPT

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Oral Evidence

Taken before the Northern Ireland Affairs Committee

on Monday 23 April 2012

Members present:

Mr Laurence Robertson (Chair)

Mr David Anderson

Lady Hermon

Kris Hopkins

Naomi Long

Dr Alasdair McDonnell

Nigel Mills

David Simpson

Examination of Witness

Witness: Mr John Doran, Managing Director, Belfast International Airport, gave evidence.

Q1 Chair: Welcome to the first public evidence session of this inquiry into aviation policy. Since we set the Committee up after the last election, we have focused on trying to help towards rebalancing and improving the economy in Northern Ireland. There are social implications to aviation policy, so we are very pleased to be starting this inquiry. I thank Speaker Hay for allowing us to hold the meeting here in this wonderful hall, and I thank the Assembly officials who facilitated the meeting. We are very grateful. Mr Doran, thank you very much for joining us. I invite you to make a few opening comments.

Mr Doran: Thank you, Chairman. I am always pleased to be able to assist the Committee with its inquiries. As a bit of an opener, I will take a brief walk through the points that were raised on the invitation that I received, and then I will be happy to take any questions that arise.

All the areas highlighted by the Committee are interlinked and have a role to play in aviation strategy, but if we look at the economic implications of current air links, there is a very good summary in the invitation setting out the data released by the Northern Ireland Chamber of Commerce that highlights the importance of aviation to the Northern Ireland economy. One in 10 jobs depends on foreign investment, and half those companies can only reach their home market through a hub airport. Therefore, there is an implication there. Aviation supports £1 billion worth of exports from Northern Ireland, and 150,000 foreign visitors arrive by air into Northern Ireland each year.

In relation to Belfast International Airport, the impacts are equally significant. We employ on the airport site in and around 4,500 people, who directly rely on aviation for their employment. That puts somewhere in the region of £450 million of wages, salaries and bought-in goods and services into the local economy each year. Therefore, it is significant. There is no doubt about that.

We can conclude only that our connectivity to the eight billion citizens who live in the outside world will be very heavily dependent on air access for the foreseeable future. Therefore, a strategic approach to sustaining and developing a robust and durable network of air services ought to be a priority and, certainly, an enabler for the rebalancing and growth of the Northern Ireland economy.

With regard to the air transport environment, Northern Ireland is fairly unique in a number of ways. If it is not the smallest population base or economy in the developed world with a multiple airport system, it is certainly one of them. We have been able to find only Reykjavík as a city smaller than Belfast with two, never mind three, operational airports. So, we are well supplied with airport capacity and are certainly not analogous with south-east England, where there is a shortage of capacity.

We are also fairly unique in the European context in that we are in the sterling zone with a land border with a euro zone country. Under those circumstances, a stable and sustainable air transport base is an essential element to support broader macro-economic strategic development. We will probably talk about that as well.

In relation to regional and international connectivity, the first point to deal with is that Northern Ireland, as a region in common with other regions of the British Isles, has experienced a similar profile of growth and relative decline in passenger numbers over the past decade or so. In the case of Northern Ireland, the key point is that we have seen a decline of about one million passengers over the past few years.

We had a look at the numbers, and the retrenchment since 2007 or 2008 has been in the order of 1·3 million passengers. If we make the comparison with other regions over the same period, however, we see that traffic in Dublin declined by 5·5 million, in the central Scotland area by about 3·4 million, the GB midlands by about three million, and the north-east of England by two million as each are impacted by similar economic factors. It is not to say that we should not aspire to recovering that lost traffic but merely to provide reassurance that we are not suffering alone. Other regions on these islands are seeing similar declines and are making similar efforts to recover the position.

Currently, 75% of the Northern Ireland air market is GB domestic, where we are well served. However, direct international connectivity remains poor, and perhaps that is where the focus should lie in European and worldwide terms. There are probably a couple of supporting measures in relation to that. The first would be the maintenance of a level of stability in the existing domestic network base in order to promote speculation on international services. Certainly, we promote in that regard a more structured engagement such as this between government and air service providers - not necessarily airports but the people who provide the air services themselves - in order that a common understanding of how the development of air services can be achieved and facilitated. That direct engagement would form a central plank of a regional strategy by engaging with all players in the market.

We also suggest that growth needs to be promoted in those international markets that indicate a high possibility of delivering economic benefits to Northern Ireland with respect to tourists and inward investors. In other words, we probably have enough Spanish costa outbound traffic. What we need is more inbound traffic if we are looking at how we rebalance and grow the economy.

Touching on surface access links; modern and fully integrated surface transportation systems are essential if Northern Ireland is to compete in the global market for visitors and investment in practice and in perception. We do not presuppose the means by which those links could be facilitated, whether road or rail, but merely make the point that if we are trying to give the impression to inbound visitors of a modern, progressive economy then good means of access on the ground are important. However, that again requires a strategic approach to determine how a surface access policy can support aviation policy and, in turn, support economic policy.

The question on the Civil Aviation Bill is interesting. I understand that the Bill has passed the Committee Stage, and will go to the Report Stage later this week, on 25 April, I think. The thrust of the Bill is to reform the economic regulation of airports, with particular focus on those airports with market dominance. In this case, we are talking about Heathrow, Gatwick and Stansted. There are some consequences of the Bill for all airports in Northern Ireland in two key areas. First, the CAA is running a consultation that may lead to a significant increase in the level of charge that it levies on airports, so a cost element comes into play there. In addition, there is the proposal to transfer some of the aviation and security oversight functions from the Department for Transport to the CAA, which, in turn, then will directly charge for those services to airports. That is not currently the case. As the Bill contains no provision for the airport operator to pass these charges directly to users, that will mean an increase in cost that the operator has to absorb. In the case of Belfast International Airport, that is likely to be in the region of between £100,000 and £120,000 annually. Obviously, that is unwelcome because it eats into our capability to reinvest in infrastructure. Those are perhaps unintended consequences from that, but they are significant.

A current theme on the Committee’s agenda is the implications of the proposed takeover of British Midland by IAG. That is now the real takeover of British Midland. The key preoccupation with the situation is the preservation of access to the main hub for international connectivity, particularly for Northern Ireland because if we cannot have direct access, then indirect access to a hub such as Heathrow is very important to us. In that regard, reassurances have indeed been given by British Airways that it will renew the commitment that British Midland has shown to Northern Ireland in the past. Undoubtedly, over the weekend and this morning, members will have seen full-page advertisements that were taken out in the national and regional newspapers as a means of saying "do not panic, it will be all right." We should also be comforted by the fact that Northern Ireland is better positioned than most other regions of the UK in that Aer Lingus operates concurrently from Belfast International to Heathrow. In recent days, it has reaffirmed its commitment to this market.

We see the key issue relating to this situation as not being the absolute level of frequency because it may well be that, as we go into the future, British Airways will work out the best economic use for its newly-acquired slot portfolio. What we should be looking at is how we maintain an overall level of seat capacity that meets market demand, thus facilitating overall worldwide connectivity and, indeed, providing a lift for British Airways’ cargo requirements.

The other implication of the transaction is on the future of bmibaby, which has received a lot of airtime over the last wee while. If a loss were to occur as a result of that, it would not necessarily be an issue for Northern Ireland’s connectivity, given that every route that that airline operates is flown by at least one, and up to three, of the airlines that are currently in the market from a selection of easyJet, Aer Lingus, Flybe, Jet2, Thomas Cook, Thompson and so on. Connectivity is not necessarily impacted by that.

Finally, the Republic of Ireland is the only valid reference point for Northern Ireland on tax policy, given our co-existence on the same land mass. Our thanks go to the Committee for its sterling work in support of the changes to band B that have been brought about and which, in due course, will be devolved to the Northern Ireland Executive. That dealt with the pressing issue of the New York service, but it also opens the door to other possibilities for long-haul route development in the future, and it will do no harm to remind the Committee that the value to the Northern Ireland economy of the current service to New York runs at just over £100 million during the seven years of its existence. For a potential hit on the block grant of perhaps £2 million to £3 million a year, getting an annual return of around £20 million is a pretty good return on the investment. Of course, we are concerned that, if the band A tax were to double in the short term, as is anticipated, that could cause Northern Ireland significant competiveness issues. I am sure that we will discuss that in due course.

That is our opening position on the key points that the Committee has raised, and, as I said, I am more than happy to take any questions from the Committee on those or any other subjects.

Q2 Mr Anderson: Good afternoon, Mr Doran. In March, you co-signed a letter in ‘The Sunday Telegraph’ to the Prime Minister about, as the Association of British Travel Agents (ABTA) put it, the impact of the ban on expansion in the south-east. Effectively, that means that Heathrow will not be allowed to develop, which will have a knock-on impact on people such as you. What exactly do you see as being the consequences if, as seems likely, there is no real expansion in the south-east? Have you had a response to the letter yet?

Mr Doran: The situation in the south-east, as I have already alluded to, is very serious because there is a lack of capacity and there has been for some time. The implications, particularly for Heathrow, are that, whenever you are running at 98% or 99% of your practical capacity, every slot has to count for the operators because they are very valuable commodities. About four years ago, Continental Airlines paid $208 million for four slots at Heathrow, so they are extremely valuable.

As time goes on and the capacity situation is not addressed to any appreciable extent, operators will, no doubt, look for the highest and best use to which they can put those slots. It may not be Belfast; it may be Rio de Janeiro, Guangzhou or somewhere in the Brazil, Russia, India and China (BRIC) economies particularly, where opportunities for hugely increased traffic exist. The challenge for Northern Ireland and other regions is to ensure that international connectivity is not impacted as a result. There are two ways of doing that. If we are looking at Heathrow as still being the primary hub for connectivity, the level of frequency of connection may go down, but the level of capacity would have to go up on each frequency to compensate. In other words, you are looking at swapping out smaller aircraft for larger aircraft to give you the same capacity while using a smaller number of slots.

If you set that to one side, a parallel route, although it may not necessarily benefit the UK directly, is to look at other hub airports in Europe like Frankfurt, Paris and Amsterdam as connecting points for traffic that wants to access Northern Ireland. You will look at how best you could organise air services to provide the necessary lift over those hubs. There are two tracks: what you can do with the capacity that becomes available at Heathrow, which means that the individual unit’s capacity that is carried on each rotation has to go up, or that you look at another access point.

Q3 Mr Anderson: Have you had a reply to the letter?

Mr Doran: Not directly. I think that the letter came from ABTA, so a reply may well have been received in the meantime but has not yet been circulated to me.

Q4 David Simpson: You are very welcome to the Committee, John. It has been put to us that, over the past number of years, successive agencies and the Government have ignored the strategic importance of the International Airport, which may have resulted in losing out to Dublin or whatever. What initiatives could the UK Government or the Executive take to try to help the airport?

Mr Doran: It is an interesting question. Given a few days, I might be able to answer it. I will try to cover it briefly. The issues that the Committee touched on in its invitation are all very important enablers in how the International Airport plays its role in supporting the economic development of the region and the rebalancing of the economy. The example that I gave of the Continental service and the direct economic benefits that it brings to the Northern Ireland economy could be replicated by other long-haul services. It is replicated day and daily when you look at European and GB domestic services. We already play a key part, but there are a number of areas in which we could play a fuller part. The taxation policy was touched on. A good start has been made on band B. We probably need to look at how we can expand that into band A if that were possible, because, at the moment, band A is running at £13 a sector. In a situation in which 75% of your traffic is to and from GB, that is £26 each time you take a return flight. That does not sound like a lot but it adds up, so there may be something to be looked at there.

We touched on the issue of how we grow international business, particularly international connectivity. A number of years ago, a good scheme - the air route development scheme - was set up, off the back of which came routes such as the New York service. About £1 million of that scheme funding went into that service; we also put in the equivalent of about £4 million over that period. Air route development funds are not flavour of the month at the moment, but that does not seem to stop some countries from operating them. South of the border, just recently, there was a bit of a move to try to remove or reduce the current €3 aviation tax. In the end, the Minister decided not to take away the tax but to hypothecate something like €8 million of the tax take from that €3 individual tax into what, in effect, amounts to an air route development fund, or a fund for developing new access to Dublin. So, the fact that air route development funds may be questionable under state aid rules does not seem to have any implication in some countries. Of course, I am not saying that the UK Government should break any EU regulation. However, at the same time, I am sure that there are creative and inventive ways of coming up with -

Q5 David Simpson: To briefly follow on from that: do you see a difficulty with the International Airport not having direct rail links to the city? By the way, the MP for the area told me to tell you that he is lobbying hard for that. Do you see an issue there?

Mr Doran: There is an issue. Again, in comparison with other international gateways such as Dublin, we lack very high-quality surface connections. In my opening remarks, I said that I did not presuppose whether "surface access" means rail or road; it can be either or both. Our connectivity is lacking. The roads system around the International Airport owes much to highway planning in the 1950s. I am old enough to remember those roads being built. They were superb for their day, but that was in the mid-60s, and we are now in 2012. Perhaps we need to take a little look at that again because it has an impact. When we are trying to attract visitors, whether tourists or potential inward investors to Northern Ireland, their first impression is that the rail or road connections do not exist. What is seen on setting foot outside the front door is important in creating a lasting impression that, hopefully, will be carried by the visitor. So it is important.

Q6 Dr McDonnell: Is the International Airport in favour of a rail link, against it or indifferent?

Mr Doran: We have always been in favour of a rail link. The only issue that we have is the amount of public funding that it would need and whether that would be better spent on a rail link or on upgrading the roads. I am not in a position to make that value judgement. However, we have always supported a rail link just as much as we have supported surface access by road.

Q7 Dr McDonnell: What would it take to move forward the possibility of a rail link?

Mr Doran: I am told that it would cost about £98 million, which is an enormous amount.

Dr McDonnell: That would not build much road.

Mr Doran: Well, it would build a fair bit of road, actually. So that is where the value judgement lies.

Q8 Kris Hopkins: Is £98 million about the price of a Titanic building? For that, you could have had a railway at your airport.

I have a bit of difficulty here. There are a lot of things that make assumptions that I am not sure are true. There are loads of "get outs" in this. I understand that Belfast International is approximately 80% reliant - whatever "reliant" means - on easyJet, and that Belfast City Airport is 75% reliant on Flybe. I think that that is sort of eggs-in-baskets situation. When each airport has only one golden egg in its basket, that is a risk that needs to be mitigated in some form. Do you feel vulnerable in that position? First, are those figures true? If they are, how do you mitigate that risk?

Mr Doran: I would not cast any doubt on the figures, because the order of magnitude is probably about right. Having so many eggs in one basket is always a risk for any business, and you mitigate that by trying to balance it out against the remaining portfolio being as widely spread as possible, as well as by building a strong relationship with your key customer.

easyJet has been in this market for well over 10 years now, and during that time, it has grown from virtually nothing to basically carrying one in two passengers in and out of Northern Ireland. Therefore, if you are considering risk, it is risk for Northern Ireland as a whole, not necessarily just for the International Airport. However, having said that, during those 10 years, a very strong relationship with and commitment to Northern Ireland has been developed. Only recently, easyJet announced a further development of a Birmingham service from Belfast International Airport. The release that announced that service reaffirmed easyJet’s commitment to the Northern Ireland economy.

We are looking at how you can then grow the pie by reaching out past GB into Europe and beyond to try to bring in routes from key source markets that are important for economic development, whether through tourism or inward investment, and develop a root structure to supports them. That would also mitigate the risk.

Q9 Kris Hopkins: To follow on from that, you essentially have two competing companies. I know there is variation in some of their destinations and client base, but I am a Tory and am fairly enthusiastic about competition. Is there a sensible conversation to be had between the two airports about not tripping over the same customers, or will the market facilitate that?

Mr Doran: I think the market has facilitated it up to this point, but you make a good and interesting point. Northern Ireland is a small land mass with a population around the size of that of greater Leeds. It is well served by three airports, and the two principle players in the market have a lot of overlap and duplication. That means that, not only do you have the risk of your fate being in the hands of two operators, but you also have the risk that some of the routes may be over-served in some cases. I do not know whether that is an area that Government want to enter.

We could have a more joined-up approach by having the Northern Ireland Executive rather than the Westminster Government looking at how the aviation assets at its disposal best serve the economic development of the region. They could then maybe do a bit of pushing and shoving around the edges to make sure that the economic development needs of the region are paramount and are served by the players in the market. That is not necessarily dictating how the market should be developed, but perhaps the development of policy in support of economics would give a bit of a nod to operators as to what they should be doing.

Q10 Lady Hermon: Presumably, John, you have had these conversations with Arlene Foster, with Sammy Wilson the Finance Minister, and with the DRD Minister; have these conversations not already taken place?

Mr Doran: These conversations take place regularly. I think that, as with all the other things on everyone’s plate, this may have fallen down the pecking order a little bit. Perhaps we need to give it a little bit of emphasis to ensure it is taken up to the top again.

Q11 Naomi Long: John, it is good to see you here this afternoon. Thank you for your evidence so far. Since we took evidence from you in June last year as part of the inquiry into air passenger duty (APD), the Government reduced the level of APD on long-haul flights, which covers direct flights from Northern Ireland to the US, to that of the domestic rate. Have you noticed any effect on the number of passengers using that route as a result of those changes?

Mr Doran: The derogation has only been in place since 1 November, and it is very difficult to draw a conclusion over the winter period because it tends to be the quieter part of the year anyway. If we look at the last couple of months and at the forward bookings, we see there has been a little bit of an uplift so far over the past few months. Future bookings are also looking very positive.

Q12 Naomi Long: That is very good news.

You will have heard members of the Culture, Media and Sport Select Committee express concerns that there will be extra strain on Heathrow’s capacity because of the Olympics. They say that it could result in chaos at that airport. You have already spoken to us today about the pressures at Heathrow already, even before we add that additional pressure. Have you as an airport, the Northern Ireland Tourist Board or Tourism Ireland at the other end in the States been pushing to persuade visitors to look at using the direct flight from North America to Northern Ireland rather than travelling via Heathrow? Has there been much publicity of that direct flight to try to sustain it further?

Mr Doran: The Olympics, the Titanic and the various other events that are taking place in 2012 are forming a platform for Tourism Ireland to promote, particularly in the States but also in other parts of the world, and encourage as many people as possible to use the direct services to Northern Ireland. I would not say that it is specific to the Olympics. It is part of the package that surrounds all the events in 2012.

Q13 Nigel Mills: Have you had any discussions or advice about what the Assembly policy might be when APD responsibility is formally devolved to it? Do you think that it will try to reduce the rate on long-haul flights further, or will it stick to where it is?

Mr Doran: My understanding is that the intention is that the rate will be reduced to zero or near zero on long-haul flights just for band B. I believe that the Enterprise Minister has made that commitment.

Q14 Nigel Mills: Presumably, you would quite like band A to get to somewhere near zero as well. Is that something that you and your airports are working to try to achieve?

Mr Doran: The cost to the block grant of band B is maybe £2 million or £3 million. Depending on how things go, it might be up to £5 million a year in the distant future. Band A might be £60 million plus, so it is a bigger chunk to take out.

There is a certain nervousness about doing something such as this. However, there are equivalent case studies in Europe that we could look at as guidance on whether something like this should even be contemplated. The situation south of the border is our nearest comparator, but it is not confined to the Republic of Ireland. The Netherlands introduced an air passenger duty and took it away again within a year because it believed that it was having a negative impact on inbound traffic. Denmark did likewise but over a longer period of time. Germany has taken the decision to reduce its air passenger duty by an equivalent amount to what the airlines are paying into the emissions trading scheme. We have not yet touched on the emissions trading scheme, but effectively it is now the European vehicle for taxing aviation or the carbon footprint. Germany has taken the decision to hypothecate that into its APD, which will then reduce it to a very manageable rate. It might be useful to take those sorts of case studies as examples and to look at the deemed economic impact of doing it against the cost to the Exchequer.

Q15 David Simpson: In written evidence last year, you indicated to the Committee that the airport was trying to attract new carriers, whether from Canada or the Middle East. Has there been any real success in that?

Mr Doran: We are certainly in a better position to have those discussions now than we were six months ago. Until the change in air passenger duty took place, airlines were not interested in having those discussions because they saw the tax as a barrier to their commercial success. Since then, we have had a number of discussions with carriers eastbound and westbound. All that I would say is that we are encouraged by the noises that we are hearing. However, we are not there yet, and there is still quite a way to go.

Q16 David Simpson: I take it that the removal of APD for long-haul flights helped with that.

Mr Doran: It helped the situation. We can have a conversation now that we were not able to have previously.

Q17 David Simpson: I take it that you are not giving too much away at the moment, what with your competitors sitting in the gallery.

Mr Doran: I think that we might operate in different markets in this instance, but that is not the reason for my reticence. We are at early stages with each of the carriers involved, and it would be inappropriate to comment any further.

David Simpson: I appreciate that.

Chair: You are to ask the next question as well.

Q18 David Simpson: Am I? I am earning my keep.

We are now on to the thorny issue. All three Northern Ireland airports have recently been criticised for setting some of the highest rates in the UK for car parking. You are in the difficult position of kicking off on this one. Your competitors will have a bit more time to think of an answer. How do you respond to that criticism?

Mr Doran: If you look at the depth of the criticism, you will see that we are the least worst, if you want to put it that way, which is an interesting position.

Q19 David Simpson: Out of the three airports?

Mr Doran: Yes.

David Simpson: That is dead on.

Mr Doran: What is charged for car parking is a reflection of the cost of providing the car parking. We operate within a fairly competitive environment, so it is not as if we have a free hand to set whatever charges we want.

Q20 David Simpson: Why not?

Mr Doran: There are quite a number of competing off-site car park operators around the airport, two of which have been there for quite a long time - for the past 40 or 50 years, or near enough - and a number of others that have come along more recently, none of which has any planning approval, but that is a different matter. If we are talking about joined-up government, we should talk about the joined-upness of the planning system as much as anything else.

It is not that we have a free run to decide to set the rates that we want. The charges are merely a reflection of the economic cost of providing the facility. I do not think that you could argue that a rate of £5 a day is over the top, to be honest. Some of the operators that we are being compared with have greater volumes of throughput to start with, and when you have greater volumes of throughput, the economic cost attached to each unit decreases, so you can charge less. It is a matter of economics and of supply and demand, I am afraid.

Q21 Lady Hermon: John, how much did you actually raise from car park charging in the past financial year?

Mr Doran: Car park charging is absorbed into our commercial revenues. It might do no harm to talk about how the airport model works. Around 15 years ago or thereabouts - perhaps 12 years - most airports received the majority of their income from what they earn from airlines coming and going. We were no different. As low-cost carriers come on stream, they want to benefit from lower charging than that which the carriers heretofore had experienced. Therefore, the only way of reducing charges to encourage the development and growth of low-cost services is to find income from elsewhere.

We are probably no different from most regional airports at the moment. Around 50% of our revenue comes from commercial sources. Commercial sources include car parking, cafes, restaurants, bars and everything else that does not fly. If you divide it into things that fly and things that do not fly, around 50% of our revenue comes from things that do not fly. Out of that 50%, car parking is probably the single most important revenue stream. You will have gathered by now that I am not going to put a figure on it, because it is commercially confidential information. It is not disclosed anywhere in our accounts, except where it is stated that 50% of our revenue comes from commercial sources, and, as I said, the single most important source of that commercial revenue is car parking.

That gives you an idea of the importance that we attach to car parking as a revenue stream and the importance of that revenue stream to ensuring that we continue to be able to charge lower costs to the airline carriers, thus keeping down the cost of flying for travellers as a whole. The basket needs to be looked at in the round. You cannot just pick out one element and say that it is too dear. You need to look at the thing in the round.

Q22 Lady Hermon: Is all revenue raised through car parking reinvested in the airport?

Mr Doran: Absolutely - every penny and more. If you look at our profitability over the past five years, you will see that we have spent just under £50 million on capital reinvestment and infrastructure at the airport. We did not earn £50 million over the past five years, so we have had to borrow a bit to supplement that. I can assure you that every penny gets reinvested.

Q23 Lady Hermon: What do you personally think of the £1 charge for dropping someone off? I speak now as a mother who drops her son off at the airport. He is a student, so mother has to pay for these things. He is out the door of the car and across to the departures entrance. I do not even get out of the car, but I am charged £1. Is that not a very mean charge?

Mr Doran: You may characterise it like that, but there were good practical reasons for introducing the system.

Q24 Lady Hermon: Which are?

Mr Doran: There are three reasons. First, we had to relocate our drop-off zone from the immediate front of the terminal after the Glasgow Airport incident. The recommendation was to move the zone 30 metres away from the front door. There is a cost to doing that. Secondly, by doing so, we expanded the kerb space, providing twice what was previously available. Thirdly, and most critically, a habit had developed of people circling around and around the drop-off zone, which was doing nothing but adding to the congestion in the zone. The only way in which to stop people doing that was to make sure that, if people are going through the zone, they have to pay to get out the other end. That certainly does stop the circling. There are good reasons for doing these things. We do not just dream up ideas and decide to do something for a wheeze.

Q25 Lady Hermon: Do you accept that it makes the airport rather unpopular?

Mr Doran: Probably less popular than we would like to be, but it is necessary. I make no apology for that.

Q26 Kris Hopkins: I do not think that you are on your own. It is my observation that regional airports do similar things. Mine is doing something similar.

We talked earlier about rail infrastructure. When a significant part of your income is associated with somebody driving a car to the airport and parking it, it would not be in your interest to promote a rail link to the airport. It would, as you said, be in your interest to promote better road infrastructure. Is that a good observation?

Mr Doran: Better road infrastructure also supports public transport, whether that be taxis or buses. We have a very good bus service that could do with better road links. As I said, I do not have any particular leaning towards whether service access is by rail or road. Both would be beneficial, as far as the airport is concerned.

Q27 Kris Hopkins: You do not think that a rail link would damage your economic model?

Mr Doran: I do not think so at all. If you look at other airports up and down the UK that already have a rail link, you tend to find, outside the London area and the main conurbations, that no more than 5% of the traffic actually use the link. A rail link does not make a lot of difference.

Naomi Long: My question has already been asked by Kris. It concerned the link between rail and parking charges. I am satisfied.

Dr McDonnell: That was my question, too.

Chair: An important question, obviously.

Q28 Nigel Mills: I have a different question, fortunately. May I take you back to the Civil Aviation Bill, which we get to deal with again on Wednesday? You already mentioned security costs. Have you any other comments to make on the Bill or concerns over it? Do you think that it strikes the right balance and that passengers’ interests can be properly protected?

Mr Doran: I think that the legislation brings a bit more order to the regulation of airports than had previously been the case. Regulations have grown up over a number of years and become a little piecemeal. It is good to bring them into one place and think about them from scratch.

The only other comment that I would make, which is more to do with how this is going to work, is that there are provisions in the Bill to deal with the financial viability of operators and the regime of charging, or penalties, for failing to provide service. If you think back a number of years, you will recall that Heathrow had a lot of issues in the wintertime. One year it was fog; the next year it was snow. On the back of that, an idea was developed that operators should perhaps be fined for failing to provide service. The idea is fraught with difficulties, because no one is sure how those fines would be levied, assessed or legally imposed. There are some difficulties coming up. I am not making any comment on whether it is a good, bad or indifferent thing to do, but I see difficulties arising from the mechanisms around it. It would be interesting to see how the financial fitness test will work, because most airports - certainly those that are privately owned - have a fairly complex ownership structure for financing vehicles, and all the rest of it. It would therefore have to be an all-encompassing approach rather than a mere look at the operating company.

Q29 Naomi Long: We have already referred to the pressure on Heathrow, and I suppose that one of the effects of that is the value of the landing slots there. Have you any comments or thoughts to share with us on the impact that the acquisition of British Midland International (bmi) by International Airlines Group (IAG) may have on the slots currently available for its flights from Belfast City Airport to Heathrow, for example? As managing director of Belfast International Airport, do you have any views on the impact that that may have on connectivity from the region?

Mr Doran: I have alluded to it already, but, as I understand it, British Airways has given a commitment that it will continue to serve Northern Ireland as a region, although it is not a cast-iron guarantee. Any airline in that position will look at how its interests are best served. If the market is there for feeding into its onward services from Heathrow, it will provide connecting services.

There is another operator in the market: Aer Lingus. It currently operates three times a day from Belfast International Airport to Heathrow. It has given a commitment to maintaining those services and, in fact, has indicated that if additional slots were to become available as a result of the structural reorganisation, it would be interested in putting its hand up and taking one or two of them in order to enhance its Belfast to Heathrow service.

We should not get too wound up about lack of connectivity, because it may be decided at some stage in the future that 10 or 11 services a day, for instance, are too much for the region and that some should be taken out. What is likely to happen under those circumstances is that the aircraft operating the peak services will become a bigger aircraft and will therefore carry the same number of passengers to feed the outbound waves from Heathrow particularly and the inbound waves from Heathrow back out to the regions again. I do not think that connectivity will be lost; I do not think that there is any danger of that happening.

Q30 Naomi Long: You also said that you felt that, in this kind of battle, it would be a matter of frequency versus seat capacity and that you might lose some frequency but retain seat capacity. You said that that was the crucial issue. Take business travel, including through-travel that passes through Heathrow and on to other business destinations. Do you accept that frequency is as important as simply being able to get from A to B, and that how quickly you can do that and the number of options that are available have an impact on people’s choices?

Mr Doran: Frequency is certainly important for point-to-point travel, so it becomes important when talking about traffic that is going from here to London to do business there and come back again. At Heathrow and other similar hub airports, you will find that the through-traffic tends to come and go in waves. Within certain hours of the day, you will find that there is an outbound wave to North America and an inbound wave to the Middle East, the Far East or wherever. Correspondingly, there is an inbound wave at certain times. It is not beyond the wit of man for any operator, such as British Airways, to organise its big, high-capacity connectors to make sure that it feeds those waves outbound or picks up from those waves inbound again in order to feed back out to the regions. British Airways is already doing that with Glasgow and Edinburgh.

You will find that, at certain rotations during the week, because of having to meet the outbound waves, British Airways is putting a Boeing 767 on the Glasgow to Heathrow and the Edinburgh to Heathrow runs. Therefore, it can be done. In between times, there could be a lower frequency of flights, but it is a frequency that hits the right times for point-to-point traffic.

Chair: Thank you. We are bang on time, unless there are any more very quick questions.

Q31 Lady Hermon: On Radio Ulster this morning, there was a very interesting item about the World Police and Fire Games coming to Northern Ireland next year, bringing thousands of people. Presumably, your airport has done some contingency planning for that. Can you share the detail of that with the Committee?

Mr Doran: We have been in discussion with the organisers of the games and the folks that will be providing the infrastructure on the ground here to ensure that the operation is as smooth as silk. Therefore, we reckon that we are in a good position to ensure that, given the numbers that are coming and the logistics of handling all the equipment that they will be bringing with them, it will all work like a well-oiled machine.

Q32 Lady Hermon: Although there might be chaos at Heathrow with the Olympics, there will not be chaos at Belfast International Airport.

Mr Doran: We have plenty of capacity.

Lady Hermon: Thank you for that assurance.

Chair: We are out of time. Thank you very much indeed. The evidence session has been very useful.

Mr Doran: Thank you, Chairman.

Examination of Witness

Witness: Mr Brian Ambrose, Chief Executive, George Best Belfast City Airport, gave evidence.

Q33 Chair: Welcome, Mr Ambrose. Thank you for joining us. I invite you to make a brief opening statement.

Mr Ambrose: I can certainly do that. Good afternoon. We are delighted that you are considering a subject that is close to our hearts and that is important for the region.

In my opening remarks, I will touch on three points. The first one may seem a bit elementary, but it is vital to this Committee. It is this: what do we mean when we talk about an air transport strategy? Secondly, I want to look a little bit at how things have evolved in the region over the past 15 years. Thirdly, I want look at where we may be going and how that impacts on the questions raised by the Committee.

My first point is a suggestion that we need to differentiate between government strategies and company strategies. There is a vital role for government in ensuring that we address some of the issues that were discussed already during the first evidence session, such as proper transportation link-ups to increase the use of public transport. However, when it comes to which airline flies which route from which airport, you are in the realms of company strategy, and I would be deeply concerned if government were to begin to involve itself in that process.

The issues that I see as being vital for government are infrastructure, taxation, planning policy and planning delivery. All those issues can have an important and profound effect on how well we serve the region, and we would be delighted were the Committee to look into them in depth.

As far as where we are and where we are going is concerned, there is a good news story here. We picked up on some of the question about Northern Ireland having three airports. I can look back to a time when we had one airport, which was not a very pretty scene. There was no competition, and it was very stagnant. With competition, we doubled the market in the decade from 1997 to 2007, with both Belfast airports doubling in size. As has been said, like most other parts of the UK and other parts of Europe, passengers numbers have decreased in the past four to five years. As a region, there is a tremendous goal for us to recover that business, both for the good of the economy and for the good of tourism. What has happened in the past 10 to 15 years has been a great success story for the region.

Obviously, we are somewhat unique. We are an island off an island, and we do not have the rail transport link options that other parts of the UK have. If you want to do a day’s business in Great Britain, you have no choice but to fly. You cannot jump on a train or jump in a car and go by ferry: those modes of transport play an important role but not in the context of attending daily meetings. There are areas in which we need to open up the debate on where we may go.

The region is particularly well served with connectivity to Great Britain. Among the three airports, we have excellent daily services. By that, I mean the number of destinations served and the frequency of flights to the vital destinations. From our perspective, the feedback from our customers is that frequency is vital for the business passenger. It is not just that we connect to the region but that we do so at the right time of day and with the correct frequency to give flexibility for doing business.

London Heathrow has a particular importance in the domestic market. It is absolutely unique within all UK destinations as far as its connectivity to the rest of the world is concerned. Any dilution in connectivity between Northern Ireland and Heathrow would be detrimental to the region. We have other options. We can look at Manchester, Birmingham, Dublin, or we can look further afield at Frankfurt or Paris, but none of those destinations comes close to giving us the vital linkages or convenience that we get through London Heathrow.

The market beyond Great Britain into mainland Europe has developed a lot in the past decade, and I believe that there is further potential there. It has been mentioned that we tend to serve the sun routes quite well, but there are many major cities with which there is zero connectivity. As someone who used to work for a Spanish company, I am very familiar with the road journey down to Dublin to fly to Madrid because my choices were to connect through one of the GB hubs or to get a direct flight, and I chose the direct flight and the convenience of Dublin. The European market has potential, and it is something that we need to find a way of fully exploiting.

As you will know, we have one daily long-haul service. There are restrictions for us as a region. Northern Ireland has been described as a region with the same population as greater Leeds, but direct connectivity is always much superior for tourism or for economic success than connecting via another airport. Therefore, GB is well served, Europe less so, and long-haul destinations are not very well served at all.

We have discussed at some length public transport linkages over the next 15 years. One of the challenges we face is that the rail network is quite limited here. I will be quite open and say that we would encourage a rail link to Belfast City Airport. You could physically throw a stone from my office to the railway track. I have never done it, but that is how close we are to the line. It is literally at the other side of the dual carriageway.

A rail link would be detrimental to our business. The people who currently use our car park and pay for it, which I will come to, could then come by rail, but I can wear a bigger hat than that of my Belfast City Airport one. I think that greater joined-up transportation is good for us as a region, and we as a business support a transport link into the airport. However, it would not be the only transport link. We have good road access. We are on a major artery, and there are plans to widen the Sydenham bypass, but, for us, the main transport link is likely to be bus. There have been enhancements as we have grown, and we are now at a frequency of a bus every 20 minutes, and that will go down to a bus every 15 minutes. Translink is committed to moving to every 10 minutes if we bring the passenger volumes to support the linkages.

Finally, on taxation, it has been mentioned that the New York service accounts for just over 1% of Northern Ireland’s total passenger volumes. To date, the moves by the Government to retain the direct service to New York, although welcome, are doing me no good. If it ceased tomorrow, we would get at least 50% of the business. However, as a region, and with me again wearing my bigger hat, we welcome it, and we think that it is important for Northern Ireland to have that direct linkage to New York. However, the action that the Government have taken on air passenger duty has left 98% of our passengers unaffected.

We get the double dip, because if we are flying a return journey to Great Britain, we pay the tax either way, which is unique to Northern Ireland, and it would cost £50 million or £60 million to remove APD entirely. The Executive need to have an informed debate on whether that would stimulate the market and give you sufficient return. Could the Government work more effectively with the industry to try to secure those seven or eight main destinations in North America and Europe that are currently missing? Would that be a better way of spending the money? The support needed there is more like £10 million a year for a small number of years rather than £60 million a year ongoing.

In summary, we need to be crystal clear when we are talking about the air transport strategy and what is within the remit of government and what there is in an open and competitive market. We are very dependent on air access, so this is a vital subject for not just the airports but the region - a region that has targeted tourism. When it comes to all those issues, we have a close working association with the Northern Ireland Assembly. We have good access, and we will continue as an industry to try to leverage that and work effectively. Those are the key issues.

Q34 Naomi Long: Thanks, Brian. It is good to have you before the Committee to give evidence. You will excuse me for raising an issue that is a constituency interest: the situation with IAG having taken over bmi. Willie Walsh said that he is committed to the bmi service from Belfast City Airport to Heathrow and that it is secure. The EU Commission Directorate-General for Competition has given it protection, at least until October. However, redundancy notices have been issued to staff based at Belfast City Airport. That makes me nervous. I am not one of those staff, so I can only imagine how the people involved feel about that. How much confidence do you still have that the commitment to continue flying from Belfast City Airport to Heathrow is secure, given the importance that you have placed on Heathrow links?

Mr Ambrose: On the one hand, I am 100% confident, because the commitment is very explicit: the linkage will be retained. However, that could mean anything.

When you strip it back, business is not that complicated. Our job is to make sure that the passenger experience is a good one. We have invested heavily in infrastructure that has created a gateway. We get it wrong from time to time, but, generally, the airport proves to be a good experience for the customer. The security that we have has been achieved through demonstrating a demand for strong linkages between Belfast City Airport and London Heathrow. Some 35% of our passengers go on to interline, and those passengers are vital to any airline. I am very confident of our case, but, as I say to our shareholders who frequently asks me the same question, there is a difference between being confident and having something signed. The next few weeks are vital. I take a differing view from what you have heard in the past: frequency is important for point-to-point flights and for interlining. The route is very profitable, but that is not the issue.

We had a very good White Paper from government. I remember submitting to what turned into the 2003 aviation White Paper. It identified clearly the lack of capacity in the south-east and the need to expand Heathrow. Almost 10 years later, we are still where we were, with an airport running at full capacity. The end result is the things that you are now witnessing: pressure on Heathrow slots; and regions having to fight to protect connectivity. I am confident that we will have a good outcome, but the coming weeks will tell whether that impression is well founded or wishful thinking.

Q35 Naomi Long: I hope that it is the former and not the latter, Brian. I realise that there is commercial sensitivity around this, and I am not sure how explicit you can be, but how important is the bmi operation, as it was, for the financial implications for the airport more widely if the slots were to be reallocated and Belfast City Airport were to become a casualty of the process?

Mr Ambrose: At a human level, it is a difficult time for staff. There is uncertainty, and we are trying to support staff through that uncertainty. As I said, for a region that is so dependent on air access, it would be detrimental if we were saying to our passengers that we still have a service to Heathrow but that it is not as frequent. For you and me and everybody else who uses that service, you could end up at Heathrow after a delayed meeting, and, instead of waiting a maximum of a couple of hours for your flight, you could be sitting for three, four or five hours. It is not the end of the world, but it is not how you want to do business. Likewise, when we fly further afield, we try to make our connectivity to limit our time on the ground. None of us, including me, like to spend too much time in an airport, so it would be a retrograde step if we were not to retain the kind of frequency that we currently have. That is more than an opinion. That is coming through crystal clear from our customers, who are very explicitly telling us that frequency is vitally important for them, particularly for the business market, and less so for the leisure market, where waiting for an hour or so is less vital to us because we are in holiday mood.

Q36 Lady Hermon: Brian, are you able to confirm to the Committee that Mr Willie Walsh or someone from BA has been in touch with you to discuss the continuation of direct flights from Belfast City Airport to Heathrow?

Mr Ambrose: I am sure that all the players in this arena have been working, as I have been, behind the scenes to meet all of the key players and to try to ensure that we get a positive outcome. I do want to be explicit about who I have met and spoken to. What I have told our staff is what I can tell the Committee: we are working tirelessly to ensure that there is a positive outcome, first, for our business and, secondly, for the region.

Q37 Kris Hopkins: I have not been to your airport for about 20 years. I was so impressed by the massive transition that it has made in that time and by the excellent service that I have had on the two or three times that I have been there since. That is important to say. Northern Ireland has gone through massive transition since I was coming here more frequently, and, as a gateway to a city and a country, the airport is extremely impressive. You are right about trying to differentiate between government strategy and company strategy, but there is an issue about governments making choices in an informed way. I agree that this is possibly not the best arena in which to ask some the questions that we may be more informed about to make some of the choices and recommendations that we want to make.

As a company, you and your investors are taking risks. There is an issue of confidentiality, and I assure you that, as an individual, I do not want to do a big government job on a private business. If we are going to make recommendations and put forward a strategy, we need to know where the best deals are and where business sustainability is. That means lifting the blanket up a little bit and having a look and having some confidence in that. I want to reassure you that, after your initial statement, this is not about Big Brother coming along to stamp over loads of people who are taking risk and who really working hard to try to deliver a good product. It is about how we can better support you.

To that end, I will ask a difficult question. Recently, you announced that you were withdrawing the application to extend your runway. Why did you withdraw your application, and what are the implications? You might say, because of commercial confidentiality, "go away, I am not telling you".

Mr Ambrose: I appreciate the positive feedback, and, as someone who has never in my life done any job at the airport, I will pass on the positive comments to the staff. I have no problems with dealing the hard issues. I come back to my third point that there are three airports and that, with a blank sheet of paper, you would absolutely not start with three. One is supported by the region, and you are about to hear from that airport. It is none of my business if that region wishes to support an airport, and I wish it every success. The two Belfast airports are privately owned and profitable. I believe and argue strongly that competition has been good. That is shown statistically when you look at when there was only one airport. Monopolies are never good for business. I have not noted your third question.

Q38 Kris Hopkins: It was on the runway extension.

Mr Ambrose: I have said publicly that, some years ago, we covered practically every base in Great Britain, and competition helped to grow that pie. We believe that Europe would benefit from competition and that we can take 20% to 25% of that market.

We have been opposed in that legally. We had two live applications in the system: one, which we do not have time to bore you with today, is to remove a seat-for-sale restriction which is now eight years old; and we had a runway application which was in its fourth year. We have decided - and the wording was quite specific - to remove the current runway application as some of the details are now out of date. The Minister of the Environment has announced that the seats-for-sale application, the eight year old one, is going through another public process which he is targeting for this autumn and we will devote our energies to working that process. However, as a business, we still aspire to increase the city connectivity into mainland Europe and I am confident that at some time in the future a runway extension will facilitate that. However, we have removed the current runway application; we have not removed our ambition to expand into Europe.

Q39 David Simpson: You are very welcome, Brian. Kris asked a question earlier about the reliance of each of the two airports on one airline - yourselves on Flybe, and the International Airport on easyJet. Some of our questions will double up, obviously to get answers from the airports individually. In your opinion, is that a sustainable situation, or is there some avenue, and I think you mentioned at the very beginning in your opening comments, in your reference to the fact that the airports are owned by private companies and so it will be a company decision on all those things. Looking five or 10 years down the road, is it feasible that the two airports could share routes internationally or domestically, split them, or do something in order to make them viable? I would like to hear your view on that.

Mr Ambrose: Your question has two parts. I would prefer not to be as dependent on one customer; that is basic business practice. One of the reasons for it is that such dependence is not unusual. You will find that City of Derry Airport is pretty dependent on a single customer. For airports of our size, it is not that unusual, in that there are not so many competitors any more. A lot of airlines have gone to the wall in the last 15 years. There are a few dominant players left. When you lose a route, and you try to find an airline to replace it, the list is much shorter than it used to be. However, we have demonstrated that we have a gateway that is no longer an embarrassment to us, and we are speaking to a number of airlines. Five years from now, we do expect not to be so dependent on a single airline. So that is an objective.

As to airports working together, the market carves itself up quite well by default rather than design. Belfast International Airport has almost a monopoly in the freight market. We will not compete in that market. It generally requires older aircraft and aircraft to operate at very late hours and through the night. There is no constraint from our side to stop Belfast International growing that market however they can. We are not in competition for long-haul business, so any aspiration that Belfast International has to go into Canada, the Middle East or anywhere else goes with our blessing and best wishes. We wish them well in that. We will not compete in the long-haul market.

The Great Britain market is certainly big enough for competition between the airports and, if you look, there are 30 or 40 flights per day going into London between us. That is good for the region and it is important that customers have choice. It is also our belief that Europe is a big enough market to withstand competition and that the competition will grow the pie. It is a myth that anything that we do in the competition for the short-haul market is in any way preventing the development of that long-haul market. We have said publicly that we are not interested in the long-haul market. The biggest constraint in developing that market is our catchment. So, though we have a population of 1·7 million, you can make it bigger than that. The road to Dublin goes north and south, and we all aspire to encourage people to take advantage of driving north as well as south. Even if you closed the City Airport tomorrow, it would make no difference to those markets because we are not competing, we are not in them and they are not our territory.

Q40 Nigel Mills: We have heard a lot of talk about Heathrow as the hub airport. Can you update the Committee on whether the Flybe regional hub at Manchester has made any difference to your passenger numbers?

Mr Ambrose: Yes. I spoke with Flybe this week, and the short-term feedback is that it has seen significant growth on some routes using Manchester as a domestic hub, which Flybe is going to develop further. It is probably early days to be definitive with facts and figures, although Flybe threw some our way, but Flybe is trying to promote the idea that, because of congestion in the south-east, you can connect through Manchester to a reasonable range of destinations. Again, however, with its range of choices, Heathrow overshadows everywhere else. I think that the regional hub at Manchester is a welcome development that will make a positive contribution, possibly more on the margins than in the mainstream, but it is early days.

Q41 Naomi Long: We talked earlier about air passenger duty and the fact that it affects about only 2% of Northern Ireland passengers. With the probable devolution of APD to the Assembly, have Executive Ministers indicated to you that they would be willing to look at significant reduction in APD, which would impact on a wider passenger group?

Mr Ambrose: I think that representatives from all three airports appeared last week before the Finance and Personnel Committee, which is specifically looking into that. As I see it, the matter is being considered. The issue for the Executive is that the Government nationally have decided not to follow the example of the Netherlands or Republic of Ireland. If they had followed their lead, the Treasury would have taken the hit. Now that it looks like becoming a devolved issue, however, the conversation for the Executive is about where to find that £60 million a year; would taking it from Health, Education or other Departments be a good use of their moneys? I do not think that enough work has been done to allow the Finance Minister or others to make a really informed decision.

The difficulty is that a number of factors led to the doubling of passenger numbers during the decade 1997 to 2007. There was a booming economy, the peace process was kicking in, tourism had early success and there was favourable taxation. Improving one of those elements does not guarantee a full reverse of the trend. However, anything short of removal will be incremental and have no real impact at all. The fact that the Irish Government have not only reduced it but ring-fenced and are redeploying those moneys into access and tourism is to be welcomed. We welcomed some short-term measures by the Executive last year, whereby money returned by Invest Northern Ireland (INI) was redeployed - about £4·75 million - into promoting Northern Ireland and Great Britain. We welcomed that step. There is a debate to be had in the Executive.

I understand that £60 million would be the cost of removing the duty entirely. However, we suggested in our evidence last week that there are a number of ways in which Government can help positively, of which that is one. Another is to actively work with the industry - not necessarily through establishing an air route development fund, which may run into state-aid rules - to help us promote some of these new routes. For Government, that is a real role with a lasting legacy that you can list for yourselves: routes to Frankfurt, Madrid and Toronto would be great gains to the region as a whole and would not cost a huge amount.

Q42 Naomi Long: You give a couple of options - eliminate or significantly reduce APD or do these other things. Is your first choice still the removal of APD? Do you still think that that is the main lever? Would you support working with other airports to lobby the Executive for that? Are your other suggestions merely a pragmatic response because you are concerned that they will not be able to find those costs? Or do you genuinely believe that removing APD is the only option and there may be better ones on the table?

Mr Ambrose: It is yes and yes: my clear and consistent position for the airport is that the only way to make a major impact is to remove the duty in its entirety. Anything else is just playing on the fringes and will not make any impact.

You are quite right to say that I am also pragmatic. If that ain’t going to happen - although we are not at that point yet - we have raised other ways in which we could work more effectively with the Assembly. However, unequivocally, we are saying that if you want to make a serious effort at recovering those million passengers and more, if you seriously want to grow inbound tourism and help local companies to export, the only meaningful measure that will have a material impact is the complete removal of APD. What has happened to date, while welcome, has left 98% of the problem totally untouched.

Q43 Mr Anderson: To go back to the discussion that we had earlier about the railways, I understand that an increase - or start - in railway usage would have an impact on the income of your car parks, but has anybody in Government or in your business done any real work on whether it is a viable option? Has any work been done on the cost of converting stations near at hand, what the capacity would be, and whether there would be any disruption to normal services, or are people just talking about it?

Mr Ambrose: Work has been done by successive Ministers in the Department.

Mr Anderson: That sounds so familiar.

Mr Ambrose: I can write the script now. What happens is that Ministers will visit the airport and stand in my office, which overlooks the railway line - I have a great view - and they will become enthused about the idea of linking up. However, before they leave the office, I will tell them that their officials will say that, using traditional rail metrics, there are not sufficient passengers using the City Airport to justify a rail halt. The officials will do the sums, quite rightly, and say that they have used the rail metric sums that they have been taught and trained to use, and they cannot justify a rail halt. It is a chicken-and-egg situation.

Of course, there are not sufficient numbers using it. People have to get off a half a mile from the airport, walk over a non-covered footbridge with their luggage, possibly in the rain, press a little button and wait for our courtesy bus to pick them up and take them to the terminal. The only people who currently use that are a few students and folks who are very price sensitive. Therefore, until you make the proposition attractive, nobody is going to use rail, and you will never justify the halt.

The vision that I have proposed to successive Ministers is that we are talking about less than £10 million, so, go for it and put the halt in. I will sacrifice my office, and the covered walkway can be brought right to the front door of the terminal. That will encourage people on to public transport and out of the car. Anything short of that will not work. However, as I said, it is a well-rehearsed answer. I have had it with four different Ministers, and we still face the situation in which the Department comes back and says that a halt cannot be justified.

Q44 Mr Anderson: Has that been worked up formally?

Mr Ambrose: It has been worked up formally by departmental officials. They will come up with some measure to say that if there are x number of people a year wanting to stop at that point, it justifies a new halt. However, the reason why that will never get there is that the proposition is so unattractive. Less than 1% of our passengers currently come by rail. It is negligible.

Mr Anderson: I understand. However, if we were to take that attitude, none of the things would ever have been done around the Heathrow Express.

Q45 Dr McDonnell: Brian, you are welcome. Thank you for all the information and evidence that you have provided. Is your company in a position to make a contribution to that £10 million, or would it all be Government money?

Mr Ambrose: We have agreed in principle to make a contribution. It will provide us with a superior product. However, there is a conditioned expectation. We will have to go to shareholders and say that we want them to contribute to something that will cost us in the long run. However, we are willing to have a joined-up approach, as we did with the underpass. The airport made a contribution to allow traffic going to Belfast to not interrupt traffic flows on the Sydenham bypass. Therefore, we have agreed in principle, but we have conditioned it to say that the bulk of the investment would have to come from the Executive. However, it is a modest expenditure.

Q46 Kris Hopkins: How do you respond to recent criticism that all three Northern Ireland airports, but, particularly, the City Airport, have some of the highest car parking rates in the UK?

Mr Ambrose: We were asked the same question formally by the Consumer Council, and we are putting a robust response together. Airport car parking is expensive, as is downtown parking. We have always tracked what other airports are charging and what downtown Belfast is charging. In our response to the Consumer Council, we will demonstrate that we are completely competitive with the marketplace, although you can of course cherry-pick some aspects.

We have a wide range of offers. You can park for a week for £30, which I think is pretty competitive no matter how you look at it. A holidaymaker who wants to park his car for a week can do so for £30. However, if a business user wants to use the short-stay car park overnight, that is expensive, but no more expensive than it is in other car parks in the city or if you take a holistic comparison across the UK.

Like the previous contributor, I would be more than happy to reduce car-parking fees significantly, but the moneys we make from aviation revenue are now only around half of our total income. Shops and car parks are the other two sources. If you look at the published accounts, none of the businesses that will appear before the Committee today are making bucketloads of money, but frankly, I think car parking is very expensive and we aspire to reducing it. However, we are owned by an international shareholder who frequently demonstrates that, unlike the figures that were presented, we are far from being the most expensive and are in the lower half of the table. When we give our considered response to the Consumer Council, I am happy to share it with the Committee if it would be of interest.

Kris Hopkins: I presume that they asked the other airports for a similar kind of response - there is a nod coming from over there. We could ask for that evidence or for that note to contribute to our piece of work.

Q47 Nigel Mills: I refer you to the Civil Aviation Bill that is working its way through Parliament; do you have any comments or concerns on the changes proposed therein?

Mr Ambrose: The concise answer is that I think John has articulated the issues as we see them. We concur with his views. Rather than repeat them, I am happy to say that we view the issues in the same way as has just been documented here.

Chair: Are there any more questions?

Q48 Lady Hermon: Chairman, having given my very frank views about car parking and the £1 charge at Belfast International Airport, I will repeat the words of our Finance Minister, Sammy Wilson. Correct me if I am wrong, but I think Sammy described the short-term car-parking charge at Belfast City Airport as outrageous. Are you suggesting that our Finance Minister is wrong?

Mr Ambrose: If he views the short-term charges in all car parks as outrageous, then I concur with him. My view is simply to make sure that we are aligned with the marketplace. As far as the £1 issue is concerned, the comment was made that many airports are introducing this charge. It is a potential revenue stream and, again, our international shareholders are asking why we have not introduced it. I would prefer not to do so. I think it will take away from the service that we provide, but if the rest of the market takes that route of finding another revenue source, you cannot guarantee for ever that we will not end up going down there. At the minute, whether it is the £1 charge or the cost of short-stay car parks, we benchmark ourselves against the industry. I believe the evidence we provided to the Consumer Council put us in a very good place.

Q49 Lady Hermon: In the short term, do you have any intention of introducing a £1 charge just to come in and drop your child off?

Mr Ambrose: I have none, but I get beaten up at every quarterly board meeting and I may give in one of these days. However, at the moment, there are no plans to introduce a £1 charge at Belfast City Airport.

Lady Hermon: Thank you. I am very relieved to hear that.

Q50 Chair: On parking, I think you referred to the remaining APD a couple of times. It is relatively small compared to parking charges, though, so if that is a deterrent, then the car-parking charges must be a deterrent.

Mr Ambrose: Only 5% of our passengers use the car park, so it is a customer choice issue. One-hundred per cent of our customers pay the airport departure tax; that is not voluntary.

Q51 Chair: You do not know the views of those who do not use the car park, do you?

Mr Ambrose: It is an argument that we look at frequently; could we change the rationale completely and start to attract people? However, there is a culture in Northern Ireland, as members of this panel who live here will know, of dropping off and picking up more so than in most other airports. That is also because our location is fairly convenient. We tend to get that more than most because we are a couple of miles from the city centre.

Q52 Chair: I am not suggesting that it is only your airport. I will fly from Birmingham to Dublin on Thursday and the car park will cost me more than the flight. I am not suggesting that only your airport is at fault. It is an issue.

Mr Ambrose: Yes. As I say, if you nip to downtown Belfast this afternoon and go shopping for two or three hours, you will gasp when you put your ticket into the machine. The few pounds in your pocket will not cover it. You need to take out a credit card or a banknote.

Q53 Chair: There are no other questions. Is there anything else you would like to add, Mr Ambrose?

Mr Ambrose: No. Thank you very much.

Chair: Thank you very much indeed.

Examination of Witnesses

Witnesses: Mr Clive Coleman, Technical Director, Parsons Brinckerhoff; and Mr Albert Harrison OBE, Non-executive Director, and Mr Damien Tierney, Managing Director, City of Derry Airport, gave evidence.

Q54 Chair: Gentlemen, you are very welcome. Thank you for joining us. Mr Tierney, will you introduce your colleagues and make an opening statement, please?

Mr Tierney: I will certainly introduce my colleagues. Albert Harrison is one of our non-executive directors and is probably the only person in Northern Ireland who can claim to have operated as chief executive of all three airports here at one stage or another in his career. The colleague on my right is Clive Coleman.

In its wisdom, as part of the restructuring arrangements for City of Derry Airport, Derry City Council has entered into a partnership with Regional and City Airports, which is a subsidiary of Balfour Beatty in the UK. It runs a couple of other airports in the UK, including Exeter and Blackpool. It has been given the management services contract to run the City of Derry Airport for the next five years initially and possibly beyond that. I am managing director of the airport.

Albert will make the opening statement. We will take questions thereafter.

Mr Harrison: Thank you very much for inviting us. I will keep my opening comments fairly brief, and then I would like to respond to some of the questions and pass comments on what my colleagues have said, giving you time to think about it and come back to me.

Basically, the 2003 White Paper set the scene for the airports in Northern Ireland. It said that all three airports were important to the development of air transport in the Province. Since 2003, each airport has made considerable improvements in infrastructure. We have seen an improvement in the number of passengers coming through. Certainly, customer services have improved at all three airports. City of Derry Airport (CODA) has been commercialised and is now a commercial organisation set aside from Derry City Council, so that, in the future, if it turns profitable, hopefully someone will buy it and I can retire.

I agree with a lot of what has been said. One theme that is coming through is that air links for Northern Ireland are essential. They are not a luxury. Without air links, this place will cease to exist. I will bet you that no one at this Table came across by ship or boat. It is impossible to get a train or to drive.

We have one major issue that I do not think my colleagues commented on sufficiently. It is that we are connected to, and on the same island as, the Republic of Ireland. Dublin Airport is a two-hour drive away. The Government there are extremely proactive in doing everything they can to boost aviation. In the past, they have given 95% grant aid to anything where facilities need to be improved for security, and 75% for growth. We have talked about the €3. They have reduced the airport departure tax because they saw that it had an impact on tourism. Tourism in the South of Ireland is double the impact of what we achieve here in percentage terms: our tourism is about 1·9% worth our growth domestic product (GDP), whereas the South’s is 3·7%.

Dublin Airport sees Northern Ireland as part of its catchment area. Ireland West Airport Knock sees Donegal, Fermanagh and most of the north-west as part of its catchment area. The latest estimates are that around 1·5 million people a year leave Northern Ireland to fly out of Dublin Airport. Even Brian Ambrose said that he drives to Dublin in order to get a direct flight. John Doran was correct in saying that its numbers have fallen substantially, but, at its peak, Dublin Airport had 23 million passengers. That figure has now dropped to 18·4 million, which is far better than the three airports in the North put together. The Irish Government have done everything that they can to boost aviation in the South. However, airport departure tax will have a negative impact on tourism, business, connectivity and everything else.

I will address some of the questions that were asked. The general rule of thumb is that around 10 million passengers are needed for a rail line to work. We are not in that bracket. Belfast City Airport might be able to use it, but a bus service for Belfast International Airport is far better in the long run. If you were to spend £98 million on the infrastructure, the problem would then be the running costs. How long would you be prepared to wait for a train at an airport? You might wait 15 or 20 minutes, and, if you want to wait for an hour, that is fine, but the more frequent the service, the higher the running costs. Therefore, putting in the infrastructure is fine, because £98 million is not a huge amount of money, but the ongoing running costs would be substantial.

Greater Leeds was mentioned by way of comparison. Northern Ireland is a small place, but you can drive or get a train from Leeds to London. The propensity to travel out of this place is probably about four times that of Leeds. Therefore, if you look at our 1·7 million catchment area, you probably need to multiply it by a factor of two or three in order to take into consideration the frequency of travel.

Brian mentioned the €3 charge at Dublin Airport. That €3, we believe, has been pumped back into a route development fund. If you look at the way in which Knock airport has grown and at the number of services that it is going to have this year, it will have possibly 600,000 passengers. Knock airport’s catchment area is sparse, but it has been able to achieve those figures predominantly through some sort of route development fund.

Heathrow is important to Northern Ireland. I am old enough to remember Belfast International Airport when it was government-controlled. Two airlines flew out of it, and there were around 1·5 million passengers a year. There are now probably around one million passengers. Therefore, the dependency on Heathrow is not as big as it used to be.

On government versus company, I tend to agree with Brian that government can help with certain things, but there are other things that have to be left to companies to sort out. If you go back to the original public inquiry when Belfast City Airport was trying to expand, the limits that Brian was talking about were put in. Brian has quite cleverly managed to move his way around them over the years. Planning is still an issue in Northern Ireland. Joined-up government thinking with planning would help things considerably.

Frequency is important. If bigger aircraft come, that could have an impact on Belfast City Airport, depending on the size of the aircraft.

We have talked about air passenger duty. I will mention three things that I would like to see and then shut up. We would like to see a strategy, something done about airport departure tax, and some joined-up thinking to try to get APD down to zero would be extremely useful. All three airports are working on that together. We have had a lunch or two, and it is the three airports’ intention to try to approach government at the end of this month or in early May with proposals on where we think an air route development fund would work. I understand that there are state rules, but there are ways and means around those, as some of our sister and neighbouring countries have found. Therefore, we are agreed on the need for a strategy. We would like a route development fund set up, because it worked in the past. I was at Belfast International Airport - I actually employed John - when air route development kicked in. It has been worth it for Northern Ireland plc, and an air route development fund for long-haul flights, such as Emirates to the Middle East or a Toronto flight, would be well worth it.

Q55 Lady Hermon: May I clarify one point, Mr Harrison? This is very interesting because none of the other gentlemen mentioned it. You explained that there will be a joint approach and a presentation by all three of the airports to government. Do you mean to the Northern Ireland Executive?

Mr Harrison: To the Northern Ireland Executive, not to the UK Government.

Lady Hermon: Thank you.

Q56 Dr McDonnell: I am very interested in your reference to Dublin Airport. It is a point with which I fully agree. Are you suggesting that we may be looking at this with only one eye if we do not, somehow or other, take Dublin into consideration?

Mr Harrison: Very much so. We talk about road infrastructure and all the rest of it. You can get a bus from Belfast city centre to Dublin Airport from 6.00 am to 6.00 pm every day, and there are 12 buses a day. That service delivers capacity of 500,000 seats. I am not sure about weekends, when the service may ease off a bit. That is a lot of capacity, and even if you allow for a 75% load factor, it means that more than 300,000 people can use the bus. If I were to ask everyone present who lives in Northern Ireland to raise their hand if they do not know anyone who has flown out of Dublin, I would be very surprised to see any hands raised.

Dr McDonnell: It costs only €10 or €12 for the bus.

Mr Harrison: Yes, it is cheap. Therefore, we believe that a considerable number of people go out of Dublin. One and a half million passengers equates to 1,500 jobs. As John said, there are around 4,500 people employed at Belfast International Airport and around 4·5 million people use the airport. In its heyday, 5·5 million used it. It is roughly right to say that one million passengers equates to 1,000 jobs, so 1,000 jobs are missing from Northern Ireland’s airports through losing those one million passengers. When tourism, and so on, is added to that - Clive can help me here - you are looking at a loss of around 3,000 jobs to the wider economy.

Q57 David Simpson: I have a couple of questions. One of them is a repeat question to which I need a response from the airport’s representatives. Mr Coleman, I assume that the organisation that you represent is involved in the refurbishment of the airport? Its facilities, infrastructure and all that. Can you give us an update on the progress being made or tell us how things are moving?

Mr Coleman: We are not involved in that. Balfour Beatty has a small airport-operating company called Regional and City Airports, which owns a couple of airports in England and has an operating arm. One of our contracts is, as Damien said, to operate City of Derry Airport initially for five years. Although we are a part of a major contractor, our contract with Derry City Council is not for refurbishment.

However, I can say that, since the difficulties that City of Derry Airport had in 2007-08, a considerable investment has been made in that airport, both physically on the runway and taxiways and in air navigation systems to improve the condition of the airport, achieve its licensing and, especially, the continuation of its civil aviation license, and make some improvements in the terminal. That expenditure is just about at the end. There is one more project to carry out, which is to provide landing lights at one end of the runway. That should be completed this year.

Q58 David Simpson: I am sorry about that. My information was that your company is involved in the refurbishment. However, that is fine. It is good to know the background.

Gentlemen, I should have said at the start that you are very welcome. The other two airports’ management teams were asked a question on their reliance on a single airline. Your airport relies on Ryanair. What is your view on that for the long term? Is your management actively looking for other carriers?

Mr Tierney: As the other two managing directors rightly said, no airport wants to be dependent on a single carrier if it can avoid it. However, for airports of our size, and even for those as large as Belfast International Airport in the UK and beyond, one tends to find that there is a dominant carrier. That situation is simply down to the fact that there are fewer airlines around. When there is a dominant carrier in an airport, it tends to put off other operations from coming in, because they would come in at much smaller level of operation and have to start from scratch. It is difficult to attract other operators, especially when you have a big carrier such as Ryanair or easyJet in the market.

Having said that, I am sure that the other two airports are in exactly the same position, because we are all in the market to attract other carriers. We would all like to have a much wider spread of carriers, and trying to attract them is something that we do as part of our normal route development structure. However, in the medium to longer term, although that is a goal, the chances are that we will have a prominent carrier for some time to come.

Q59 David Simpson: Brian Ambrose talked about cargo-carrying at Belfast International Airport. You are a fair distance away from that airport. Is your airport involved in any of that cargo-carrying?

Mr Tierney: No, there has been a shift in how cargo operations are managed around the world. Hub airports tend to manage the cargo into a region, after which it is taken off and put on to the road networks. To be honest, the amount of investment that would have to be made at our airport, for example, to put in a freight base would be prohibitive for the amount of freight that we would get. Therefore, it is unlikely that we would enter that market. It will probably be Belfast International Airport’s baby for some time to come.

Q60 David Simpson: To finish, how many passengers did you have in the past financial year?

Mr Coleman: We had 412,000 passengers.

I will add a little bit more about route development. As Damien said, we are currently all out in the marketplace. At any time over the past two years, we have been speaking to 12 carriers and operators. These are difficult times. We all know that there has been great consolidation in the airline industry, and it is fairly obvious that one of the easiest ways of losing money is to operate an airline. Most airlines are very risk-averse at the moment.

If you go back to the early 2000s, a lot of airlines would have allowed one or two years to start a route, lose money and then make it profitable. Most airlines now will have no incubation period, and it is very difficult to attract them. Hopefully, as economic circumstances improve and markets become a little bit less price-sensitive, airlines will come back, but it is a very difficult marketplace at the moment. We probably spend between one and a half and two man years in a team each year on actively pursuing group development. However, that is very difficult when the market is price-sensitive and fuel prices are high. For a number of the carriers, it is because of APD, unfortunately. For example, the choice of two of the carriers was to concentrate on running service into Knock airport rather than into City of Derry Airport.

Mr Harrison: Basically, Ryanair has stated that if APD continues as it is, it will not be growing in the United Kingdom; it will be growing in Europe instead.

Q61 Nigel Mills: In your submission, you raise the issue of redirecting point-to-point flights from Heathrow to Gatwick to get some extra capacity into Heathrow. However, you raise some concerns about the implications of Gatwick pursuing a strategy of being a hub of its own. Will you talk us through those concerns and how you think they might play out?

Mr Coleman: The point that we were trying to make is twofold. First, Northern Ireland traffic into London should not just concentrate on Heathrow, because there are other airports. If you are going to certain parts of London, such as the City rather than the West End, Gatwick is a better option. The concern that we have is that Heathrow, under its new owners, Global Infrastructure Partners (GIP), has invested well and turned it into a very nice airport. The aim is to make Heathrow a hub for Middle East traffic, with a couple of the big Middle East carriers being based there.

The airport changed its pricing regime in April 2011, which led to some fairly significant increases in the tariff for aircraft of sub-110-seater size. Our concern is not an immediate one, but looking to the medium term, that might squeeze out some of the short-haul operators. If that happens, the airlines will probably look at what their most profitable routes are, and could squeeze out some of the intra-UK short-haul flights. That might have an implication for Northern Ireland, and it might have an implication for some other UK regional routes.

Q62 Mr Anderson: Can I ask about getting support from the Government to keep services going?

The example on the mainland is that of people flying from the Scottish highlands and islands getting assistance under a public service obligation (PSO). Have you considered asking for that, particularly for the route to Stansted?

Mr Tierney: We have not asked for that explicitly. The UK Government have made it clear that the only PSO routes that they would consider are the highlands and islands routes. Whether Northern Ireland could be considered in the same light is debateable. However, we have made the argument when discussing APD that we have an exceptional set of circumstances here that makes us different from the other UK regions. We do not have road and rail links, and we have the added difficulty of a competitor on our doorstep with a different tax regime. Those issues do make our argument slightly different from that of the other UK regions.

That is part of the reason that we think there should be a separate aviation strategy for Northern Ireland, whether contained in the wider UK framework document or sitting alongside it. There are issues affecting us that do not affect the rest of the UK, perhaps not quite to the extent of issues affecting the highlands and islands, with their obvious remoteness and lack of connectivity. However, the two are certainly similar.

Q63 Mr Anderson: I think that I am right in assuming that you used to have a PSO in place for flights from City of Derry Airport into Dublin but that the Irish Republic decided that that was not going to continue. Would that be something that you could raise with the UK Government if, given what you have just said, you can get them to accept that there is a clear difference here? For example, I live in a region that is similar in size to Northern Ireland, and that has Newcastle Airport and Durham Tees Valley Airport. There is an argument about how well Durham Tees Valley Airport can compete, particularly after it lost the flights to London. There are clearly huge differences in the relationship. Would you raise the point that Dublin is as important in reaching the next step for people from this part of the world as London is to people from my part of the world?

Mr Tierney: The Irish Government took a view on PSO routes from Dublin to all its regional centres, or as many regional centres as it could. The Republic has now retrenched, and there are now only two PSO routes in the Irish Republic.

The UK Government never had the same appetite for PSO-type operations. Bearing in mind that we have a twice-daily operation to Stansted with a commercial carrier, it would be difficult to persuade the UK Government to look at it as a PSO route, as someone is already prepared to do it without a PSO. If that service were to be lost, we would have to examine that, but it is not something that we would look at at this stage.

Q64 Naomi Long: Thank you, gentleman. It has been very useful to hear your evidence so far. We noted that you and the two Belfast airports are working on a proposal to put to the Executive asking for support for some form of redevelopment fund.

I suppose that this is the same question that I asked Brian: is your priority still the removal of APD? Is this simply a pragmatic response to the fact that you feel that the Executive may struggle to fund that removal, or would your preferred option be to have APD remain in place or be reduced slightly, with some sort of route development fund used as an alternative? I am simply trying to determine what your preferred option is.

Mr Harrison: I would prefer both; I would put both options on the table. To return the Continental Airlines issue, John is right, in that Belfast International Airport put in around £4 million of its own money, the Government put in £1 million, and the return has been £100 million. We need to encourage airlines to come. With a bit of luck, having an air route development fund could very well attract an Etihad Airways or a Qatar Airways to fly to the Middle East, where there are big hubs that could service all of Asia and New Zealand and Australia, thereby reducing the need to go via Heathrow.

Again, Toronto would be quite useful, as the number of tourists whom we get from Canada is substantial. Air route development funds help prove to an airline that the route is commercially viable, which is essential. The key word is "development". A development fund would help the airline to develop the route.

If we slap on a large APD, that does not constitute development; rather, it is restrictive and will impact on the number of people who can afford to come to Northern Ireland.

I went to a wedding recently. A chap and his wife beside me had travelled from Delhi. I asked whether they had come via Heathrow, but they told me that they had come via the Middle East to Dublin and got a car up because it was much cheaper. Those are two passengers that we could have had, but they found a more economical route.

I will use flights to Johannesburg as an example of what is available on some websites. If I want to fly from Belfast to Heathrow to Johannesburg, it can cost me £x. If I fly on the same airline from Dublin to Heathrow and connect with the same flight, the Dublin flight is always considerably cheaper. That either means that the airline is doing extremely well out of Belfast to Heathrow or, overall, the whole route is considerably cheaper, because both are connecting with South African Airways out of Heathrow. People will go to where it is cheapest. To answer your question: both, please.

Q65 Naomi Long: You obviously remain committed to the Committee’s view that the removal of APD is a major factor in trying to stimulate growth in the aviation sector. That is very helpful.

Mr Harrison: We live in a very price-sensitive market. In the current economic climate, disposable incomes are not as high as they used to be, and that will have a negative impact on people’s willingness to travel.

Mr Tierney: APD is restricting growth in the market as it is. Our primary carrier is Ryanair, and we have had discussions with it over the past two years about developing routes out of City of Derry Airport. It has told us quite clearly that routes into the UK will not be developed any further than they are currently and that there may be retrenchment. Ryanair has pulled 18% of seat capacity out of the UK, year on year, for the past two years, and it has moved that off to Spain and Germany, where there APD is less. Ryanair is a profit-driven organisation, so it will move to where it can make more money. A tax of £26 on a return seat from City of Derry Airport to London Stansted is a lot of money, when you consider that the average fare that Ryanair charges is probably £60 or £70. Therefore, £26 on top of that is a lot of money. The fact that APD is restricting growth is in itself a problem. Ryanair is not on its own on this. easyJet will be in the same position, as will Flybe. As it stands, the fact that APD is there is restricting growth into and out of Northern Ireland.

Q66 Lady Hermon: Is air passenger duty the one critical reason that Ryanair has given?

Mr Tierney: Every single conversation that we have with Ryanair starts with APD. We are asked whether there has been any movement on APD or whether the Northern Ireland Assembly is going to make any changes to APD. Ryanair says that it cannot grow until the situation changes.

Obviously, Ryanair is having a much bigger argument about APD with the UK Government, but, in so far as our growth is concerned, it is about what the Northern Ireland Assembly can do, because there are moves to devolve the charge. Ryanair wants to know how that is developing. As Brian and John said, the steps being considered by the Assembly on band B air passenger duty would be very welcome for Northern Ireland plc but would do very little for us as an airport and for 98% of the passengers who fly back and forward from the UK.

Q67 Lady Hermon: That is the position for Ryanair on APD. I would like clarity on something that Mr Coleman said around 10 minutes ago. Am I right in thinking that the sole and main deterrent for new carriers coming in is APD?

Mr Coleman: It varies. Yes, that is the case for some of the carriers, but there are a range of factors for other carriers. Take Flybe, for example. It operated a very short series from City of Derry Airport last year. It operated for four months, and that was all that it was guaranteed to operate for. It looked at it again this year, but it had other options, one of which was to go to Knock, and, because of APD, it chose Knock.

Lady Hermon: Thank you. That is very worrying.

Q68 Dr McDonnell: Thank you for your evidence so far, which has been excellent. I want to return to the subject of rail access. I know that you have heard it twice already and that you mentioned it in your written evidence. Rail access is almost non-existent, despite the fact that main railway lines are on the doorstep, as it were, of each of the three airports. I think that you intimated that efforts to rectify that have been difficult and may have been met with a degree of intransigence on the part of the Department for Regional Development (DRD). Did you approach the Department on the basis of a united effort by all three airports or on your own?

Mr Tierney: To be honest, I do not think that a united approach has been made to the Department. I think that it was Brian who said that any time that rail links are mentioned at all, we get the same response from politicians, who, when they see how close railway lines come to the three airports, are usually quite in favour of saying that we should consider having rail links.

There are issues with departmental officials, who quite rightly go back to their investment criteria guidelines and respond that an airport should have 10 million passengers before a rail link can be justified. Bearing in mind the very close proximity of rail lines to some airports here, it could be looked at in slightly more detail before a no is given.

I am not for one instant saying that all three airports should have a rail link. In our case, for example, although the railway runs literally metres from the end of our runway, it is still about half a mile away from our terminal. Therefore, it would be quite difficult to put in a rail link that would be in any way justifiable in cost terms. However, Belfast City Airport, which has a railway line very close, could be a case in which rail is a justifiable option. It cannot be ruled out of hand simply on the basis of the 10 million passengers rule; otherwise, there would be no option at all for a rail link at any airport in Northern Ireland.

Q69 Kris Hopkins: I have been given the challenge of grilling everybody on car parking.

Lady Hermon: We know that you are up to the task, Kris.

Kris Hopkins: I think that you will have heard the question before. [Laughter.]

Mr Harrison: We answered it when you stepped out. [Laughter.]

Kris Hopkins: I am sorry that I had to step out; my apologies. I will read your responses to the other questions. All three NI airports have recently been criticised for setting some of the highest rates in the United Kingdom for passengers parking their car. How do you respond to such criticism?

Mr Tierney: We had a meeting with the Consumer Council in January to discuss that very issue. The recent report that it gave to the media fuelled the debate that we are now having. In our discussions with the Consumer Council, we outlined many of the reasons why we believe that our car parking fees and charges are as fair and reasonable as they can be, bearing in mind what we are doing at the airport. All the arguments that John and Brian made about costs are very valid. We echo those arguments 100%. We are responding in written form to the Consumer Council about a request that it made just last week. If the Committee would like a copy of that evidence, we are quite happy to pass it on.

Car parking has to be an element of the overall cost of flying, because it is all part of the same package. When you go to the airport, you book your parking, book your ticket and move on. When you consider what people were paying to get in and out of Northern Ireland 15 years ago, before the rise of low-cost airlines, you were paying significantly more than you are paying now for your ticket. Brian mentioned that. A lot of airports, including ours, were offering free car parking at that time because the airlines were paying us significantly more than they are now.

As a commercial organisation, however, and part of the reason that Regional and City Airports has been brought on board, is to commercialise how City of Derry Airport operates. As a council-run airport before, it was very much about providing services and it was not very good at providing any commercial activity. We have to justify every single penny that we take from Derry City Council ratepayers. The thing about a car parking charge is that it makes the user pay. Those who use the airport pay for the facilities.

When you combine the current cost of car parking with the ticket cost from a low-cost airline, it is still significantly cheaper to travel in and out of Northern Ireland than it was 15 years ago. Car parking cannot be seen on its own. It has to be seen as part of the overall package.

Q70 Lady Hermon: On quite a number of occasions, comparisons have been made with Knock airport. Is there free car parking at Knock?

Mr Tierney: No.

Q71 Lady Hermon: How do your charges compare with those of Knock?

Mr Tierney: They are very similar. Only recently, we were at Knock airport and met its directors and managing director. Their charges are very similar to ours, except that they are priced in euros. So, if it is €35 for a week’s parking there, it is £35 here. It is very similar, allowing for the euro differential.

Q72 Lady Hermon: Did you pitch it at that to make it competitive with Knock?

Mr Tierney: No. Until now, our car parking charges have been set on the basis of competition within Northern Ireland. Obviously, as Knock has risen over the past 18 months to be more of a competitor for us, that competition may drive our prices. That is something that we, as a company, will take account of. Until now, our prices are based on the Northern Ireland market, not on the Republic of Ireland market.

Q73 Lady Hermon: Do you have long-stay and short-stay car parks? Do you have the awful £1 charge that they have at Belfast International Airport?

Mr Coleman: No, we do not.

Lady Hermon: Bless you.

Mr Coleman: There are no plans to introduce it, simply because we believe that it would cause chaos in the surrounding roads.

Lady Hermon: That is excellent. I will have to come and visit now. I might not fly, but I will come and visit.

Mr Coleman: City of Derry Airport is a little unusual in that it has really got only one car park. Most airports, as you said, have a short-stay car park close to the terminal and a long-stay car park that is remote. Due to our size, the car parking is all in front of the terminal. Long-stay parking is done, in effect, in the short-stay car park. It is very close.

As Damien said, over the past year, we have tried to change our commercial approach. Until about six months ago, we really had only a turn-up-and-pay price or a phone-up-and-book-the-day-before price. We are now similar to other airports in that we have a web-based booking engine, and the further in advance you book, the cheaper it becomes. For this summer, our prices include car parking for only £3·75 a day. So, for certain tariffs for certain long-term stays booked well in advance, we are below the prices that the Consumer Council has cherry-picked from Cardiff Airport, I think it was, for comparison.

Q74 Lady Hermon: For all the celebrations for Derry city being the UK City of Culture, will adaptations - reductions - be made at the airport?

Mr Coleman: We are looking at that. We are also looking at the ability to use the airport car park in the quieter winter periods as a park-and-ride facility for journeys into the city. We are looking at those kinds of options. We are working very closely with the City of Culture team and certain airlines on how we can use the airport as a gateway into the celebrations.

Lady Hermon: That is very good and very interesting. Thank you.

Q75 Chair: Will the City of Culture status help you to increase the number of flights generally?

Mr Tierney: It is very difficult to say, at this stage. We have been discussing, with our existing carriers and new carriers, the whole City of Culture year and what that will mean for the city. It has been slightly hampered in that the programme for the City of Culture has not yet been published and so we do not yet know what the events are and when they will be. Obviously, if we are telling our main carrier that we would like to put on additional flights for an event in August 2013, it is good to be able to tell them what that event is. We still have a bit of an issue there. That is part of the reveal that the City of Culture is involved in, and it has to get its programme in order before it can publish it. However, we have had discussions with airlines, and we will pass on that information as soon as we get it. We simply do not know whether it will lead to anything long-term. Obviously, we would like it to have a legacy beyond 2013. If we get a new or extended service because of it, I would like to think that we could sustain that beyond 2013.

Q76 Nigel Mills: Do you have any comments or concerns about the changes that the Civil Aviation Bill proposes?

Mr Tierney: I think that the comments made by Brian and John are valid. There are concerns within the industry about the possible additional cost that it may levy on airports. The Bill does not yet indicate whether the charge can be passed on to the final users.

If it were simply to be levied as an airport charge, it could be very difficult for airports that are already on the margins as to whether they can stay open. The general thrust of the Bill, which is about improving the regulation of airports, streamlining how regulation is delivered and bringing security in with safety in the Civil Aviation Authority’s (CAA’s) remit, is welcomed by most airports. The better we can regulate airports, the more effective and streamlined regulation can be and the better for airports and regulation itself. The general gist of how the Bill is moving forward is fine. There are some issues around the cost and how regulation will be delivered. The delivery mechanisms need to be agreed in advance before we move away from our current systems with which all airports are familiar. There has to be a transition period for moving to the new delivery mechanisms. However, by and large the Bill is OK. We are just concerned about costs.

Q77 Naomi Long: In the written evidence that you have presented to us, you seem to be fairly relaxed about the International Airlines Group (IAG) takeover of British Midland and the impact that it is likely to have. I have two questions. The first is: BA pulled out of its Belfast-Heathrow route in 2001, so why do you think it would be more committed to the Northern Ireland market now than was the case then? Secondly, given the decision that BA took with respect to their Belfast ground operation and the issue of redundancy notices to staff, has your relaxed position changed?

Mr Harrison: Unfortunately, I was managing director of Belfast International Airport when BA pulled out. Basically, 9/11 had happened. If you go back, you will find that there had been a major falling out between my predecessor and British Midland. British Midland decided to move to Belfast City Airport, which grew as a result. 9/11 happened. We had already talked to British Airways at a very senior level about increasing the number of their services, etc. At that time, our cost structure with British Airways was quite good for the airport. Substantial revenues were coming in and, basically, the airport owners at that time really did not want to reduce the cost. So, British Airways was faced with a very high-cost base at Belfast International. 9/11 happened. I had a look at everything and decided that we had to cut our cloth. They were not getting enough interlining passengers. easyJet had already kicked off and the low-cost easyJet service to Stansted and Luton were having an impact on Heathrow. Heathrow used to take 1·5 million passengers, but I believe that it takes only one million now. So, low-cost airline direct services to London had an impact. That is some of the background. Belfast to Heathrow was one of the few profitable British Midland routes, as far as I am aware. They have streamlined it and cut out business class, etc. I expect BA to do the same, and I am fairly confident that BA will continue to fly out of Belfast.

Q78 Lady Hermon: Would you care to elaborate on that? Which airport will they fly from?

Mr Harrison: I am just confident that BA will continue to fly out of Belfast. I know absolutely nothing, believe me. Brian Ambrose and John Doran are extremely tight when it comes to that sort of thing, but I am confident that BA will continue to fly out of Belfast.

I can see the advantages of all Heathrow services flying out of one airport and they may take that into consideration. If you remember, when British Midland and British Airways were flying, if you had a flexible ticket and you were 10 minutes late for your flight, you could walk across to the other airline and get on the next flight. We almost had an hourly service. I do not say, in any way, shape or form that I know anything - and please, that is gospel truth - but I am just convinced that British Airways will be relaxed and will continue to fly out of here, because it is profitable.

Q79 Lady Hermon: I have one minor point that I would like to ask about. It really is a matter of curiosity. There was a proposal to rename the City of Derry Airport the Amelia Earhart Airport. Are you allowed to say whether you are disappointed, neutral or relieved at its failure?

Mr Tierney: I am slightly disappointed in how it was managed. It was proposed though a motion at Derry City Council, but the proposers had not consulted with the airport. That is where our objection originally came from.

Q80 Lady Hermon: You had not heard about the proposal until it was made?

Mr Tierney: No, we had not. We first saw it in the press. That is local politics for you. We had considered it before that at a board meeting and we had come up with a number of issues that it might have raised and which might have been negatives for the airport. However, we are happy to sit down and have a discussion with the politicians who want to promote it. If they can persuade us that the hurdles, which we see as being in the way, can be moved aside, there is absolutely no reason why we would not consider it. However, there has to be a wider discussion than a political decision taken within Derry City Council. It has to involve the new structures that Derry City Council has put in place for the airport.

Lady Hermon: That is a really interesting response. Thank you. I did not know the half of that.

Q81 Chair: Are there any other questions? Is there anything that you would like to add that has not already been said?

Mr Harrison: We have probably said too much.

Mr Tierney: We will probably find out on Radio Foyle tonight.

Lady Hermon: Radio Ulster will be in touch with you later. [Laughter.]

Chair: It has been very interesting. Thank you very much indeed.

Prepared 15th May 2012