I am of course acutely aware that the appeals process has been a matter of strong focus by the airlines. Would you agree that the Bill gives airlines a much more effective appeal right than the judicial review, which is the only option available to you under the current regulatory regime?
Dr Humphreys: As you know, that was an issue that the airlines placed a great deal of importance on, and we engaged with your Department over many months discussing the issues involved. I certainly agree that giving the airlines a right of appeal, along with the airports, presents a much more evenly balanced regulatory package and will produce benefits for everyone, including the regulator, but especially the passenger.
As you know, there was concern at one stage—I think you yourself expressed it to me—that giving airlines the right of appeal would result in frivolous and vexatious appeals. We went to a great deal of trouble to address that issue. We employed specialists in regulatory law, and with your officials we went through all the possible problems that might arise, and we came up with a model that we think more or less guarantees that there will not be such vexatious appeals, so we are very happy with the way the Bill has turned out.
That was indeed very useful input, without which we could not have come up with the package that is now in the Bill.
I am sure that the Committee would be interested to hear your views on some of the environmental issues that we have been discussing during our early sittings. Could you explain why your membership does not feel it necessary to include an environmental duty for the CAA in relation to economic regulation?
Dr Humphreys: It is not that we think the environment is not important—it absolutely is. We very much recognise that if the industry is to be allowed to grow, the environmental impact has to be addressed. However, we do not think the Bill is the right place to insert new environmental requirements on the CAA. There are already a number of opportunities for the CAA to exert influence on environmental matters. May I give you a couple of examples? In the last few weeks, the CAA has published two documents: one is entitled “Aviation Policy for the Environment”, and the other concerns a consultation on the CAA and the environment. That document lists at great length all the areas in which the CAA is already involved in the environment. It just is not necessary, in our view, for additional duties to be placed on the CAA.
In addition, we are concerned that a Bill that is essentially related to airport regulation and the new role for the CAA is not the right place for environmental duties to be imposed. Many environmental requirements are policy issues that should rightly be the responsibility of the Government, not an independent regulator.
Dr Humphreys, you have referred to a document, which you are entitled to do. If you would like to make it available to the Committee, we will ensure that members have sight of it, if that would be helpful to you.
Dr Humphreys, most people who have sat in that chair over the past day and a half have disagreed with your organisation’s view on a secondary duty in relation to the airlines. You will have heard the arguments why such a duty is not considered necessary in the Bill, and it is not included in the Bill. Would you like to articulate why your organisation still believes that it ought to be?
Dr Humphreys: First, we believe that the CAA should have a primary duty to look after the interests not only of the passenger, but of the airlines, in relation to airport regulation. We have pursued that argument at great length—and I think we have probably lost it. Nevertheless, that is our preferred option.
The reason why airlines are so central to airport regulation is that they are the prime customers of airports. I understand that the passenger, of course, is a customer as well, but we are dealing here with airport regulation. This is a five-year cycle that is extremely complex, very time consuming and very expensive. It is a process that individual passengers, with the best will in the world, are just not able to participate in. Indeed, even passenger representative groups have told us repeatedly that it is not something they either want or are able to participate in. You are dealing with matters such as the cost of capital, baggage systems, investment in terminals and capacity. These are technical, complex issues that realistically only the airlines and the airports are in a position to deal with. We think it extremely important that the CAA take notice of the key role the airlines play.
The Department for Transport argues that there are numerous places in the Bill where the CAA is required to consult the airlines. We welcome that and have no doubt at all that it will consult us, but in our opinion being consulted and there being a duty to take account of your views are two quite different things. We believe that having at least a secondary duty for the CAA to take account of our interests would improve the quality of the CAA’s decision making, to the benefit of the ultimate consumer.
You mentioned terminals. I do not see any reference to the proposal for inter-terminal competition in future, mentioned and provided for or dealt with in the Bill. Do you have a view on inter-terminal competition?
Dr Humphreys: The Bill provides for such competition; it does not enforce it in any way. We think it is a good idea to provide for it, in case it becomes an issue in future. In my previous role, before I retired as a director of Virgin Atlantic Airways, we frequently argued that Virgin benefited considerably from inter-terminal competition at Kennedy airport, for example, where it was possible to transfer between terminals, have better service and lower costs. That was absolutely impossible at Heathrow, for example, where the approach was “take it or leave it”, to put it bluntly.
However, the likelihood of getting into terminal competition in the near future is zero, because, in order to have it, you need spare capacity. At the moment, Heathrow may be a single monopoly; if you had different companies operating each of the terminals, you would just have five monopolies instead of one. It would not really take you much further. Who knows what might happen in future? There may well be at some airports more spare capacity between the terminals. It is something that might be worth taking into account.
Representing the airlines, your clients or your organisation will spend a great deal of money cosseting the passenger for most of their journey. However, for the last, say, 10% of their journey, when they are dumped in the arrivals hall, all that customer experience work can be unravelled. In the Bill, there is a duty on publication of information. Do you have a view on whether that duty should be extended, say, to the customer service operated by UKBA?
Dr Humphreys: I think that would be a very good idea. If I might expand on that slightly: airlines have been concerned about the border agency, both UKBA and its predecessor, for many years. We have not been—to put it bluntly—impressed by the management of the organisation. You will have to excuse me, because I flew back from India only last night. I know there have been changes to the UKBA.
Dr Humphreys: I just flew through it actually; I have not always done that. I know there have been changes, but my impression is that they have not addressed the core problems that our members face. That is that there are times when foreign visitors to this country can queue for three hours. UK citizens can queue for an hour to get into their own country. We think that is totally unacceptable.
I understand that UKBA has an objective of 45 minutes. That can be a long time if you have just come off a flight of several hours with young children and so forth. It seems to us that there is room for a fundamental review of the whole approach of border security. When you get a situation where, when the staff go on strike, the queues disappear, and civil servants can be trained in under two days to do the job, it raises some fundamental questions about what is going on there. We would welcome that review.
I didn’t particularly want to open the can of worms about UK border security. I was thinking about the publication of information about queue times and maybe even staffing levels. Do you think that would be a helpful step?
I wonder whether you can help me; I am trying to be clear about what the Bill does or does not do. In your evidence, you said:
“These failings have resulted in excessive price increases and poor quality service at regulated airports.”
Could you help me by identifying the failings that did that?
Dr Humphreys: Well, that is not only the view of the airlines; the Competition Commission was also critical of the approach taken by the CAA over the last 10 years or so. Fundamentally, the problem we saw was that it was not strong enough in addressing the problems that the airports had and allowed the airports to get away with more than they should have done. So the quality of service, in terms of investment, which translates into facilities for airlines and passengers, was not good enough and they were allowed to have price increases that were quite excessive in many cases. Can I give you an example?
In the last review, when BAA still had control of Gatwick, the CAA approved an investment programme for Gatwick, despite the fact that the airlines said that really was not a suitable investment programme that did not meet the needs of the customers of the airport. When BAA sold Gatwick, the new owners produced a revised plan, much closer to what the airlines had originally said; it involved less absolute investment, but was more focused on what was needed. If you go to Gatwick today, I think you will see quite a significant improvement in the quality of service provided there.
We have been critical of the CAA. That was the former management of the CAA; there have been many changes there now, and we are more impressed with the current people there.
I am just trying to get my head around whether you think that that would still happen if you are not part of the secondary duty. Why is this Bill going to solve the problems?
Can you give any examples of ways in which you think that consumers could be ultimately helped by giving airlines a secondary duty? You stated it, but I wonder if—
Dr Humphreys: The airlines will be consulted in this process—there is no question about that—but it is a question of how much weight the CAA will be expected to give to certain stakeholders’ views. Clearly, it will give considerable weight to the passenger, which is quite right under its primary duty, but if it does not have this secondary duty and is only required to consult, then we are concerned that our fundamental interests will not receive the weight that they ought to.
I am sorry that that is a very vague answer, but it is not an area that it is possible to be absolutely precise about, I don’t think.
You will be aware that some smaller airports have concerns about some of the additional costs that the Bill will provide. They will struggle to pass them on to the airlines. Do you have any comments about that concern? Do you think it really will be a problem?
Dr Humphreys: If I understand it correctly, their concern is mainly about data collection and information provision, and that does concern us, because the Bill will also potentially require airlines to provide more information.
It is important to remember that there are no free lunches when it comes to regulation; regulation comes with a price attached that must eventually be passed on to someone. That is why it is a good idea that the CAA should have powers to collect information, but it should be careful about using those powers and use them only when there is clear evidence of market failure and when value can be added by collecting and publishing the data. An analysis is necessary in every case. Does that answer your question?
Dr Humphreys: Who knows what will happen in the future? It depends on who the new owner is and what they do with their investment. We have seen a new owner come in at Gatwick, and, as I said, our members have been relatively pleased with what has happened so far. They think the new owner is doing a better job than BAA did before.
However, Gatwick still has monopoly power in our opinion, and whether it has will be determined by the CAA. It will do an economic analysis, we will contribute, and it will come to its conclusion. From our perspective, Gatwick certainly still has economic power and can therefore adversely affect the interests of consumers.
One final question, if I may, Mr Chairman. Most of us would agree that competition has driven many more routes from many more airports than I can remember there being 10 or 15 years ago. There is a concern that some of the regional routes into Heathrow may be under threat, especially following a recent change of ownership. Do you have any thoughts on whether there is any need for the Government to be involved in ensuring that links from, say, Belfast and Scotland into Heathrow, are maintained going forward?
If I understood you correctly, you were fairly clear at the beginning of your evidence that there should not be any further environmental duties in the Bill. Do you think there needs to be anything in there that recognises the impact, of noise particularly, on local residents around an airport?
Dr Humphreys: I certainly think that that should be taken into consideration, but not necessarily in the context of the Bill. There are already numerous provisions for taking account of environmental impact, whether that be noise or emissions or whatever. My point was that I just do not think that you need anything else in the Bill. If you do put something in the Bill, there is a danger that it will create unforeseen outcomes that may not be welcome.
Following up on the, if you like, unforeseen foreseeable, are you saying that if noise became part of the regulatory framework and the environmental package, it could hasten the demise of Heathrow and give further impetus to a new airport in, say, the Thames estuary? I apologise if I have drifted slightly, but I think it is always important, when we discuss tightening up or adding new regulations, that we look at all the potential impacts it might have.
Dr Humphreys: That is not what I was saying, no, although it may well be the case. There are already rules in place, and I believe the Department for Transport will soon be consulting on, for example, night flights, which are a particular issue, so I am not sure the Bill would make that much difference.
Allowing that there may well be existing rules, and assuming that the CAA starts to flex its muscles on noise abatement and environmental matters, if you follow the logic, surely that might make Heathrow environmentally unsustainable on whatever grounds, which would then hasten the argument for another airport. I am asking not that you agree that we should have another airport, but whether my logic is correct in that it could flow through Heathrow’s becoming environmentally unsustainable.
Dr Humphreys: I suppose, theoretically, you could mount a case, but I think it would be a challenge. There are already such powerful restrictions on operating into Heathrow that I cannot envisage many more being imposed. Remember that the previous Government, when they approved a third runway, laid down as a condition very severe restrictions that had to be met before that runway could be operated. The powers are already there to do whatever you want to do on the environment around Heathrow.
Dr Humphreys: Some of our members are part of large tour operators, such as Thomas Cook or TUI, and they tend to view the matter very much from the perspective of the tour operator. I am sure ABTA will explain that view later. On the other hand, we have airlines such as British Airways, Virgin or bmi that have only very small tour operator groups and are purely focused on the airline side of things. They take a very different view on whether airlines should have additional restrictions imposed on them. So the airlines are split down the middle, I am afraid, and there is no common ground between them.
Do they justify that on competition grounds? Most of us think that if it looks like a package and feels like a package, it should be a package, although we then discover that, if we are stranded somewhere or parts of our holiday collapse, it is not a package. Can they justify in any way why they feel they should be outside?
At the moment, the CAA has the ability to enforce fines where there have been contraventions of licences. In BATA’s view, how well do you feel the CAA has done as custodian of that power so far?
Dr Humphreys: I think the CAA has done a very good job. This applies mainly to the safety side, of course, and I heard some of the evidence given by your previous witnesses, which I did not recognise.
I think we have a superb safety record in aviation. It really is quite incredible when you think that there are thousands of metal tubes flying through the air every day. One reason for that record is the co-operation between the regulator and the industry; it has clearly benefited everyone, and the CAA has played a critical role in that. What we are concerned about is that if those powers are expanded, they might become more like policemen, rather than regulators, which would not be welcome. It could have adverse effects on safety.
I take that point, and I am also aware that individual airlines will jump up and down and go crazy at periods in which airport operations grind to a halt. What is the best way, in your opinion, in which the CAA can use the powers in the Bill, and those it has more generally, to ensure that airport operators provide the kind of service that end passengers would expect?
Dr Humphreys: They already have powers under the current law to set certain standards; if those standards are not met, there is a financial penalty for the airport. I would not quite describe that as a fine, although the end result might be similar. Indeed, at the moment, if they exceed those standards, they get more money, so I think the Bill will simply expand on that and make doing that easier.
In that case, thank you very much. You will not mind my saying that you have skated across some fairly hazardous ice very skilfully indeed.