Select Committee on European Communities Minutes of Evidence

Examination of Witness (Questions 480 - 496)



Lord Paul

  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 mention.

  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 decision—there 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 discuss—I 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.

Lord Methuen

  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 Heathrow.

  490.  At this point are you talking to other coordination groups in other countries? A slot is no good unless you have both ends.

  A.  Coordinating 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.

Lord Paul

  491.  Bermuda.

  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 system.


  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 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, is it?

  A.  My "fiddling", yes.

  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 throughout Europe?

  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 do that.

Chairman]  Thank you.

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