INDUSTRY ISSUES: 14 July 2008 CONSUMER ISSUES Air Passenger Duty Aviation and the environment REGULATORY ISSUES Airport Charges Expansion at Heathrow Airport Future Heathrow Group Passengers with Reduced Mobility BORDER CONTROLS AND IMMIGRATION ISSUES e-Borders Penalties and detention costs "Presenting" passengers SECURITY Aviation Security regime National ID Cards CONSULTATIONS This section briefly itemises the various consultations that are being addressed by BAR UK CONSUMER ISSUES AIR PASSENGER DUTY (APD) or Tax per Flight? In the Chancellor of the Exchequer's Pre-Budget Report in late 2007, he stated that, instead of Air Passenger Duty (APD) per passenger being levied, a charge per flight to the airlines would be introduced, in November 2009. APD already generates over GBP2.5 billion annually, and the Treasury now aims to source an additional GBP520 million from airlines and the flying public through the guise of this new tax, called Aviation Duty. Now, over 18 months before its planned introduction, a 10% increase has already been announced for 2010! At no time has it been defined how these revenues are going to be used for environmental purposes. Aviation Duty, like APD, is nothing more than a money grabbing exercise. The proposed structure of the Duty (although the charging levels are unknown) is a combination of Max.Take Off Weight (MTOW) linked to a distance flown pricing band, and the revenues due would be collected directly from airport operators, NOT the airlines. Treasury published a consultation document in late January, for which responses were required by 24 April. They also presented their proposals to the BAR UK membership at our general meeting on 1 February. Having objectively assessed the Treasury's proposals, BAR UK has identified major competition distortions that will arise; they affect not just UK carriers but also a significant number of foreign ones as well. In addition, and very fundamentally, MTOW has no direct bearing on emissions, there are questions of compliance with international law, and strong objections to the proposal to collect revenues from airport operators. A strong response reflecting these sentiments, and many more, has been made by BAR UK to Treasury. A copy can be found on this website under 'Responses'. After assessing all the responses it has received, Treasury is due to engage with the industry during the next few months before publishing its final decisions by November 2008, to take effect in November 2009. CONSUMER PROTECTION A confused legal situation as to what exactly a 'packaged holiday' is, and when an ATOL (Air Travel Organiser's Licence), so offering consumer protection in the case of tour operator or agency failure. Over the years, the amounts refunded to travellers in the case of such failures, have exceeded the amounts of ATOL bonds, and caused a huge deficit in the Air Travel Trust Fund that covers the excess. The CAA proposes to modernise the ATOL system, long-recognised as requiring change, and is currently undertaking a consultation with all interested parties. Even after an extremely lengthy dialogue with industry and consumer groups, the definition of what constitutes a package is still extremely unclear, and confusion is expected to remain for a long time yet. AVIATION AND THE ENVIRONMENT What a complex and emotional topic! The airline and aviation industries have been accused of all sorts of matters in respect of the environment, and especially climate change. Aviation is a polluter and the industry recognises that it must not only pay its way to offset its environmental costs, but also develop new technologies and practices to actually reduce its impacts. It has done so on a continuing basis for many years, and will continue to do so. Environmental gains are possible through new technologies, new fuels, new procedures and, last but not least, better-organised air traffic control centres. Until 2007, there had been no cohesive forum to either debate, or explain, the points of views that exist or the actions that have already been taken, and what can be done in the future. That forum now exists, and is called 'Flying Matters'. Click here for much more information. See also The Air Transport Action Group and the International Air Transport Association REGULATORY ISSUES AIRPORT CHARGES London Heathrow, Gatwick, Stansted and Manchester Airports On 11 March, the CAA announced its decisions in respect of regulated charges at Heathrow and Gatwick Airports, for the 5-year period 1 April 2008 to 31 March 2013. The airline community had feared that the authorised pricing regime would be costly, but not to the extent that these decisions allow for. At HEATHROW costs per passenger are increased in the first year by a staggering 23.5%, to £12.80, after which each of the successive four years can be increased by Retail Price Index (RPI) + 7.5%. Costs in the five-year period are therefore expected to increase by 50%, on top of a similar set of increases already incurred between 2003/8. For GATWICK the story is similar. The first year's increase is a massive 21%, to £6.79, and they are allowed to increase by RPI+2% for the following 4 years. Whilst airlines had expected substantial increases because of the investment plans that are due to be implemented, these authorised levels are staggeringly high. The CAA is seen to have leaned heavily in favour of BAA. Major stakeholders are scathing in their responses: IATA Director General and CEO, Giovanni Bisignani "Failure is the only word to describe the CAA's decision" bmi and Virgin Atlantic jointly "Airport regulation is failing the customer and needs to be changed". British Airways "We suffer from very poor regulation and the whole process needs a root and branch review." BAR UK "The CAA's decisions not only reward BAA for past failures, but even give them a bonus for exceeding minimum standards". We believe that there has been a breach of process, in spirit if not in law, by the late and very substantial additions to expenditure made by BAA and which were accepted into this process. On a broader level, the datelines used in this regulatory process are impractical. It is nonsensical that airlines engage with BAA and the CAA for a couple of years, and yet only get advised of the decision a couple of weeks before the effective date of the new charges. This is not only bad practice from a financial management point of view, but gives no time in which to debate and challenge the sorts of issues that arose in November last year. Whilst not accepting the criticism, the CAA does acknowledge that the form of the regulatory framework has shortcomings that need to be overcome. BAR UK certainly concurs on that point. In recent weeks, industry concerns have led to an announcement by the Secretary of State for Transport that a review of the entire regulatory process will now take place. STANSTED Pricing at Stansted is subject to a different set of influences. Originally, the CAA had proposed that Stansted be de-designated, so leaving the airport operator free to make its own pricing decisions. However, the Department for Transport decided that Stansted should remain a designated airport, so regulated pricing is retained there. For 2008/09, the CAA extended the previous 'RPI-0' price control into a sixth year. After adjustment (and before allowing for additional security costs) the price cap in 2008/09 is around 1% higher than in 2007/08. For 2009/14, the CAA published a consultation document in January, for which the closing date was 17 March, seeking views on whether or not the standard 'building block' methodology used elsewhere was appropriate, or if another method was required; four other options were offered. The CAA has now referred a range of charging options, including a suggested one from the airline community, to the Competition Commission. Its report back to the CAA is due in October, after which the CAA will publish its proposals, seek responses, and hold oral hearings before any final decision is announced in March 2009. The charges will then become effective in April 2009. MANCHESTER The CAA's proposal to de-designate Manchester Airport was accepted by the CAA, so the airport operator is now clear to determine its own charges. EXPANSION AT HEATHROW AIRPORT White Paper 'The Future of Air Transport' In December 2003 the government produced a White Paper on aviation policy for the period up to 2030. The Government has reported on progress since the White Paper was published. Subject to planning and environmental constraints, and public consultation, it has affirmed a policy for the development of a second runway at Stansted, mixed mode operations at Heathrow, and a third runway at Heathrow. In respect of the proposed changes and expansion at Heathrow, the Department for Transport has issued a consultation document 'Adding Capacity at Heathrow Airport'. Success is dependent on several factors, not least local objections, and meeting the many stated environmental requirements concerning noise and emissions. The consultation closed on 27th February. There are four main topics within this document: Section A: Adding a third runway Section B: Making more use of the existing runways Section C: Impacts of current operations - westerly preference and the Cranford agreement Section D: Night-time rotation and early morning runway alternation Collectively, these four sections then present themselves as no change or three different options: The unanimous view of BAR UK members is for Option 3; this is shown on the table below. Scenario Number of Runways Throughput (number of Air Traffic Movements) Introduce mixed mode on existing runways, to improve efficiency and resilience, from around 2010/11. Two, with mixed mode operations initially within the movements limit 480,000 Use mixed mode to add capacity from around 2015/16 or as environmental limits allow. Then with additional capacity added as environmental limits allow Then add new capacity with third runway in mixed mode and other runways in segregated mode, with alternation Around 540,000 Then add a third runway in around 2020   Up to around 702,000 by 2030 BAR UK's response to this consultation 'Adding Capacity at Heathrow Airport' can be found here, on this website FUTURE HEATHROW Future Heathrow is the name of the forum that has been founded by parties who have a shared interest in modernising Heathrow. They include trade unions, business groups and airlines. BAR UK is one of those founding members. Its aim is to convince as many people as possible that Heathrow is a uniquely valuable asset to the UK and to London. It is also critically important to the economic prosperity of west London and the Thames Valley region. It seeks to convince people that it is possible to develop Heathrow in a way that allows it to retain its premier position and in a manner that is sensitive to environmental issues and the needs of the local population. There are many different audiences to address and many competing interests. Its aim in everything it says and does will be to address problems that arise from further development of the airport in a positive and constructive manner. Full details here. PASSENGERS WITH REDUCED MOBILITY (PRMs) The first stage of the the EU's Regulation for PRMs, became effective in July 2007. The second stage becomes effective in July 2008. The responsibility for the provision of PRM services will pass from airlines to airport operators. The key task now is to ensure that the correct information is passed to the airport operators in a timely manner. The regulation includes not only travellers with physical mobility issues, but many others with non-physical disabilities who may require assistance. Concerns or complaints arising out of the implementation of the Regulation will be handled by the Equality and Human Rights Commission (EHRC) overseen by the CAA acting as regulator. BAR UK has commenced the process of developing a working relationship with the EHRC. Various and significant practical issues will arise, not least in the early days of implementation. It is vital that they are overcome in a satisfactory manner as soon as practicable. BORDER CONTROLS and IMMIGRATION ISSUES e-BORDERS The e-Borders (electronic borders) programme is a combined programme by the Immigration authorities, Police, and HM Revenue & Customs, to implement much stronger border control measures, both in and out of the UK. The lead department is the Home Office. The e-Borders team has established a programme of engagement with principal stakeholders, and BAR UK is playing a major part in that engagement. To be introduced progressively between 2008 and 2013, e-Borders will require specified travel information to be transmitted to the authorities in advance of travel and, ultimately, for immigration clearance to be authorised prior to any inbound flight to the UK being taken. The Government's own Regulatory Impact Assessment (RIA) reveals that, in the first 10 years, airlines will need to spend GBP450 million, for which the only tangible benefit will be getting rid of yellow landing cards (savings of GBP0.66m). The situation right now is that e-Borders is imposing massive costs on airlines, without any benefits for them, or the travelling public. To offset these huge costs, BAR UK has been calling for efficiencies and benefits such as speedier immigration processes, faster and more effective decision-making in respect of passengers refused entry, and the elimination of 'Presenters' (see below) which costs millions every year. The Home Office has yet to provide any meaningful solutions. PENALTIES AND DETENTION COSTS The requirements of the UK immigration regulations are onerous and can result in draconian penalties being administered, if not followed to the letter. The UK continues to be a country which attracts many asylum seekers. Although airlines go to great pains to ensure that only those passengers with valid travel documents board their aircraft, it is still the case that passengers inbound to the UK either destroy or dispose of their passports and then seek asylum on arrival. This can leave the airline concerned open to a penalty of GBP2,000 for landing a passenger without proper documentation. A further GBP2,000 penalty can be incurred if the carrier has to pay for detention costs and finally, if the authorities decide to deport the asylum seeker, the carrier is responsible for arranging this and if the country of origin is not one to which the airline flies then further expense is incurred in buying tickets on another carrier. Airlines are liable to pay for up to 14 days worth of detention costs, which can amount to GBP2,000. BAR UK takes the view that government should be able to decide within 72 hours, or three days, as to whether the passenger should be admitted or not and consequently is campaigning for the current requirement to pay for up to 14 days detention costs to be reduced to 72 hours. "PRESENTING" PASSENGERS One particular part of immigration legislation is outmoded and this is the requirement that is placed on airlines to "present" passengers to the control authorities. At airports around the world it is usual for passengers to "self-present". This normally entails passengers entering the immigration hall, joining the appropriate queue, and going forward to the control desk when signalled to do so. For reasons best known to the authorities in the UK, this system is not used here yet. Despite formally asking the Home Office to do away with this expensive process, they refuse to do so. The cost of presenting at the three major airports around London, plus Birmingham, Manchester, Glasgow and Edinburgh, costs the airlines over GBP3 million a year - a very significant amount that has to be passed on to travellers in one form or another. AVIATION SECURITY REGIME Passenger Security As a result of developments in August 2006, aviation security has stepped up to a new level. Drinks, liquids, gels and any other substances that may be deemed as 'liquids', and which are in the possession of passengers before they go through their security checks, are only permitted in very small quantities. The airline industry, including BAR UK, campaigned for the severe restriction on cabin baggage to be eased. It was pleasing to see the industry's concerns being acted upon. The Secretary of State for Transport revised the criteria whereby airports, providing they are equipped to do so, can now allow more than a single item per passenger. The policy became effective in January 2008. It is subject to airports applying to the Department for Transport and demonstrating they can meet the specified criteria. NOTE:   For an up-to-date summary of the latest security policy please click here. National ID Cards for Airport Staff It was with great surprise that the aviation industry learnt that the Home Secretary proposed that ALL airport staff working 'airside' (ie airport areas for which an airport pass is required) would be required to possess a National ID Card before they could obtain an airport pass. Many constructive questions on this proposal were raised with the Identity and Passport Service, most of which strongly queried the distinct lack of benefits that would arise from changing the current processes of identity checking, whilst incurring extensive additional costs. Receiving no comfort that their views were being listened to, or accepted, the top executives of various airlines, their associations (including BAR UK), airports and trade unions jointly wrote to the Home Secretary calling for the proposal to be reversed. That such a letter was not well-received is probably an understatement! However, it is causing a lot more constructive dialogue to now take place, the outcome of which will be known in due course. CONSULTATIONS 1 Controlling the mis-use of slots at coordinated airports in the UK Closes 01 August 2 South Central Franchise Consultation (re Gatwick Express) Closes 14 August 3 Office of the Rail Regulator (re Gatwick Airport station) Closes 14 September This page published 15 July 2008 Site built and maintained by working websites, content © BAR UK 1997-2008: design, scripting & coding © working websites 1997-2008