UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 76-i

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

Northern Ireland AFFAIRS Committee

An Air Transport Strategy for Northern Ireland

Wednesday 16 May 2012

NIGEL SMYTH and MATT SHELDON

LUKE POLLARD and DOREEN McKenzie

Evidence heard in Public Questions 82-156

USE OF THE TRANSCRIPT

1.

This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.

2.

Any public use of, or reference to, the contents should make clear that neither witnesses nor Members have had the opportunity to correct the record. The transcript is not yet an approved formal record of these proceedings.

3.

Members who receive this for the purpose of correcting questions addressed by them to witnesses are asked to send corrections to the Committee Assistant.

4.

Prospective witnesses may receive this in preparation for any written or oral evidence they may in due course give to the Committee.

Oral Evidence

Taken before the Northern Ireland Committee

on Wednesday 16 May 2012

Members present:

Mr Laurence Robertson (Chair)

Mr Joe Benton

Oliver Colvile

Mr Stephen Hepburn

Kate Hoey

Naomi Long

Jack Lopresti

Dr Alasdair McDonnell

Nigel Mills

Ian Paisley

David Simpson

________________

Examination of Witnesses

Witnesses: Nigel Smyth, Director, CBI Northern Ireland, and Matt Sheldon, Senior Policy Advisor, Infrastructure, CBI, gave evidence.

Q82 Chair: Welcome, Mr Smyth; it is good to see you at the Committee. We are conducting an inquiry into aviation policy and the impact on Northern Ireland, in terms of business travel and social travel, tourism, etc. You are very welcome. I look forward to hearing what you have to say. Would you like to perhaps introduce yourself and your colleague? Anything you want to say as an opening statement, please do.

Nigel Smyth: Thank you, Chairman. Thank you very much for the welcome. I am Nigel Smyth, Director of CBI Northern Ireland. I am joined today by my colleague Matt Sheldon. He is a Senior Policy Adviser for the CBI here in London, with responsibility particularly for infrastructure and aviation. We are delighted to be able to give evidence today. I intend to make a short statement summarising some of the key points in our written evidence, and we look forward to being able to respond to the Committee’s questions.

We welcome the Committee’s inquiry. Air transport and air connectivity are crucial, and indeed vital, to the future success of the Northern Ireland economy. They will become more important as we seek to rebalance the economy and, indeed, achieve the goals set out in the recent programme for government and the economic strategy in Northern Ireland. We need to increase our exports significantly, including to developing and emerging growth markets. We need to double our tourism revenues by 2020, coming from a relatively low base, and we need to attract significantly more foreign direct investment. Air access and air connectivity are clearly key elements in each of these strategic areas. Regional air services and links to the UK’s hub airport, Heathrow, are absolutely fundamental requirements. We do not have other options or alternatives in Northern Ireland. We cannot drive; we cannot get on a train. We have a very high reliance on air transport.

We have summarised the current position of Northern Ireland air services in our written submission. I do not intend repeating the detail, but maybe I will draw out a few key issues. Over the last decade, there has been a general improvement in Northern Ireland’s air connectivity, especially with Europe and with the service to the United States by United. We continue to be linked with airports across the rest of the UK. There are increasing concerns that capacity constraints in the south-east of England, and particularly at Heathrow, are a significant risk to the Northern Ireland economy. Indeed, it is fair to say that the CBI believes there are concerns about the wider impact on the UK economy because of the constraints at Heathrow. There is a concern that continuing increases in air passenger duty are undermining the airline industry, and in Northern Ireland that puts us in an increasingly uncompetitive position in relation to the Republic of Ireland, where the Committee will be aware the equivalent taxes are €3. We have clearly welcomed the decision both to devolve the power and indeed reduce the Band B APD charges, and are grateful for the Committee’s inquiry into that particular issue last year.

We also recognise that this is an intensely competitive market, both in terms of the airlines and the airports. They have to act in a commercial manner. They have choices about where they invest and clearly they need to make an appropriate return on their investment. This means that there are more uncertainties and more risks. Clearly this has not been helped by the current recession, high fuel prices and increasing air passenger duty. It also means that we do need to be particularly careful about any potential Government intervention in the market.

Our members believe it is essential that urgent action is taken to address the capacity constraints at Heathrow. This is critical, as there will be increasing pressure to develop new UK air services to highgrowth developing economies and we are coming from a lagging position there. This in turn will put an even bigger premium on access to Heathrow. The status quo is not acceptable and risks, on one hand, the UK’s access to these developing markets and, on the other hand, regional development within the UK and, in our case in particular, Northern Ireland. Without increasing capacity at Heathrow, there will clearly be greater risk to maintaining adequate capacity. That could be both in terms of frequency in services and indeed in seat capacity.

On public transport links, we believe these are adequate within Northern Ireland. Indeed, bus links to our airports, particularly the two Belfast airports, are very good. At a time of constrained public expenditure, we do not see rail access as a priority. We do not believe the implications of the Civil Aviation Bill are major for the Northern Ireland economy, although there are likely to be additional costs, which ultimately the passenger is likely to bear, although these are likely to be modest.

The recent acquisition of bmi by IAG has clearly created uncertainty. With regard to the strategically important Heathrow route, there have been reassuring statements from the chief executive of IAG regarding their commitment to retaining the route and to maintaining, in the short term, their current service provision. However, as the Committee will be aware, bmibaby operations will now close on 11 June and, fortunately, other airline operators do fly to the three GB destinations impacted by that. Clearly, bmibaby does fly to a number of others in Europe. Indeed, already there have been some commitments to enhance their flight schedules from the other airlines, but there has been considerable disruption to summer holiday plans and also potentially to tourists actually coming to Northern Ireland, which is highly unfortunate.

Finally, the APD issue: this is an increasing burden and an unwelcome one. As APD rises, flights from Northern Ireland become less competitive with Dublin. We saw that very clearly with the Band B rates, which have now been addressed, so it is essential that the UK Government restrains future increases; otherwise there will be increasing pressure with considering devolving all APD to the Northern Ireland Assembly. We look forward to answering the Committee’s questions.

Q83 Chair: Thank you. We will come back to a number of those issues. Just to give us an idea, do you know roughly how many businesses based in Northern Ireland the CBI would represent?

Nigel Smyth: We are a confederation, both with direct members and with over 170 trade associations. Our membership is broadly about a third of the private sector. That would be our best estimate.

Q84 Chair: Would that be across the UK or Northern Ireland?

Nigel Smyth: That would include Northern Ireland, about a third within Northern Ireland. That is a mixture of small businesses, large businesses and from a variety of sectors including, I would say, airports and airlines as well.

Q85 David Simpson: Nigel and Matt, you are very welcome to the Committee. Recent evidence that the Committee took from DETI set out a number of key targets that the Northern Ireland Executive believe are necessary for growth within Northern Ireland. What is the CBI’s view on how we can obtain growth, or what are the obstacles to growth that you see as the CBI within Northern Ireland? Is it regional or international connectivity, APD, corporation tax or what in your view is it?

Nigel Smyth: I think there are currently a number of key headwinds. Clearly there are ongoing credit constraints impacting on businesses, particularly SMEs in terms of accessing credit. That is in the context of a much riskier and much more difficult economic environment. Secondly, you have very significant public expenditure constraints, which was a major driver for the Northern Ireland economy over the last decade. That is going to be no longer. We clearly have a very significant property construction hangover, from a very significant boom ending in 200708. We are picking up the pieces from that and that will continue for some time to come, impacting not just construction but the whole housing market. We have a very small private sector, which is one of our biggest challenges. The final headwind would be the whole area of consumer demand and consumer constraint, due to high inflation and due to wage increases on the back of that.

What we need in the challenge of growing it-and we are broadly supportive of the programme for government, the economic strategy, particularly the final ones, which were more ambitious than the originals were-is investment. The future’s going to be driven by more investment, more exports and tourism. The investment will, by and large, include foreign direct investment but also investment from indigenous companies in Northern Ireland. That is why one of the key drivers of encouraging that investment is going to be lower corporation tax. I have been here-probably 12 to 15 months ago-on that debate, which is ongoing. We believe it is an extremely high priority to get that to be able to transform the Northern Ireland economy. Without a lower corporation tax rate, it is very difficult to see how we get out of the very challenging structural problems that we have in the economy.

Q86 David Simpson: In order to obtain what you have just outlined in relation to export, indigenous businesses and the lot, surely the key element of all of that is to make sure that those companies receive the finance that they require and some flexibility from the banking society, in order to help them with credit. Especially small to mediumsized companies are finding it very difficult today-and I raised it today in Northern Ireland questions-to get access to finance. Surely that is one of the key components because, if you have the finance, you can do a lot.

Nigel Smyth: I identified that as the number one issue and I would agree. It is a complex issue. CBI Northern Ireland has a report, which hopefully will be finalised in the next two to three weeks, which has looked at all of that in Northern Ireland. There are no simple solutions to that. For the banks themselves, there is less capital available. It is going to cost more money. On the demand side, the companies looking for the capital are good trading companies that do not have problems, but there are a lot of companies that are maybe in a less good position that are going to find it more difficult. They are much riskier. There is no easy solution to all of that. I would agree that the access and the constraints in capital, including venture capital-Northern Ireland is very poorly positioned in the venture capital space as well, not just in traditional bank lending-are absolutely a key constraint.

Q87 Ian Paisley: Nigel, you are very welcome. I want to ask this question in the context that George Best Airport and the International Airport at Aldergrove are both private businesses. Just have that in front of us whenever you are answering this. Reading through your paper, the general wisdom of it is, if I am correct, that we should actually just have one superairport in Northern Ireland, competing, blow for blow, against a Dublin Airport. Am I right in that assumption?

Nigel Smyth: No, you are not.

Q88 Ian Paisley: Really?

Nigel Smyth: When I helped with a contribution to the paper, we identified that within the two airports in the Greater Belfast area, certain services are duplicated. But at the same time-and maybe we did not draw that out-over the last 10 to 15 years, when we have had two very active airports competing, as I said in my initial statement, we have had a much greater range of services now provided in Northern Ireland. Our air connectivity is significantly better now than it would have been 12 to 15 years ago, on the back of that. We certainly have never argued to have one airport. I think you will get a variety of views from the business community, but certainly that is not on our agenda. As you rightly said, these are two commercial operations. They may, at one stage, decide to do something between themselves, but there is no desire from certainly the CBI and my members to argue that we should have one airport in Northern Ireland.

Q89 Ian Paisley: You are saying that the customers in Northern Ireland have better choice because there are two airports competing against each other and competing with Dublin.

Nigel Smyth: That is how it has worked out. Arguably, if you had one bigger and larger airport, the services may well have developed too, but we are where we are on that. There is no doubt many people-I think the previous evidence you have had has indicated 400,000 or 500,000 passengers a year will, from Northern Ireland, go down to Dublin. Clearly they have got economies of scale down there. They have increasingly got something like 12 flights a day to the USA in recent times. They have got significant flights now through the Middle East, on the back of that. That is an extra choice for Northern Ireland customers. That keeps the pressure on the Northern Ireland airports too, in terms of competition.

What I am saying is there has been no debate or significant pressure from our members to say, "Why on earth do we have two airports in Northern Ireland?" People use different airports for different things. Clearly the City Airport is very convenient for people living in Belfast and the eastofBelfast area.

Q90 Ian Paisley: Are you aware of discussions for the development to have better or some broader domestic and international routesharing arrangements between the two businesses?

Nigel Smyth: I am not aware of the detail of that, no.

Q91 Ian Paisley: I am asking if it is a discussion that could be had.

Nigel Smyth: It is possible. They would probably have to be careful in terms of monopoly commissions and various things. My understanding is the airports are, on a daily basis, trying to encourage more airlines to come in to look at developing routes from Northern Ireland. The airports offer different things. Clearly with their access into GB in particular, they are competing head on. For the farther longerdistance international freight, that is clearly the International Airport. The view from our members is they have been well served. I think that is what we have summed up. We are in a fairly good position, despite even bmibaby pulling three GB routes and six or seven international or European routes. Connectivity is still much better now than it was 10 or 15 years ago.

Q92 Oliver Colvile: I just want to ask a quick question. You may not be aware of this, but can you just talk to me as to how many airports there are in the whole of Northern Ireland and how many there might be in southern Ireland as well?

Nigel Smyth: I cannot tell you for southern Ireland. In Northern Ireland, in Belfast, we have clearly Belfast City Airport within about a mile of the city centre, with 2.5 million passengers a year. You have the International Airport about 15 miles outside, with 4 million to 4.5 million passengers a year. Then you have Derry City Airport, with probably less than 0.5 million.

Q93 Oliver Colvile: So we are saying three.

Nigel Smyth: There are three, but there are then some small private.

Q94 Oliver Colvile: How long does it take to drive from one airport to the other?

Nigel Smyth: From the City Airport to the International, it is less than half an hour, and that is on the way up to Derry. Derry would be about an hour to an hour and a quarter from the International up to Derry City Airport.

Q95 Oliver Colvile: If you wanted to catch a plane down in southern Ireland, how far would it be?

Nigel Smyth: Most people from Northern Ireland, if they were using a southern Ireland airport-and I do not know the facts, so need to be careful-would be flying out of Dublin Airport. Dublin is 100 miles from Belfast. It is now, since two or three years ago, all dual carriageway/motorway, so you could be very comfortably down in Dublin in an hour and a half. They are flying around 20 million passengers a year, so it is a different scale and obviously they have a good choice.

Oliver Colvile: Thank you, Mr Smyth, and thank you also for coming by the way, and Mr Sheldon, too. What would be quite helpful at some stage, if someone might produce it for our next meeting, is to actually have a map of whereabouts all the airports are within Northern and southern Ireland as well. If we could have that, that would be helpful.

Chair: Okay, we will do that. Thank you.

Q96 Kate Hoey: Welcome, both of you. As a frequent traveller back and forward to Northern Ireland, I actually think we are pretty well served by our airports, but of course-and we will come on to that later-it is the air passenger duty and the cost of the taxes that are making it very difficult, not just for businesspeople but for people who have to, for all sorts of reasons, go back and forward. Can I just ask about the three airports that you have referred to? Belfast International relies heavily on easyJet. City Airport relies quite a lot on Flybe. Obviously City of Derry is Ryanair. Are you, as the CBI Northern Ireland, trying to encourage more variety of airlines to come into each of the airports, or do you have a feeling that that is not really your job? How do you feel about persuading other carriers to bring in even more competition?

Nigel Smyth: That is an easy one to answer: that is not our job. Our job in Northern Ireland is to create a better environment for businesses to invest to create more jobs and employment. Hopefully that will then attract the airlines. The primary responsibility for that, I would see, is with the various airports themselves, which I think are pretty active in that space.

Q97 Kate Hoey: Your members would be, on the whole, happy enough with the choices and the routes that there are at the moment from Belfast.

Nigel Smyth: Broadly so. The one area that we may come on to would be parking charges. The choice that we have, particularly into GB, is very good. Traditionally, we were very weak in terms of accessing Europe, if we go back 10 or 12 years. That has been partly addressed. There have been some backward moves with the recession-some flights have been pulled-but we are certainly in a better space. There may be one or two key European routes we still do not have, which would certainly be attractive. That is where the interlining through Heathrow is exceptionally important for those people doing exports. It is the exports that we need to be increasing.

Q98 Kate Hoey: If you were to put one thing, one most important thing, that would make a difference to your members and the people of Northern Ireland, in terms of air transport routes, what would it be?

Nigel Smyth: Maintaining highquality access into Heathrow. If I am allowed a second one, it may be one or two additional cities into Europe, whether that be a Frankfurt or a Madrid. That may well move up the agenda if we felt there was a serious threat, or the threat to Heathrow did come to fruition in various things. We may have to look at accessing other hubs. The issue with Heathrow is it is good because of the frequency. We do fly into Amsterdam, which is another important hub, but it is one flight a day, so it is fairly limited. I think it is only one flight a day. You do need a certain degree of frequency to make that attractive, particularly for business travellers.

Q99 Kate Hoey: So cost is not the most important.

Nigel Smyth: Cost is not the most important. Clearly cost does come into it, but for businesspeople the frequency of services is probably number one. There is no doubt that businesspeople are now tending to travel more on some of the lowercost, because that is the nature of the beast.

Let me give you an example. In Northern Ireland, because of the downturn in our construction sector, the sector has had to look outside Northern Ireland. Of the top20 construction companies, 60% of their exports are now outside Northern Ireland. The vast majority are now building things in Great Britain. A typical contractor, when he is pricing a job, when bidding, will have to build in between 300 and 400 flights. The construction companies are telling me that air passenger duty is a tax on their jobs, because they are having to fly so many people across over the twotothreeyear nature, depending on the contract. Cost is important to them, because that is going to add up £20,000 to £30,000 or whatever it is. They have to build that into their tender price. Likewise for anybody who is exporting, it is time; it is cost. It is all factored in.

Q100 Jack Lopresti: You briefly alluded to transport links in your opening remarks. In paragraph 16 of your written evidence, you say that public transport services to the two Belfast airports are good. Presumably you are not going to agree with other witnesses who have said that a rail link to Belfast International and a rail halt for Belfast City airports are crucially needed.

Nigel Smyth: I would agree. I did a little estimate. At the end of the day, I highlight in our day that public transport is very good indeed, particularly to the two Belfast airports. To have the cost of a rail link-and this has been talked about on and off-my understanding would be, even with International’s 4 million passengers a year, you need to be at an airport of something like 10 million. Just to give an example, back of the envelope, if you have 4 million passengers a year-work that down to a daily basis-about 10% would use rail and that is probably at the extreme. That is 1,500 people. If you split that into two services an hour, that is 75 people a train. You can get on the bus every 15 minutes. You have a big capital cost and you have big ongoing costs. While it would be a nice idea, in the current public expenditure constraints we are in, it is certainly not a priority from the business sector.

Access and indeed improved road access, particularly around Templepatrick-which is a small village you have to go through-would be helpful. I know at City Airport you are sitting there with a railway that is literally across the way, but again you are looking at a relatively expensive link and moving the halt. Anything in railways does not come cheap on the back of that. Certainly from the business community, I have heard no pressure or no demands for the rail link.

Q101 Ian Paisley: You do know Belfast very well, Nigel, and you do know that the fact of the matter is that, if you try to go to George Best Airport by rail, you have to get out across the road and walk over the road, carry your bags and walk to the airport. No one is going to use the rail halt unless they are absolutely stuck. Aldergrove is the same; there is no direct link. The fact is, if it was provided, that small percentage might quadruple, because people would find it easier. It would be cheaper for them, instead of parking their car and all sorts of other arrangements. Should that be a priority, for Government, for the airports, for consortia, to arrange to really put effort into making public transport to the airports much more sustainable? The fact of the matter is, if we travel from Heathrow or Gatwick back and forth to Ulster, we use an express train. It is the only way in and out of this city. I know it is not the same, like for like, but that comparison is important.

Nigel Smyth: You still have to park your car. I have been thinking about this debate. Where would I park my car if I was to do it? You would not drive into Belfast city and park your car to get on the railway to get there.

Q102 Ian Paisley: You would probably get a bus into Belfast.

Nigel Smyth: I would spend a lot more time getting to the railway than getting somebody to drop me off or driving up to the railway. I think one would like to say we are all supportive of getting more people into public transport. We have been saying that at a national level, but you have to come down to it: railways are an expensive business. You need economies of scale. You need big airports to attract that. At the moment, we do have goodquality buses. They get you from A to B, and they do it very well and very frequently. If you can get out of Belfast International, even compared to if you had a train at the terminal, I would still bet that, most days, you would still get into the city centre quicker on a bus than a railway line, which is going to take you all around Lisburn or whatever it does. I have not heard any pressure from our members to be saying we should be pushing strongly for it. There are other priorities for how we should spend capital money, when it is pretty precious.

Q103 Oliver Colvile: Certainly I am slightly aware of some of these issues, because I did have an airport in Plymouth, which has just gone and closed. One of the key things you need to have is to make sure you have good transport links into the airport, so people can get in and out. I think I am fair in saying that Northern Ireland is a specific story, because you frankly cannot get anywhere apart from Northern Ireland, unless you want to go to southern Ireland, unless you end up taking a plane somewhere. That means, as an economy, the Northern Irish economy is very dependent on being able to travel to and from the place. I think you would rather agree with me.

In your memorandum you pointed out that the transfer of surveillance responsibilities to the CAA, which is included in the new Civil Aviation Bill, would have additional costs, I think, of £100,000 to £120,000, of the running costs of the airport and the size of International. Do you have an estimate on how much extra airlines will need to charge passengers to meet this cost to make sure that this happens?

Nigel Smyth: I do not. We made just a short paragraph on that. Again, that was relying on feedback from our members in the industry. If that is the only cost and you divide that by the number of passengers, we are looking at 20p to 30p, so that is why I said in my opening statement that this appears to be a relatively modest cost. I will put my hands up and say I do not know whether we have fully understood the implications of this but, it appeared from the evidence that we had here that this is not a major game changer in various things. Nobody likes to pay more, but it seemed to be fairly modest in terms of some of the other charges we are seeing.

Q104 Oliver Colvile: Do you want to actually go off, after this afternoon is over, to look at that and just confirm your position?

Nigel Smyth: I am happy to confirm that.

Oliver Colvile: I think that would be very helpful to do, because that then means we have all the information that we need to have when we come to our conclusions in all this.

Q105 Dr McDonnell: Nigel, you are very welcome; thank you for being here. I just want to turn briefly to bmi, British Airways and the acquisition of bmi by IAG. Do you have any comment or concerns, or are there concerns expressed by business interests, about the possibility that IAG might reallocate slots currently used by bmi at Heathrow for more profitable routes and thereby lose that route?

Nigel Smyth: As we have reflected in the paper, this would be a commercial decision. We have highlighted that there is an increased risk. That risk, it is fair to say, has probably always been there. Clearly now, as part of a much greater airline industry, particularly, as we tried to highlight, the pressure for the UK to develop its international links with the developing market more, we certainly believe that those risks have now gone up. We certainly believe the route itself, without seeing the detail, the talk in town would be this is a profitable route. As we have highlighted, the chief executive has confirmed he is going to maintain the route. The big issue will be that we are looking at it varying between six and seven a day; normally, it is slightly less at the weekend. We have also highlighted in the paper that we should not forget we have Aer Lingus flying three flights a day from International into Heathrow too, which is important.

They are going to be under pressure. Heathrow, we all know, is going to be under significant pressure. We believe the best way of easing the risks for us is to address the capacity issue in Heathrow itself. There are different ways in terms of managing that capacity. One is the number of seats. If we reduce the number of flights, you could actually put on bigger airplanes and carry the same number of people. At the same time, level of frequency is very important too, particularly for people who are interlining. I think about a third of people using bmi are interlining and going on to a further destination. The view I would sum up is that the risks have gone up. There was always a risk there, but the risks have gone up and the best way of dealing with this is to address the capacity issue at Heathrow head on.

Q106 Dr McDonnell: Have you any views on the closure of bmibaby or bmi Regional, and what impact that might have on travellers generally or business travellers particularly?

Nigel Smyth: I think it is a major disappointment. It was not a total surprise. The surprise was that we were given a month’s notice. British Airways had made very clear that they had no intention of keeping bmibaby. It had been up for sale for several months by Lufthansa, so it is not a surprise. The unfortunate thing is there were bookings, probably several hundred thousand bookings, right the way through to September/October time. While our automatic reaction and the media’s was around the holidaymakers in Northern Ireland who have been caught out, who have booked their holidays both into GB but also into the various Spanish destinations in particular, there were also, particularly from the East Midlands, people who maybe would have booked to come into Northern Ireland who will be affected by this.

Encouragingly, we have heard the chief executive of the City Airport quite clearly say he is looking at negotiating. There are interested carriers stepping into that. My understanding would be Flybe has already stepped into the East Midlands, and put on additional flights to look for that. That might be Birmingham. All of those airports are still serviced by other operators, and hopefully some of them will respond. They will see that as a business opportunity at the same time. These are early days, but clearly the big point and the big concern was it was just a shock at the very shortterm notice. If they said they were going to run the summer schedule then close it, people would have generally accepted that. It was very disappointing; it had a knockon effect for Northern Ireland tourism for people coming in, but also for the holidaymakers in Northern Ireland, who have obviously been significantly impacted by this for those going out.

Q107 Naomi Long: Nigel, it is good to see you. I just want to explore a bit further what you were saying, because we discussed this with the airports when we took evidence from them, and there seemed to be a very different view being taken, depending on which airport was giving the evidence, about the importance of frequency of the flights and simply just the number of passengers that the airlines could carry. My personal view is that actually frequency is important, particularly for business travellers, in terms of both being able to access Heathrow at different points in the day, but also being able to then connect onwards with different carriers. The argument in return for that was that, actually, some kind of rationalisation of routes across with larger planes, carrying the same number of people but maybe with reduced frequency, but better co-ordinated with online flights, might actually benefit Northern Ireland business passengers. I am just wondering if that is something you have discussed with your members. Is there any feedback that you would have? What would your instincts be in terms of seat numbers or frequency, when it comes to actually trying to protect the links with Heathrow particularly?

Nigel Smyth: It is fair to say we would not have had a detailed discussion on that. As I highlighted earlier, frequency is important. As I say, it does vary during the week. Some days there are six; sometimes there are seven. On the weekend, it drops off a little bit. If the seven were to drop to six, it might not be the end of the world, but the issue then is to make sure we have sufficient capacity going in. We have, again, at a general level in our evidence, highlighted it is at key times of the day. Depending on your international connections and flights, whether that is coming back from the Middle East or coming in from the States, it is going to be different times of the day on the back of that. We have had no detailed discussion in that. Clearly you do need to have regular flights in the course of the day. That is where the weakness is in terms of links into some of the European places, maybe if you fly into Amsterdam. If you only have one flight a day, or even two probably, it is not going to be enough to encourage that to be another hub or increase our interlining through that.

Businesspeople are probably happy. They probably need to allow maybe a couple of hours anyway, in terms of transfer of luggage and various things, but if you are sitting four, five or six hours that is probably too long. People will look for alternatives around that. Time is pretty precious for businesspeople. There is a little bit of a balancing act in there. There is a little bit of a tradeoff, but there would be a significant concern if that number or frequency was to be cut considerably or if there was an impact on seat capacity if they cut it by one and put on a bigger plane to offset that. Clearly the risks have gone up. It is unclear what we can do. Our view quite strongly, and it is a strong CBI view, is that we do need to address the capacity issue. That would solve the problem and reduce the risks.

Q108 Mr Hepburn: Why do you think UK Governments are so keen on a passenger duty, when other countries, on the continent for example, are either not introducing that sort of tax or, indeed, some of them are even scrapping them?

Matt Sheldon: To pick that up, there is obviously an attractiveness to APD from a collection point of view. It is relatively straightforward. The administrative costs of collecting APD are always attractive; they are very low compared to other taxation. We are obviously looking back as an industry on the tax introduced in 1994, which has increased fairly steadily in leaps and bounds. We had a moratorium last year but, this year, I think it would be fair to say, what we put forward as the CBI ahead of the Budget was a compromise position. We recognise that, with the fiscal situation, the aviation industry needs to pay its way, which is why what we proposed ahead of the Budget was that the full 8% aboveinflation increase be mitigated somewhat. We deferred some element of that; we were looking at more of a 5% increase. We were disappointed, it is fair to say, by the Treasury’s decision to go ahead with the full impact of that. That clearly throws the competitiveness of UK aviation and the viability of certain UK routes into question, particularly in the Northern Ireland context, where the competitive edge is sharpened with the land access doubling.

When we see the impact of this in the increasing calls for reduction and deregulation of some of the duties from Northern Ireland, that has a consequence at the very high national levels, so our primary focus is a restraint on some of those future increases, particularly as well looking at ETS, which are the Emissions Trading Scheme charges beginning to be introduced this year. From January next year that is going to steadily increase as a charge on flights as well, so we want to look at the package of costs that are being passed to consumers in the round.

Q109 Mr Hepburn: Have you given any consideration to putting your support behind a congestion tax as a replacement for air passenger duty?

Matt Sheldon: There is a tangled thicket in how government would intervene with the implementation of a congestion tax, involving what would be a fairly micromanaged approach to the market. It is something that would, perhaps, in a fiscal perspective, return you to a 1980s position, when the Government was in an analogous position, telling airlines to which airports they could and could not fly. We very much supported the liberalisation of the air market, which allowed airlines to choose and make commercial decisions on the airports into which they fly. On that basis, we are fairly stridently opposed to moving towards a congestion approach. I know it is an issue that has come up.

Q110 Mr Hepburn: What effect would a congestion tax have on Northern Ireland, if it was introduced?

Matt Sheldon: We have not looked at the detailed market impact. We are not at a stage where there is a proposal so that we could understand exactly its impact. Our concern would be on its impact to Heathrow. The primary concern, as Nigel has picked up on, is the interlining options from Heathrow-the passengers who hub through Heathrow on from Northern Ireland. Our concern would be the impact of a congestion charge. Where we are looking at a congestion charge, if that falls most heavily on Heathrow, it is the impact that then has on some of the routes whose commercial viability is now being called into question. That would be our concern. I guess that comes back to our main point that constraints on Heathrow is the principal impact that we see on Northern Ireland. Tackling Heathrow has a negative impact on Northern Ireland.

Q111 Mr Hepburn: Just one last question: what is the position of the individual Northern Ireland airports on congestion tax? Have they made a statement on it?

Nigel Smyth: I am not aware of it. I have not heard a discussion around that.

Q112 Nigel Mills: I think it has been about six months now since the long-haul APD was reduced down to the shorthaul level. Have you seen any evidence from your members yet of that increasing the amount of investment in Northern Ireland from the States or perhaps the other way, and more business travel going that way?

Nigel Smyth: I am not aware of the detail in terms of the flying. We still obviously have an ongoing commitment from United now, as it is branded, to the route, which strategically we see as very important. It is absolutely critical in terms of linking this with the debate on corporation tax. Having that direct US investment and our link into the US are critical. If you look at the south of Ireland, ongoing investments from the IDA, 7080% of those are from the USA, so that connectivity with the USA is absolutely critical. We would believe, in the medium and longer term, that would become even more important. To be honest, I have not seen the figures from that.

Q113 Kate Hoey: Would the CBI nationally, and UK CBI, support Northern Ireland being a special case? Do they support Northern Ireland being a special case for the reduction of APD or the abolishment, as this Committee asked for, given our special nature-we cannot get a train and it is actually a very long and expensive journey to go by boat?

Matt Sheldon: I will pick up the first half and then perhaps pass on to Nigel. We recognise that, speaking for the aviation industry and airports and airlines across the UK in this perspective-so speaking for the common wealth of the industry here-there was an extraordinary case and there are particular pressures on the Newark route. That route is offering a particular value and is under particular competitive tension, so we recognised, accepted and supported a case for a reevaluation and a specific interrogation of that issue. More broadly, our primary focus is looking at APD at a national level. This is a consequence of the high pressure on airlines across the UK from the increasing rates of APD, in the context of a higher oil price, in the context of new charges on emissions trading and other areas that are being passed on to the consumer. That is why our primary focus comes back to that. That is why, again, looking forwards, our primary objective is a restraint on those national increases.

Q114 Kate Hoey: Do you accept, even if you were not going to argue for it, that businesses and small businesses in particular in Northern Ireland suffer more because travelling back and forward actually costs? They have to fly.

Matt Sheldon: We would recognise that, with the UK having the highest levels of APD in Europe, Northern Ireland is at the sharp edge of the competitive impact of that fiscal decision from Government.

Q115 Kate Hoey: I am just interested, because the only way we are going to ever get this is for a really united campaign, with all sorts of people saying that it is just ludicrous that we should have to pay all this extra money, when we cannot go by train like everybody else can.

Nigel Smyth: We can get a ferry but, if you want to come to London for the day, it is not the thing to do.

Kate Hoey: I know how long that takes; I have been on it.

Nigel Smyth: Absolutely. I just have a couple of comments. My understanding of APD is that the cost to Northern Ireland would be £50 million to £60 million. I have not heard any businesspeople, perhaps maybe bar the airports, arguing that we should zero this and take a hit of £50 million to £60 million. I am not sure what that would deliver in value to the Northern Ireland economy. Passengers would get a cheaper flight in and out, but it is not going to increase investment from foreign direct investments into Northern Ireland. It is fair to say that real debate has probably not taken place.

The position that we have got to is we believe there is increasing noise from our members to say, as the APD goes up, we are much more exposed than anyone else in the UK and we are going to get into a similar position that we did with Band B and the longdistance international on the back of that. That would be regretful, but we are not quite at that stage, but we see an increasing risk. It then comes; what would you do with it? Would you decrease it modestly? I do not think there would be a strong campaign from business, and indeed from ourselves, to say we should take the hit at £50 million and just have no air passenger duty, because I just do not think that would deliver. There are a lot of other priorities in terms of the Northern Ireland economy first. It does come back to, overall, we have good air connectivity. We are in a good place. Clearly nobody likes to pay more. It probably has a bigger impact to the tourists coming in. Tourism is going to be very important for the economy. For those people using the lowcost airlines-and the market is dominated by the lowcost airlines-APD is a much more significant element of the cost of those.

Q116 Naomi Long: In terms of the evidence that we took from Belfast City Airport, they reckoned that the reduction in longhaul APD, the direct longhaul flights, which was reduced then to the shorthaul level, affected about 2% of Northern Ireland passengers overall. The point that they were making was that that is quite a small percentage, although it is an important part of the market. What action would you, as the CBI, want to see the Government take, or indeed the Northern Ireland Executive take, to help that other 98% of passengers, in terms of encouraging that to grow?

Nigel Smyth: Hopefully I understood that question. It is only 2% because those are the people using the international flights, which is very important. To help the 98%, you are coming down into the whole APD. The CBI position is quite clear: we need to see restraint on APD. If we do not achieve that, I think there would be growing pressures in Northern Ireland to seek to have this devolved. We need to take a decision on whether we cap it, whether we reduce it modestly or what it is. I suppose there is limited evidence that people-there have always been a certain number of people going to Dublin, which is what we are competing against. They have the benefit of a significantly bigger airport catchment area and international flights. That will probably always happen. The issue does come back to restraint at a national level on APD. If we had that, that would go quite a long way. It is a bigger impact for tourists than a businessperson, to be honest. To go back to my construction company, that is still going to end up with thousands of pounds that they are going to have to bid and they see that as a tax on them having to win work in GB and various things. It does add up to the same point. Restraint is the number one priority.

Q117 Naomi Long: Restraint on APD, but you had also mentioned earlier the issue about capacity at Heathrow itself. Which of the two do you think is the more critical?

Nigel Smyth: The two go hand in hand. They are addressing different issues and challenges. For tourism, foreign direct investment and for exporters that access to Heathrow is absolutely critical and we need to maintain that. I just think then, for the general trade exports, even those people who are "exporting" into GB for the tourism individual, the increasing APD is just seen as another burden on business, creating wealth and for our tourism sector and various things, and with this likelihood that we are distorting ourselves. If you are in Newry, all of a sudden, you are not going to get people travelling from the south of Dublin up to Belfast. The people living in Newry and the border areas, maybe even in Donegal, whether they use Knock or Londonderry, that will help them to make choices. If you take a family of four on holiday that all of a sudden adds up. It is not £13; it is £52 or whatever it is. This is a very competitive place, all done on the internet now. You look around. You look at your car park charging and all the things that are billed into this. I think the two are actually equally important for their own particular reason.

Q118 Naomi Long: You mentioned the other charges that are levied by airports. Finally, you mentioned car parking and we have discussed public transport and so on. To what degree do those charges impact on demand, growth and business?

Nigel Smyth: As I hinted at earlier, if you go to lunch with businesspeople, the one topic that may come up when you talk about air strategy is airport car parking charges, which are probably paid for by their company anyway. The model has changed. The model has changed significantly. For the airlines, first, you have to pay for the car park, but clearly they get an income from that and it is balanced because the airline industry has driven their costs, in terms of what they get on the back of that. More people are using taxis. There is probably some demand for public transport. A lot of people get dropped off at the airports and various things. All the costs add up, but it is not the end of everything. You can book on the internet. There are ways of reducing the cost of doing that. You just need to be a little bit smarter and work at it.

Q119 Kate Hoey: Can I just ask, because I like to get it on, did the CBI support International charging £1 to drop people off?

Nigel Smyth: We did not support or not support. That was done in their commercial interest. I have been dropped off outside the airport without paying £1. If you want to walk a few hundred metres, it can be done. I know that has not gone down particularly well. I think they argued they have had to make major changes for security reasons and various things. All these things cost money and there are various reasons why they did that. That does not tend to feature, the £1 dropoff, as it would for general parking for 24 hours, coming in at £28 or whatever it might be, but there are ways of trying to reduce that.

Q120 Oliver Colvile: Just before I ask the next question, I seem to remember being told that one of the big key earners for airports was actually the car parking charges. Do you think that is right?

Nigel Smyth: IKEA? I passed a bus recently, and my understanding is IKEA is right beside City Airport.

Oliver Colvile: Not IKEA, sorry. I obviously spoke badly. The key issue for-

Nigel Smyth: Because IKEA does offer parking and a bus ride. Apologies.

Oliver Colvile: No; it was totally my fault. Do not worry about that. My understanding is that the big earner, as far as the airports are concerned, is actually car parking and that actually makes the whole thing play quite a bit.

Nigel Smyth: Yes, I would probably agree with that.

Q121 Oliver Colvile: The Committee has produced a report saying that APD, from Northern Ireland into Great Britain and back again, should actually be abolished. Do you think that is a good idea?

Nigel Smyth: If Great Britain taxpayers are going to pay for it that would be great.

Q122 Oliver Colvile: That is the key issue, isn’t it? If we end up actually abolishing it, then we have to find the money from somewhere else.

Nigel Smyth: We need a mature debate. People going to Dublin pay it, so I would argue that, if you are flying out of the UK to Dublin or Belfast, you should pay the same rate on the back of that. The issue is when we are flying from the island of Ireland into London, East Midlands, Glasgow or wherever it is. In Northern Ireland, we are paying significantly more than you would be out of Dublin. That is the argument from us flying out. My understanding is, if it were going to be devolved, we would then take the financial hit on it. You then have the debate about whether that is the best way if you, say, eliminated it and you took a hit of £50 million or £60 million. Is that in the best interests of trying to develop the economy? I am maybe suggesting that probably would not be in the position the CBI would come from, but it is fair to say we have not had that level of debate yet.

Q123 Oliver Colvile: On the other hand, if we believe in devolution, then maybe that is actually an answer. Maybe we can get them to make a responsible decision for themselves.

Nigel Smyth: Perhaps.

Q124 David Simpson: I can understand the confusion with IKEA. Oliver does not shop at IKEA.

You made an interesting point in the last paragraph of your evidence paper, 27, about the increased passenger charges for domestic flights. Could you expand that or clarify that a wee bit? Have these charges been introduced by Heathrow off their own bat or have they been imposed due to a direct response from Her Majesty’s Government or the EU? Where have they come from?

Nigel Smyth: I do not know the full details of that. My understanding would be that this was a decision by Heathrow. I do not think there was any pressure from the Government to do this, but I would not want to mislead the Committee. I thought that was a view from BAA, the airport operators in Heathrow itself, but I may be wrong on that, so I cannot answer you on that, David.

Naomi Long: I could maybe just shed a bit of light on it, because I have written to BAA and to Gatwick. Both are introducing passenger landing charges for those whose terminal destination is their airport rather than for through passengers. It is essentially a tax that they are levying in order to encourage the focus to be on Heathrow as a hub airport rather than a destination airport. They are basically charging passengers who land as their final destination. For example, if you are flying to London, they are trying to press you to fly to other airports. If you want to fly through London to somewhere else, then you should go through Heathrow. That seems to be the idea of imposing passenger landing charges. I can share correspondence that I have had with them over quite a period, because of the impact that it has on the cost of actually flying in and out of London. I have actually written to them about it and have had some clarification from both airports about it. When Heathrow did it, Gatwick then felt that they could as well, and there did not seem to be much more rationale than that for having introduced it. I can share that with the Committee, Chairman, if it is helpful.

Q125 Chair: Thank you; that would be very useful. Finally, you said earlier about the importance of flights to Heathrow. You presumably do mean Heathrow, not Gatwick, London Luton, London Stansted or Boris island possibly. You are not persuaded by the prospect of highspeed rail or anything. It is very much Heathrow that you are keen on.

Nigel Smyth: Absolutely: Heathrow is the key. Certainly Gatwick has a number of large international connections, but actually Heathrow is the key international hub and that is absolutely clear.

Q126 Chair: It is more for the connections rather than getting into central London.

Nigel Smyth: Absolutely. I think Northern Ireland is well served. If you want to come into central London, you have a wide choice of airports. Even this year, there is the Southend Airport; easyJet are flying into that.

Kate Hoey: A very good airport.

Nigel Smyth: Heathrow, for the interlining aspect of all of this, is the essential one. The majority of people-I do not actually know the balance-but I am assuming the majority probably use the Gatwicks, the Stansteds and the Lutons, so we are very well served, but Heathrow is the absolute key.

Q127 Chair: It is the connections.

Nigel Smyth: Yes, it is the connections side.

Chair: Okay, that was good timing. Thank you very much indeed for your evidence. It has been very useful.

Nigel Smyth: Thank you for the opportunity.

Examination of Witnesses

Witnesses: Luke Pollard, Head of Public Affairs, ABTA, and Doreen McKenzie, Proprietor, Knock Travel and ABTA member, gave evidence.

Oliver Colvile: Mr Chairman, I think I should just declare an interest in that Luke and I both know each other, because Luke is a Labour activist down in Plymouth and we have seen each other for many years.

Ian Paisley: Could I declare a serious interest? I do quite a lot of business with Knock Travel.

Q128 Chair: Thank you very much. Mr Pollard, Mrs McKenzie, thanks very much for joining us. I think you sat through the previous evidence, so no need for me to go into what we are doing here. Thank you very much for joining us. Would you like to briefly introduce yourselves and make a very brief opening statement?

Doreen McKenzie: Certainly. Good afternoon. Maybe I could start. I am Doreen McKenzie. I am the owner of Knock Travel, and my business has been trading since April 1990. I employ 21 local people in Northern Ireland. I have two retail shops, one in Belfast and one in Bangor, and a corporate travel division, which represents approximately 70% of my business, which has a turnover of just about £5.5 million. We provide travel management services for a number of prestigious Northern Ireland companies, including Government Departments, and we are the leading independently owned travel management company in the province. The provision of quality, efficient and competitively priced air travel is vital to our clients, so aviation is very important to my business. While the majority of our corporate travel is domestic travel to the UK, approximately 20% is related to inbound travel into Northern Ireland. I personally have over 40 years’ travel experience. I am delighted to be here today and to answer any questions based on the personal business or, indeed, the wider industry opinion.

Luke Pollard: I am delighted to be here today. Myself and Doreen gave evidence to the Northern Ireland Assembly investigating similar matters about a month ago. In that, we discussed the impact of air passenger duty, aviation capacity and also holiday protection on the Northern Ireland economy. It might be useful if I first just give a sense of how many companies ABTA represents. We have 1,200 members across the United Kingdom, representing about 5,000 different locations. In Northern Ireland, we have 39 members that have nearly 150 locations across Northern Ireland. We represent travel agents, tour operators and cruise companies, from the smallest companies up to the largest multinationals, so it is a full range of anyone involved in selling travel, be that leisure and business, for whatever purpose that may be.

The key areas that we have been focusing on recently have been around air passenger duty. As a leading member of the Fair Tax on Flying campaign, we have been calling for the damaging increases in air passenger duty to be halted and also for the structure of air passenger duty to be changed, especially using the income from the Emissions Trading Scheme to be offset against that total amount. In particular for Northern Ireland, we have been encouraging the Northern Ireland Assembly and the Government here to really take the mantle of devolution of air passenger duty to heart and really make a case for it. We think the devolution of Band B and above was a welcome first step, but now we need to look at the other 98% of flights departing Northern Ireland to take the full devolution of Band A as well, as a further measure to not only increase the economic prospects for Northern Ireland, but also to make it more affordable for travellers as well.

In addition to passenger duty, we have a wide range of views in relation to aviation capacity. Very similar to the witnesses you just heard from, a central key point, not only for businesses in Northern Ireland but also in every other nation in the region of the United Kingdom, is connectivity to airports in the southeast of England, especially into Heathrow.

In addition to that, there is the issue of holiday protection. A lot of the correspondence we have with our members in Northern Ireland not only relates to air passenger duty and capacity, but also relates to issues around holiday protection and whether their holidays are protected. The changes in the market have not only affected the different types of airlines flying in and out of Northern Ireland, but have also affected the ways holidays are sold, from being sold purely as a package to being sold as other arrangements. I know that is something that the Government is looking at, and that will have an impact also on the holiday market and the travel market more broadly in Northern Ireland. I am delighted to be here and answer questions.

Q129 Naomi Long: Can I just maybe ask you a bit about your written submission? You have argued very strongly, from a UK regional perspective, that it is important that there is an expansion of Heathrow. Could you just explain why that is so important, particularly in terms of Northern Ireland? Chairman, I should possibly declare an interest in that one of Doreen’s stores is already in my constituency. I will declare that-at least the fact that I recognise that. I just wanted to see what the regional impact is of the constraints that are on Heathrow at the moment.

Doreen McKenzie: First of all, probably, Naomi, from our perspective as a business, taxation is the main thing that is stopping people travelling, because all businesses are very costconscious and that includes our Government Departments. Everybody is very, very costconscious. Whenever they are doing international business, they need the Heathrow hub, because that has so much more in terms of worldwide links to different destinations for them. It is much easier to go straight into Heathrow and straight out of another terminal, than go to Gatwick and have to get a coach or train across to another airport. From that perspective, it is essential that we do have a Heathrow hub.

Q130 Naomi Long: Just briefly before we move on, one of the other issues obviously-I know because I have heard you discussing it in the aftermath of the bmibaby pullout and so on-but one thing we have been discussing is the vulnerability of the direct route between Belfast and Heathrow, and the debate around the value of the slots versus the value of the actual airline routes. Is that again something you think would be addressed in terms of capacity issues around Heathrow itself?

Doreen McKenzie: I think we probably would be looking for more capacity, rather than trying to ring-fence off slots, because I think it is government’s job, in my mind, to put together the sustainability of a framework that we can all comply into. If they start tinkering and meddling with commercial businesses, airlines are very risk-averse at the moment. It usually takes them a few years to get settled into a route before the start making money. If you start saying, "You have to operate here or here", you will not end up having anybody operate anywhere, so you have to let the economic market, with its supply and demand, control that itself. It is a very important route. If we can get the capacity into the southeast that will help us as a region and all regions, but I do not think we should be asking you to say, "You must fly between here and here."

Q131 Naomi Long: The key thing there is that, if you had the capacity in the south-east, the value of each individual landing slot would reduce and, therefore, currently those flights that are not financially viable, in terms of stacking up against the value of their landing slot, actually may be.

Doreen McKenzie: Yes, you could well be right in that. I have to say that, to date, BelfasttoHeathrow services have been a profitable route. It has not been one that has been suffering. We do have a choice there. You have already heard we have three flights a day with Aer Lingus from Belfast International to Heathrow. We now have six flights a day with British Midland from the City Airport into Heathrow, so we have a good selection of flights that feed into all the international flights going out of Heathrow.

Q132 David Simpson: In the evidence that we took from the DETI officials, they have said that its key targets for growing the Northern Ireland economy include increasing visitor numbers and revenue to 4.5 million and £1 billion. Is that realistic and, if it is, what would the Northern Ireland Executive or others need to do to make sure that was achievable? Is it realistic by 2020?

Doreen McKenzie: It is a good target. Whether it is realistic or not –

David Simpson: That was a politician’s answer.

Doreen McKenzie: We have gone tremendously well this year towards it, with the start of tourism coming to Northern Ireland. There is no reason why we could not get them to come back, but you have to make the customer the heart of all of this. They have to have a good experience coming into the airports and getting from the airports into the city centre or getting into our rural areas. The whole picture has to be put together; it is not just about a route from here to here. We need to get the whole infrastructure in place. We need to not just have a Titanic every year. I think we have a beautiful country and there is a lot for them to see. I am not sure, in my own mind, we can have the numbers coming and spending two weeks just there, but we would be happy to get them for a few days, send them to the south, send them up to Scotland. We are in a nice position that we should be able to get them, certainly for a while. We could do the numbers if we all have joinedup government in getting it together.

Q133 David Simpson: Apart from joinedup government, what else? You mentioned infrastructure.

Doreen McKenzie: Yes, we need to make sure that it is easy for tourists. Northern Ireland airports are not that far away from any point where anybody lives, and a lot of people get dropped off by family and friends. If we have tourists coming in, they are not going to have that facility. The two airports at the moment subsidise a little coach service that operates between Belfast International, to the City Airport and back again. That is on a relatively regular basis, so that is quite good, but tourists want to come in and everything is about speed nowadays. People want to come in and just jump straight on to something that is waiting there. If you ask them to wait for an hour, it gives the first step a bad impression.

Q134 David Simpson: What would your view be then on rail links, because you heard the evidence from the CBI? There was not a real demand for that. We know the difficulties. Belfast could be difficult.

Doreen McKenzie: From a purse perspective, if we had an upgraded possible rail link into the City Airport-because we have a rail link, as Mr Paisley already said earlier, but it just falls short of the airport and it is out in the elements. You need to be able to bring that right into the airport and there would be a cost element to that. Now, I understand that the City Airport might work with government and have some sort of funding that might be able to provide that. I think that would be an excellent service and would be well used. I believe it has already been put to the planning people, but turned down because they are looking at existing numbers on it. You cannot look at existing numbers; you have to look at the potential numbers that will go on it. To the International, it is a lot more of a distance to get to and I understand there is a cost there of something like £98 million to put an extension in. That would be difficult, in today’s trading, to justify perhaps, but it would get cars off the road and it would get us up there, being an international airport with proper connections, like other worldwide cities.

David Simpson: Your turnover could double by 2020.

Doreen McKenzie: If it does, then it would justify itself.

Luke Pollard: I think it might be worth adding, in addition to the welcome and the facilities at the airports, there are two other factors that have a huge impact on the attractiveness of Northern Ireland for visitors. They are largely issues that currently Northern Ireland cannot do much about. One is aviation taxation, which I am sure you are going to come on to, but the other one is visa costs. It is an issue that is facing all types of inbound businesses at the moment. In fact, a UK visa is considerably more expensive than a Schengen visa, which will give you access to all the countries of the Schengen area around the European Union, and it will also be processed quicker. As a result, what we are seeing across the board is that the UK looks more expensive just from the visa point, let alone before you start looking at the flight options and the aviation taxation on that point as well. If we are to achieve greater levels of inbound tourism, and it is not just Northern Ireland that thinks tourism should be part of rebalancing the economy, visa costs need to be factored into that as well.

David Simpson: We need to talk to the coalition about that.

Ian Paisley: That is above our pay grade, that one.

Chair: I am CoChair of the BritishIrish Parliamentary Assembly. We were in Dublin yesterday and the day before and that is an issue that did come up quite a lot, the visa situation, so perhaps we will look into it a bit more closely as we progress.

Q135 Nigel Mills: I am sure you have seen the recent reports about the chance of direct flights to Abu Dhabi and maybe a Toronto flight being restored. Have you seen much demand from your customers already to get to those places or effectively to go to places that would use those as hubs? Do you think the activation of those routes would be beneficial to the Northern Irish economy?

Doreen McKenzie: We have quite a lot who go to visit family and friends in Canada. I thought you might be asking me how you felt the United service has settled in, in the last six months, so I looked at our statistics for our own company, and we have noticed in the last six months there has been an 8% increase on the services that we have used for Continental to America. When I looked at the final destinations, about a third of those were actually going to Canada as opposed to going to the States. People are using that direct service as a hopon to go somewhere else. The Abu Dhabi one is not so much generally a demand by our customers, at the moment, as it is by the Middle Eastern airlines, coming in and trying to get market share. Emirates is operating a daily service from Dublin, and Etihad is five days a week. If they can come to Northern Ireland with a few of those services that really would be super for some of our businesspeople.

Q136 Mr Hepburn: Which is the harder task for the travel industry in Northern Ireland-to get people to make their first visit to Northern Ireland or to get people to make their second and third visits?

Doreen McKenzie: First visit is probably the easier one. If we have got the infrastructure and everything on the ground right, they will come back a second time. It is getting them here first. I think, because we have had a lot of marketing done by our tourist board this year, a lot of people are talking about Northern Ireland and in a good way, not in a bad way, so a lot of people are wanting to come. We have got it right in getting them there for the first time. It might be just a little bit harder to bring them back a second time or keeping them longer.

Q137 Mr Hepburn: Where do you target the industry, on overseas visitors or GB visitors?

Doreen McKenzie: There are more GB visitors who visit us than overseas ones, but the growing countries of the Far East-China and India-are probably where we should be targeting them to come, and maybe Japan because they love golf. We can bring them and tell them about our lovely golf courses. We have a lot going for us, so we need to be targeting not any one specific country, if we can spread our net as wide as we possibly can.

Q138 Ian Paisley: You said in your comments in opening-and you are both very welcome; it is good to see you-that taxes are stopping people from travelling. You heard the evidence from the CBI, where they seem to equivocate on that point. Did that concern you as a person on the ground, who deals with customers?

Doreen McKenzie: It did actually. I felt that they were maybe talking not from a small business perspective, because we are seeing it. We are seeing it every day from our business customers. We have to check every range of services, left, right and centre. People really baulk whenever they see the breakdown. They did not used to know before. They used to get the full fare; that was the fare, and they did not know what it was made up of, so they accepted that was what they had to pay. Now they have every element broken down, and that is why you have people complaining about car parking taxes or prices. Whenever they see that the fare is so much cheaper than what the taxes are going to be, they get annoyed about it. Yes, I would disagree with the CBI from that point of view.

Q139 Ian Paisley: You also heard them saying that two airports make sense. It has created competition; it has created choice. Do you agree with that point?

Doreen McKenzie: I think if we had a blank piece of paper and we sat down and wanted to have an ideal world, we would have one nice big superairport, which is not going to annoy anybody or interfere with anybody, from a resident’s point of view, nature’s point of view or whatever, but we have what we have. We have got two airports that have been very successful. They have driven the numbers up. They are competing nicely and competition is healthy. We have got what we have, and we need to develop that more. We have capacity still in those two airports and we use that to our best ability, rather than trying to shake that around and make just one airport.

Q140 Ian Paisley: For your customers, when they are faced with choice and faced with travel needs, is travelling to the Republic of Ireland and travelling out of Dublin, not a problem for them? If that is where the best fare, the best connectivity is, that is what they will do.

Doreen McKenzie: They do, but it does make a problem for them. As you know yourself, Dublin Airport car park is not the easiest place to find your car again when you come back. It is quite a large one and very expensive. Particularly people who live in Belfast or the north part of the island do not want to do that journey. They do not want to travel all the way to the south to fly. The road has improved and it is a lot better, but it is the cost of the ticket and the cost of taxes that drive them down to the south of Ireland. They would rather go from their own airport, especially if they are travelling with children in a car, because it is a couple of hours’ car journey down.

Chair: You may be aware though that, when we spoke to the airports, they took a much more serious view of the level of tax. They did think it was a problem.

Ian Paisley: They are with you on the tax. The CBI are the only people, I think, who have said they are agnostic on the tax issue.

Chair: Although the airports did not necessarily see that the parking charges were a problem.

Q141 Dr McDonnell: I just want to come back generally-to go back to the beginning, if you like. The whole purpose of our inquiry here is to look at an air transport strategy. The point is this: if we cannot find ways and means of improving access and easing access for passengers, then there may not be much of a strategy. Really what we are looking for is whether there is anything you would suggest that would contribute to the strategy. For instance, we did maybe touch on the two airports, the competition and all the rest. In your view, either of you, is that a good thing or a bad thing? Are we oversupplied? Are we competing to the point that they are doing each other damage? Maybe that might have a commercial dimension.

I would go back to the point as well, perhaps, about the rail links because, in my humble opinion, the rail links are probably symptomatic, more than anything else, rather than being significant in their own right. If people can get on a bus, and I think the last time I did it for £10 or something, and you are in Dublin Airport in two hours or two hours and 10 minutes, and if we do not begin to outreach beyond Banbridge-if you are sitting in Newry, for instance, it is easier to go to Dublin. How do we get the volume of passengers sucked into both Belfast airports to make them more viable and more effective to provide the services? The worry I would have and the worry a lot of other people would have is that if you bleed away another 10% or so, as a result of the air passenger duty, a number of the flights and a number of the connections may not become viable, or they might drop to three days a week instead of five days a week or whatever. Have you any views as to what practically we should be saying? Could I come back on the rail links, not just as rail links in isolation, but as reaching out? For instance, if we have a rail link that makes it easier for people in Coleraine and that makes it easier for people in Newry. That makes it easier for people to stop on our train at Antrim, Ballymena or whatever and feed into our airports.

Doreen McKenzie: I think both the Belfast airports, especially the International Airport, see people in the south of Ireland as part of their catchment area and vice versa. Both target both markets. If we did have that rail link, that could take people from Newry or Dublin straight up to the International Airport. Whenever we did have a good rate of exchange, when you went to the International Airport, all the car park registration numbers you were seeing were from southern cars. Sometimes for people in the south, it is as easy for them to get to our airport as it is to get to Dublin Airport. If we can make that infrastructure for them and get the cars off the road, so that they do not have to pay for parking, they can get on, it is a pleasant journey and they literally jump off at the airport at the other end, then we are halfway there with the strategy. It is trying to do what you can do in steps. We cannot do it all in one go. There is usually a cost element to everything. It is trying to work out what is the best one. Luke, have you anything to add on the wider picture that might come into it?

Luke Pollard: ABTA’s perspective when it comes to aviation policy is actually into looking at where the planes go and where the customers go. If you follow the customer journey from when you book until when you get to your destination and vice versa, there are some really critical paths in there. The affordability one is absolutely critical. If you consider that 1 million passengers a year, approximately, fly from Dublin Airport that originate in Northern Ireland, you can see actually that there is a huge potential market for realignment there. If affordability is one of the main reasons as to why they go there that certainly needs to be looked at. The reduction in air passenger duty for the Newark flight is welcome, but there are an awful lot of other destinations that people will be travelling to Dublin to connect through to save a lot of money, especially in tough times.

If you look at the affordability part, you also have the reliability part of it. You have to make sure that actually they are flying a reliable service and they are connecting easily to get there. Connecting to the airport, the surface access, is absolutely essential as part of that mix. To Doreen’s point, which she raised earlier, one thing we are seeing in terms of airports right across the country, looking at improving their passenger numbers, is not only looking at improving it for people who live locally, but also what the experience is for an inbound passenger who has come into that destination for the first time. Once you get off the plane, where do you go? Is it clear where you are going? Is it easy to get somewhere and is it affordable to connect? If you can link all those bits together, then you will be in a better place.

Dr McDonnell: Do you see or are you aware of any source of revenue beyond government and beyond the airports themselves? Have you any suggestions as to who or what might help stack up?

Q142 Oliver Colvile: Can I link in my question to this as well? As you may know, the coalition Government is incredibly keen to try to make sure the Northern Irish economy is very much more rebalanced than it is at the moment. It is far too dependent on the public sector. One or two areas down in the south-west are a bit like that too, but do you perceive that, by rebalancing the economy, getting more private investment and more private companies, and a private economy actually going in Northern Ireland, that that will improve the numbers of people who will actually want up using airports and will the airport business then flourish? Or is it the case that actually having an economy that is dependent upon the public sector, because people need to come over here in order to come and see Ministers, come to Whitehall or whatever it might be, actually is the sustainable part of it? Which one of those two-private sector or public sector-do you think would make the airports in Northern Ireland much more sustainable than they are at the moment?

Luke Pollard: At the risk of giving a politician’s answer, it is a little bit of both really, in that respect. The private sector rebalancing is something that is important, not only in Northern Ireland but across the country. There is no doubt about that. If you are looking at a business investment decision, where you are entering a relatively high tax regime compared to a low tax regime that is just down the road, then that decision has already half been made for you. It is not only looking at the corporation tax, which may be the headline one that an awful lot of people look at. If you are making an investment decision about where you have to site your business, you look at the whole range of taxation levels. Increasingly in a connected business, air passenger duty as a cost of flying is one of those reasons you look at.

It is part of the balance along the way, but you should also not forget here that, when you look at aviation, there is a lot of focus on business travel as the sole driver of growth. What is certainly clear is that business and leisure-because it is very rare that you get an entire plane composed entirely of holidaymakers or entirely of businesspeople. You get composite flying. That is certainly true of all the Northern Ireland airports. Actually, leisure drives an awful lot of jobs and growth as well. That should not be forgotten within that, because sometimes there is a focus on foreign direct investment and people in suits driving jobs, but actually it can be people on leisure, on holiday and visiting friends and relatives that can provide just as much of an economic impetus to an economy.

Oliver Colvile: Unfortunately I have to go in about eight minutes, because I have something else to do. Do not take it as a personal slight. It is not; it is just that I have to go and do something else.

Q143 Nigel Mills: Can I take you to the Civil Aviation Bill and the proposals to reform the ATOL scheme? I think you touched on it in your written submission. Can you just explain to us why you think that is such a key issue for ABTA members in Northern Ireland?

Luke Pollard: Absolutely. I can probably give the context around that and I think Doreen probably has a more local view on it. As background, the way that people have been buying their holidays has changed considerably since the ATOL scheme was first introduced. ATOL protection, by and large, covers package holidays and airbased package holidays in particular. What we have seen, certainly since the ATOL regulations were introduced, is the growth of lowcost airlines and the growth of internet sales. That has fundamentally changed the way people buy holidays. ATOL’s perspective on holiday protection is that we would like to see holidays protected, not just one unique definition of what a "holiday" is. At the moment, of all the holidays sold in the UK, only about a third of them are packages, and so ATOL protection has been focused on a much smaller market in terms of the total number of holidays.

In terms of the reforms that the Department for Transport has been leading on, and has been doing so now for about five years or so, what we have been calling for as ABTA is to see an extension of protection so holidays are covered. They would be holidays where they are booked as a package; where they are booked as a FlightPlus arrangement-which is the new definition that says that, if you buy a flight at or around the same time as a hotel or car hire, then that is a FlightPlus arrangement-or as any other type of arrangement. It is a challenge to find any consumer in any travel agent up and down the country, who will be able to correctly identify what legal entity they are purchasing, in terms of their holiday. That does not seem to be the correct place to apportion whether they are protected or not.

In terms of the Civil Aviation Bill, the extension to Flight Plus is very welcome. It can be done under current regulations. The bit that is left out from there is any holiday sales outside a travel agent or tour operator is airline sales. There are two provisions in the Bill that we are really keen to see put through. One is a holiday sold by airlines. Under the new reforms the Government has pushed through, your holiday will be protected if you buy it from anyone but an airline. If you go to an airline’s website, buy your flight, buy your hotel and buy your car hire, that could be the identical hotel, car hire and flight as you are buying from a travel agent, but because you have bought one from an airline and one from a travel agent, one will be protected and one will not be. We did not think that was the right way forward and the Government has agreed with us. That is why they have put the powers in there.

We feel it is really important that those powers are put on to the statute books but, more importantly, that they are used once they are on the statute books. We want to see the Department for Transport put in a decent consultation to bring those holiday sales into the scheme so, at the end of it, if you have bought what looks like a holiday, you will be protected. Ultimately that is what consumers want to know when they are buying what is, in many cases, the largest purchase that that family will make in any given year. They know that their money is safe if they are making a purchase in advance or, if they are on holiday when there is a failure, they are going to get brought home. That is absolutely critical for confidence in the industry.

Doreen McKenzie: I believe that financial protection, from our customers’ perspective, gives them confidence in buying travel products. Probably an example would be when bmibaby decided to close; a lot of customers were ringing up and saying, "It is going to cost me more money to do it." However, if they had booked it as a package through the travel agent, the tour operator accepted that liability and had to pay the difference. Those customers did not have anything, so it was quite good from that perspective. That was an early example of it actually kicking into place. At the moment, we are just pushing for the Government to move as quickly as possible to get the level playing field, because there is still confusion from the public. If they just go and buy it online, as Luke said, click through and buy the second element, there is no protection.

Q144 Nigel Mills: The important thing is that people who are booking know whether they are covered or not. That is very hard at the moment.

Luke Pollard: Absolutely. Consumer confusion is one of the main reasons why it is worth doing. To make sure you get your ATOL stamp or your ATOL certificate, as it will now be, for any protected arrangement is so important. There is an assumption from travellers right across the UK that, no matter how they buy their travel arrangements, no matter who they buy it from, they are protected. With falling levels of purchases of travel insurance, even if they may be protected on their travel insurance, and not all policies cover failures in any way, shape or form, we are seeing the number of people still not being protected falling. We want to see all holidays protected, because that is good for the industry and it is good for the consumer.

Q145 Dr McDonnell: Air passenger duty on flights from Northern Ireland to North America has now been reduced to domestic levels. The responsibility for setting the rate has been devolved to the Executive in Stormont. Have you had any discussions or any indications from Ministers in the Executive that they intend to reduce the air passenger duty on domestic flights? Have you had any feedback?

Doreen McKenzie: We have not been told specifically, but we just have an understanding or have heard, shall we say, that the will is there to take it to zero, which would be wonderful. That would make it compete easily with the south of Ireland. As has already been mentioned today, 98% of people are still having to pay £13 each way, which, by the way, is intended to be doubled next April, so it is going to be £26 each way.

Dr McDonnell: That is where the worry is. That is why I am asking the question.

Doreen McKenzie: That is a real worry. We would like to see that you ask for the powers to be devolved to the Northern Ireland Assembly for the whole of APD. Now I understand that the cost to the Government would be somewhere between £55 million and £60 million to cover the whole of Band A, but, if we could get our tourist numbers up, it could pay for itself.

Q146 Dr McDonnell: My sense is that people would be comfortable with the £5 to £10 range. Once you start moving above the current range, it begins to become prohibitive. You have heard noises of good will but no substance.

Doreen McKenzie: Just noises, yes.

Luke Pollard: You need to have the economic facts and figures to back that up along the way. At the moment, there is a very strong emotional argument about reducing air passenger duty. What we are preparing, as part of the Fair Tax on Flying campaign and with other groups, are the economic figures that say, "If you reduce APD in some respects, not only will you gain a greater level of flights, so that there will be more APD coming in at a reduced rate, but you will gain additional taxation via other means as well". Certainly it is our view that the opportunity that Northern Ireland presents in allowing devolution of direct Band B flights, but also the potential for devolving Band A, will really shine a strong light on the fact that reducing air passenger duty will not only produce more money for the Exchequer but also get more people back into work. The only opportunity across the UK to demonstrate the argument that lower APD will produce a greater return in the economy is in Northern Ireland. As well as looking at the specific cases in Northern Ireland, it is something that ABTA members right across the country are encouraging, because it is a firm belief of ABTA members that lower taxation, when it comes to air travel, would encourage more people to get on planes. That would be good for not only their businesses, but the wider economy as well.

Q147 Jack Lopresti: On that point, in your submission you point out that Netherlands, Belgium and Denmark have scrapped or not introduced their versions of APD. Why do you think this Government is so insistent on retaining it and, from 2013, actually increasing it? Do you have any thoughts on that, apart from the obvious?

Luke Pollard: One of the strong reasons why the Netherlands, for instance, and some other European member states have removed or reduced their air passenger duty is because of shared land borders. If you take the perspective of the customer again, if you can fly from a lowtax environment compared to a hightax one, and travel easily to there, you will do so, because that will make a big difference. That is exactly what we have seen in Northern Ireland, in the fact that Northern Ireland passengers have been flying from Dublin precisely for that reason. The rest of the United Kingdom cannot access another EU member state with low tax as easily in terms of that. For that reason, it has been a captive market, so to speak. The ability to increase taxation regularly has gone on.

We are concerned that there has not been the othersideofthebalancesheet research done by the Treasury. They can tell you how much money they are going to net in, and they have projected that out until 2016, where it is approaching £4 billion a year, but they have not done the analysis that says, "If we reduced it by a certain rate, this would yield X amount more jobs." Looking at air passenger duty as part of a way to kickstart the UK economy is really important. That is again why Northern Ireland, looking at devolution in this case, can provide such a good boost to the argument that actually lower APD across the UK will provide more jobs everywhere in Britain.

Q148 Naomi Long: Could we maybe just look at the issue about the Heathrow slots again, just looking at that very specifically? IAG has given an assurance that the BelfastCitytoHeathrow linkage is secure. The decision by the Competition Commission is that it has to be protected until at least October. However, in the intervening period, we have seen ground staff put on protective notice from bmi. We have seen bmibaby rather unceremoniously removed at short notice to much inconvenience, I have to say, of passengers. How much confidence do you have in the reassurance that we have been given about the Heathrow link?

Doreen McKenzie: I am pretty confident that it is business as usual up to the end of this year. The fact that a couple of people in Northern Ireland have been offered jobs of a permanent nature with them, albeit they are not based in Northern Ireland, has given me confidence going forward that they intend to still operate the service. As to what that service is going to look like in a few years’ time-whether it will still be operating out of City Airport, it will be split between City and International, or it will be moved to International for larger aircraft-is just a guessing game, at this moment in time. I think they will retain the service. I think they can see that it is a feeder hub into their worldwide services, so they would be very keen to get that, because that is going to drive onward business for them. I am confident that, yes, we will have it, but I am not sure that it is going to look the same as it looks today.

Q149 Naomi Long: Just from your perspective-we asked this of the CBI, so you will have heard this question-on the issue of frequency versus capacity, one of the arguments is that you could trade frequency for larger aircraft, retain the seat numbers but have less frequent flights. That may work if it is simply viewed as a feeder into other services, because you can align those very carefully. From your perspective of booking people on to those flights to Heathrow, how important is frequency?

Doreen McKenzie: Frequency is very important. I am not sure you could align larger aircraft to feed into certain times of flights, because we have so many large terminals in Heathrow and different timescales to get, say, between Terminal 1 and Terminal 5, or Terminal 1 and Terminal 3. You could not just have one flight going in, in the morning, to feed the whole lot. That would defeat the point of a feeder service. We need the frequency there for that. We need that frequency during the day, so you can feed into all different flights going into different parts of the world, but we do need the capacity as well.

Q150 Naomi Long: In terms of the closure of bmibaby and bmi Regional, what kind of impact has that had on UK holidaymakers and business travellers, particularly in terms of Northern Ireland this year and people going outward and coming in?

Doreen McKenzie: We were okay on the business travel passengers, because that was mainly domestic and immediately there was a rebalance of other airlines putting in additional capacity, so we were able to get people there sorted out very easily.

The holidaymakers were a different ballgame, because they had booked well in advance to get a cheaper price. Where the disappointment really came through is they knew that IAG did not intend keeping bmibaby; it was not a model that fitted with their business model, so they had always intended to get rid of it for financial reasons. The shock came because they dropped Northern Ireland in June, a month before our peak season, and they kept Birmingham and East Midlands until September. It would have been easier blow if they had kept it until September, but it was obviously done for commercial reasons, so we just had to accept it. However, I do believe that there are going to be more carriers announced very soon and they will pick up the slack. As I say, those people who booked a package through travel agents were out no extra money at all. It was just the people who had done it themselves on a clickthrough.

Q151 Naomi Long: In terms of ABTA themselves, how many of your member organisations operate their own flights, their own airlines?

Luke Pollard: It is our three largest members, so: Thomas Cook, as in Thomas Cook Airlines; TUI, who has Thomson and First Choice; and then Monarch Group, who has Monarch, which is a scheduled airline. They are the three largest ones.

Q152 Naomi Long: Obviously you have said that APD is hugely important. How important would it be to your other constituent members, particularly those who operate airline services?

Luke Pollard: It is an issue for all our members, to be honest. The passion with which members talk about it is the same whether they are one of the largest multinationals, like TUI or Thomas Cook, or whether they are a small familyowned travel agent. Over the years they have seen the increasing rates actually having an effect on their business. It may be easier to quantify if you are a large multinational, with the greater statistical abilities and passenger numbers to demonstrate where that is having an effect, than it is for a small business, but it is something that every member certainly has expressed concerns about. I think there is a worry among some of the smaller ones that we have seen around the fact that the impact on their businesses may be a bit more hidden, because it is an inexorable rise going up all the time.

Actually, when it comes to small businesses, a 5% increase in this tax every year does have a big difference. The majority of ABTA’s membership is small and mediumsized businesses. There are some very large ones that carry an awful lot of people, but the majority of our members are small businesses and this is a tax that directly affects those small businesses. It is not only on behalf of the travelling public that we oppose the increases in air passenger duty. It is also for that reason.

It is worth bearing in mind that APD is not the only tax here as well. The Emissions Trading Scheme is coming in. It is something ABTA supports and our members, generally speaking, support, but that is going to add another tax on top of what is going on. Unlike APD, which is to a certain extent transparent, because you all know how much tax you are paying, depending on what destination and what class of travel you are in, ETS will be a much more hidden tax, because it will be based on the business model of the airline on which you are flying, so obscured from the public view. That is why it is really important that the Government makes an early stage here and says, "Yes, we are going to offset ETS income from APD." That is exactly what Germany has done. They have made a very clear statement that they want to raise X amount of money-I think it is about €1 billion a year-from aviation. Emissions trading income will be the primary one and then the remainder will be billed in their version of air passenger duty. We think that is the fairer way of doing it, and that is partly Fair Tax on Flying’s perspective. That is where the "fair" bit comes from, in the fact that we do not want to see multiple taxation applied on here, because there is a real danger that we keep taxing and taxing at one rate but Emissions Trading Scheme taxation is designed to increase at a much faster rate than APD’s 5% a year.

We should not kid ourselves into thinking there is only one tax that people sitting on planes are paying; there are going to be two. That will especially have a big impact when the availability of carbon and the licence cost increases, as it will in the next five years or so. That is something perhaps for a more longterm view of where aviation in Northern Ireland is coming from: it is actually looking at what the impact of the Emissions Trading Scheme is, as an additional taxation measure, not just APD. That might be worth considering.

Q153 Chair: It might be completely out of context, but does the minimum carbon price affect you at all or would that not affect you?

Luke Pollard: It is not entirely clear about what the price of the carbon licence is going to be down the line. What we can assume, based on the modelling that has been done at the moment, is that it could be anywhere from £5 to £40 a ticket, so it is not entirely clear what is going to go on. It is also not entirely clear how airlines are going to adjust their own business models to adjust to the carbon licences that are available. At the moment, certainly ABTA has no figures to be able to say, "It will cost the average customer this amount of money".

Q154 Chair: You feel it will affect you though.

Luke Pollard: ETS will certainly affect passengers, yes, and they will be paying for it through their ticket prices.

Q155 Mr Benton: If I might go back to the issue that was brought up about attracting people for the first time and why it is harder to get people to come back on additional occasions. I was just wondering if it was possible to be a bit more explicit. I speak as a person who will always remember my first visit to Northern Ireland. I absolutely fell in love with the place. I find it difficult or hard to imagine anybody not wanting to come back for a second time. I was just curious as to whether there was a compelling reason or some obstacle, not necessarily a reason. It seems difficult for me to understand why somebody would not be waiting to get back.

Doreen McKenzie: That is great to hear. I do not think we have a problem within Northern Ireland. I think it is because the consumer has so many choices now. We have so many airlines flying to so many destinations from every airport in the UK that there has been, just prior to the recession starting, people going on their annual twoweek holiday, and then going two or three times a year for weekend breaks to European cities and what have you, with all the nofrills offering cheap deals. That all started to dry up, but people still try to have their holiday. I do not want to keep harping on taxation but, when that all starts increasing the price, the short breaks are dropping off. People have a list of saying, "I will try Belfast this time and maybe go to Newcastle next time. I’ll go to New York for Christmas shopping." We are having people going to Hong Kong for a weekend, which is not a short distance. I think it is because there is so much choice that we, as a part of a UK, have to compete against, not just from the rest of the UK but from the rest of the world, to attract people coming in.

What we have been very successful, in the last couple of years, in doing is actually attracting a large number of cruise ships to include us now in their destinations. That has really opened up as a market, because those cruise shops that are normally coming in have about 1,000plus passengers on board, and quite a lot of those are British citizens coming in doing roundBritishIsles tours, and also American citizens coming in. They are starting to say, "I will come back there. I will come back a second time," so it is utilising that. Now, we need to do an awful lot on our welcome entry at the ports, but that is another day, another story. We are not welcoming there at all, but the opportunities are there, if you get all the infrastructure right, that they will keep coming back.

Q156 Mr Benton: The reason I went back to that question was I take it the answer is commercialisation basically. There is no other factor that you could point to as creating an obstacle.

Doreen McKenzie: No.

Chair: That was a very useful session. Thank you very much for coming over and giving us the information. Thank you very much.

Prepared 22nd May 2012