Examination of Witness (Questions 480
THURSDAY 23 JULY 1998
480. If you had to auction these 440,000
slots at Heathrow, what do you think you would get?
A. My Lord Chairman,
how long is a piece of string.
481. Picking that point up, you have said
quite categorically that slots are swapped, although we got a
fairly clear indication that they are traded, in fact. I do not
want to pursue that any more because you have given the answer
to Lord Berkeley. Would you favour any changes in the forthcoming
renewal slot allocation regulations? Would you be in favour of
any form of auction?
A. If I may,
my Lord Chairman, could I answer that question in two parts. Yes,
I would like to see some significant changes in the regulation
of slots in Europe. I have got a few key points I would like to
482. I hope you are going to give them to
us in a minute.
A. The question
of auction is a separate question, I will deal with that later.
In terms of the slot regulations, the change I would certainly
like to see is clearly more emphasis on the issue of enhancing
capacity. You do not need a lot of people like me if you can increase
the supply side and certainly it is important that every effort
and energy is given to making sure that airport capacity is maximised
and then slots need not be so heavily regulated. The regulation
we work with at the moment contains a large number of ambiguities
and indeed as a company we have suffered under some of those ambiguities
over the years. I referred earlier to the court action from the
States of Guernsey and that is all based on the ambiguity of one
particular paragraph in the regulations. Certainly I would like
to see some clarification of a number of sections of the regulation.
I think while we pride ourselves on the way we do things in the
United Kingdom it is fair to say that the regulation has not been
fully implemented across the European Union. I think before we
start changing radically the slot regulations we should try and
make sure that what we have got at the moment is fully implemented.
483. Is that a DG VII responsibility?
A. It is, yes.
As a coordinator, obviously I would like to see clearer objectives
and priorities. We touched earlier on the number of criteria which,
as a coordinator, I have to take into account in making a slot
allocation decisionthere are something like 14 of them.
That gives you very little guidance really. You just have to take
all these things into account all the time. To use a very simple
example, you have referred a number of times to the priority which
should be given to new entrants. The way in which "new entrants"
is defined at the moment is actually quite broad. It is so broad
that almost half of the airlines serving Heathrow are new entrants.
Carriers like Thai Airways which has been serving Heathrow for
25 years is a new entrant and falls within the scope and definition
of "new entrant".
484. This is the 2 or 3 per cent?
A. It says that
if a carrier has less than four slots a day, then it is still
a new entrant. So if in one part of the regulation it says that
the new entrant should have priority, then it defines them so
broadly that half the people flying to Heathrow have got priority,
it is not much of a priority. I believe that in future versions
of the Directive the intention is to broaden the definition even
more, so it is diluting its value, in my opinion, and it shows
perhaps lack of focus, lack of clear policy objectives in what
we are trying to achieve in this.
485. Do you have the chance of giving input
with the changes you would like to see? If so, how do you do it?
A. My Lord Chairman,
our own Government does consult on these issues, and I am in regular
contact with the DETR specifically on these issues. Our own company,
ACL, has made representations to the Commission about changes
we would like to see in the future. I am also a keen member of
a trade association, the European Union Airport Coordinators Association,
which has also made representations to the European Commission
about what changes it would like to see in the future.
486. So you have direct access to DG VII,
is that right?
A. That is so.
487. Mr Morrisroe, you said fairly near
the beginning of your evidence that you had a meeting coming up
on 30 July. Is that the one which looks at the winter schedules,
or have I got it completely wrong? What is the meeting on 30 July?
A. No, that specifically
is to look at the future funding and the structure of ACL, because
there are a number of tensions which we have touched on.
488. I see. When do you have your meetings
which discussI think you used the words "horse-trading"?
When are your horse-trading meetings held?
A. My Lord Chairman,
I do not think I used that term, but perhaps I can explain very
simply to you the process which goes on. The IATA system divides
the year into two seasons, summer and winter. The summer is seven
months long, April to October. The winter is five months long,
November to March. The process is, if you take the current summer
as an example of how the process works, that way back in September
of last year we sat down with the capacity providers, the air
traffic control authorities and the airports to look at how last
summer had gone, what infrastructure changes there had been and
therefore what the new capacity was going to be. We decided on
the size of the cake for this summer.
489. Is that just for the United Kingdom?
A. That process
is really going on in varying degrees around the world at the
same time. This is a kind of global process, taken slightly more
seriously in the United Kingdom perhaps, but it is going on in
the rest of the world. That decided the size of the cake in September
last year. Also around September of last year we monitored the
data of all the airlines' activities throughout last summer and
we decided which of them had met these usage criteria in these
rules. There are some "use-it or lose-it" rules in place.
Airlines that do not use their slots do not get them back as historics.
Airports like Heathrow, it would be very rare for an airline not
to use its slots. We advise the carriers in September of what
we consider to be their historics, those that they can reasonably
apply for and assume they will be given again. There was then
a deadline in October of last year, middle of October, at which
all the airlines of the world submitted their requests to us.
The 12 airports we manage there is one date in October where every
airline that wants to fly to the United Kingdom for summer 1998
would send in their request by that date. By the same token, United
Kingdom airlines would be sending their same requests to the Japanese
coordinator, the South African coordinator, the German coordinator
and so on. It is a key point in the calendar. As coordinators
we then have two weeks to make the decisions, fiddle about with
the requests and fit them within available capacity and also to
make the new decisions allocating that handful of new slots at
490. At this point are you talking to other
coordination groups in other countries? A slot is no good unless
you have both ends.
both ends of the routes. That is I suppose one of the weaknesses
of the present system. At the moment there is a lack of coordination
between coordinators. It works reasonably well at the moment,
as I will explain in a couple of moments. I believe you are right,
as more airports in the world become more saturated there will
be a need to coordinate activity between coordinators during that
decision making process. Having made the decision we travel then
to a thing called the IATA Scheduling Conference which takes place
in November for each summer season and June for each winter season
at which all the coordinators in the world and all the world's
airlines meet together in one hotel for a week basically to thrash
out the world's airlines schedules for the coming season.
Chairman] I hope you
meet somewhere nice, it must be a hell of a week.
A. This conference
is growing in scale as more airlines are established and as more
airlines fly international services touching on more congested
airports. I have just recently come back from one held in Montreal
which was discussing next winter where there were 850 delegates
and 250 airlines. People like ourselves we send a team of seven
people and we set up an office with computers and literally run
a coordination service for the United Kingdom in a hotel. The
first day we give the carriers the feedback: "This is what
you asked for, these are our decisions. This is what we have given
you". They have a week then to coordinate what we have offered
them with what the coordinator at the other end of the route has
offered them. Where there is an inconsistency there they will
rush from one coordinator to another and the objective at the
end of that meeting is literally for the world's airlines to have
a slot cleared schedule for the summer 1998 season.
Lord Skelmersdale] Amazing
492. You are judge and jury on this. You
get applications, you sit down, you work them out and you say
to each airline: "This is what we are prepared to offer you".
Is there any appeal against that?
A. Like any judge
and jury there is a sophisticated appeals process. Clearly the
first appeal is when the airlines come to see us directly, one
to one, at this conference and we have to justify all our decisions
individually to that airline. The debate often goes "Why
them not me, why this time not that time" and we have to
rationalise all those decisions. In the first instance if the
airline is unhappy with the decisions that we have taken there
is a committee at these conferences of senior people from other
airlines who listen to any grievances and try and mediate if there
is a disagreement. Beyond that, back here in the United Kingdom,
we have at airports like Heathrow established things called Coordination
Committees, which we are obliged to do under the EC slot regulations,
and they have a right to sit and listen to cases that are brought
before them, disputes between the coordinator and any airline.
Beyond that, of course, every airline has the right to apply either
to the United Kingdom courts for judicial review of our decisions,
as has happened in the States of Guernsey, for example, or as
is also not uncommon they apply directly to DGIV. So there are
lots of checks and balances in the system.
493. Mr Morrisroe, you have given us some
absolutely fascinating information. Could I ask two final questions,
one very specific. We have talked a lot about Heathrow and Gatwick.
What is the position at Stanstead? How much elbow room is there
A. Although it
is one of the fastest-growing airports in the United Kingdom,
and has been for a number of seasons, Stanstead was freely accessible
to airlines until comparatively recently. You may be aware that
recently a company called Go Airlines has decided to launch a
low-fare operation from Stanstead. That, I think, has given other
carriers confidence in Stanstead, and we have now seen a significant
number of applications from flag-carrying airlines from European
countries deciding that they would like to try Stanstead as well.
So it has really turned the corner comparatively recently this
summer when Go Airlines started operations. I believe that by
next year there will be some form of slot allocation, some form
of schedule adjustment taking place, because in the peak hours
there will be insufficient supply to meet the demand, and the
belief is that Stanstead will then grow quite quickly.
494. So this is going to add to your burden,
A. My "fiddling",
495. My second question is a much more general
one. As you are aware, and as I said at the beginning, we are
looking at the proposed Airline Regulations as produced by DG
IV. If those go through in, give or take, the form they presently
have, what difference do you think it is going to make to slot
allocation, presumably both within your own organisation but also
A. The issue
of bilateral agreements between countries has been put by our
own Government at arm's length from the slot allocation process.
In other words, the two processes work independently of each other.
That occasionally causes conflicts, because our Government will
sit down with the government of another country and they will
agree to increase the access to the United Kingdom, more flights,
more frequencies, more capacity or whatever, but our Government
is at pains to point out that that does not guarantee them access
to the airports, and the issue of slot allocation is made by an
independent third party, ACL. As you might imagine, that causes
some frustration with other countries' governments and their airlines,
if on the one hand our Government gives them the right of access,
but there is no real access because there is no capacity available
to them. I guess what may happen on a grander scale, if the Commission
is negotiating open skies with free-er access of third countries
to the United Kingdom, is that that problem will just become worse,
where on the one hand these carriers, having got the rights to
fly to the United Kingdom, will expect to get access, but in fact
they will be denied access because of the slot constraints. I
believe that in most countries in Europe a similar situation applies,
slot allocation works independently of the bilateral agreements,
although in some countries the two are more closely tied.
Chairman] Mr Morrisroe,
I would like to repeat my very sincere thanks. You have come at
short notice. You have given us an extremely interesting hour
plus of evidence. We are going to need to scratch our heads quite
hard. I do not think we have begun to get right through it, how
could one in an hour and a quarter. Thank you very much for what
you have told us.
Lord Methuen] I wonder
if we could have a copy of the IATA allocation document?
496. There is some other information you
are going to send us.
A. Yes, I will
Chairman] Thank you.