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Airports Act 1986 (Amendment) Bill [HL]

Volume 762: debated on Friday 19 June 2015

Second Reading

Moved by

My Lords, regional policies are designed to prevent, or at least reduce, economic decline in those areas of the country that have seen their economic strength eroded as traditional industries have contracted. These regional policies have also been augmented by the European Union through numerous measures, including the ERDF and the ESF to name but two. Therefore, it is no surprise that those of us who represent regions look at government policy from time to time through the prism of regionalism to see whether our interests are being protected.

I have tabled previous QSDs and introduced an Airports (Amendment) Bill in 2012-13 that covered transport links between the regions and the London hub airport at Heathrow. A number of noble Lords drew attention to the problems faced in different areas of the UK because of poor rail or road infrastructure. Aviation issues were also mentioned.

One of the principal requirements of regional policy is to improve the competitiveness of a region. In order to do so, access to these regions is critical. This requires investment in infrastructure and it means having good communications by road, rail, air, sea and, in today’s world, broadband. In this context, I commend the report by the National Connectivity Task Force, ably chaired by the noble Lord, Lord Shipley, who is not in his place today. This report, published in March 2015, sets out starkly the unique issues facing the UK and Crown dependencies. It demonstrates that our geography and pattern of development, combined with an absence of spare capacity at our major hub airport at Heathrow, creates a barrier to competitiveness unique among our European partners.

The recently proposed acquisition of Aer Lingus by BA has undoubtedly provoked interest in the matters we are about to debate. This has raised a wider question about the absence of any government powers to intervene in the trading of landing slots at Heathrow Airport. This is a critical issue because, unlike other European countries, the UK has only one major hub airport.

Even with the addition of a third runway at Heathrow, the implication is that, even with the expected easing of current capacity constraints once a new runway is built, there are no grounds or mechanisms the Government can use to ensure that some of that new capacity is reserved to help restore some of the air connectivity that many parts of the UK have lost, or to maintain the current vital connectivity to our regions.

An article in the Independent on 8 June 2015 reported:

“Heathrow is likely to ditch its domestic routes to Aberdeen, Glasgow, Leeds Bradford, Belfast and Newcastle if the Airports Commission does not approve its expansion”.

I am well aware that this is a likely view to come from the pro-expansion lobby at Heathrow at this time, but it highlights that nobody can predict events and that air travel to our regions is at the mercy of those who have no commercial interest in maintaining those vital hub transport links. The fact remains that if a difficulty were to arise, the Government are powerless to act.

As is the case in many policy areas, there is a major European Union dimension to our deliberations. Aviation is a matter where we have ceded a competence to Brussels that is highly relevant to this Bill. Currently, EU Council Regulation EEC95/93, as amended by Regulation EC793/2004, provides a policy umbrella for the conduct of air connections between major hub airports and regions within member states. The preamble to the regulation states:

“Whereas it is necessary to make special provisions, under limited circumstances, for the maintenance of adequate domestic air services to regions of the Member State concerned”.

In practice, this means that if a national Government believe that one region is becoming isolated from another, they may apply to provide a public service obligation so that a subsidy can be paid to an airline to provide a connection between regions. Two PSOs currently operate in the UK, one, I believe, between Newquay and Gatwick and another between Dundee and Heathrow. However, this provision does not allow for a PSO or other measure to be applied to a connection between two specific cities or between a region and a specific airport.

In the previous European Parliament, Brussels addressed a number of aviation issues. In 2011, the Commission produced a report, Airport Package—COM (2011) 827 final—which deals with a number of policy areas, including landing and take-off slots. On 19 December 2011, the European Parliament’s Committee on Transport and Tourism produced its own draft report on the future of regional airports and air services in the EU written by the rapporteur, the late Philip Bradbourn MEP. Paragraph 8 of that report states that the committee,

“considers it essential for regional airports to have access to hubs”.

That quotation is the core rationale for this Bill.

In February 2012, I travelled to Brussels for a series of meetings with members of the Transport Committee of the European Parliament. I met with Philip Bradbourn, other members of the committee, UKRep and, lastly, the then chairman of the committee, Brian Simpson MEP. In all my meetings there was great understanding of the UK’s specific issue and considerable support for the proposals in my current Bill. However, even with this support from our European colleagues, the task force report indicated:

“It seems unlikely ... that planned EU reforms will translate into a formal legislative presumption allowing the ring-fencing of slots for connecting domestic services given the level of industry opposition it would generate”.

The UK has a unique problem: we have only one major hub airport and that is operating at 98% to 99% capacity. In other EU member states where there is a connectivity problem with a hub airport, most of our continental partners have the opportunity to use spare capacity to add slots to accommodate connectivity between regions and hub airports. That option is not open to the UK because of the lack of capacity at Heathrow. For example, our colleagues at Charles de Gaulle Airport in Paris have four runways, so, if there are connectivity problems within France, they have extra capacity to put in the necessary slots. The slots at Heathrow are owned by individual airlines. If airlines decide to sell their slots or use them for more profitable international routes, that is presently entirely a matter for them. In 1990 there were 18 UK regional cities connected to Heathrow, but this has been reduced to seven as more lucrative international destinations have emerged. Of those seven, only the Leeds Bradford flight has more than two rotations a day.

The implications of this for UK regions could be profound. Our regions depend heavily on connectivity as a selling point and as an incentive for inward investment and tourism. Adequate access to the national hub airport is essential. What an airline may say today about its intentions is irrelevant to this legislation, but even if an airline says that it will keep a particular route open, it has the opportunity to reduce cycles and maintain that it has kept its word.

The task force report also recommends:

“The Government should recognise the importance of London airports and Heathrow in particular as a gateway to the world for air cargo from the UK regions, nations and Crown Dependencies”.

It calls for:

“A clear declaration of intent that the Government will require the promoter of a new runway to commit to ensuring that between 5-10% of new capacity (equating to 70-110 additional slot pairs) is ring-fenced for use in enhancing the connectivity from the UK’s regions, nations and Crown Dependencies in the period 2025-40”.

During the debate on transport earlier this week, the noble Lord, Lord Shipley, referred many times to the issues that the task force report had dealt with, but I want to get across the point that there is a unique issue that separates us from everybody else. The European Union allows Governments to intervene to connect one region to another: in other words, they could pay for a PSO to protect a region of Scotland’s links with London. However, there are many airports in the London area—Southampton, Stansted, Luton, Heathrow, Gatwick, London City and so on—but there is only one hub airport that gives international connectivity. Many regions are trying hard to attract international businesses to locate there; but if business people find that after getting from somewhere in America to London, they first have to embark on a huge journey of two to two-and-a-half hours to get to a peripheral airport, and then get to a region, they are simply not going to do it. That will be a huge disincentive. So long as this country has only one hub airport, it is essential that protection is in place for regions to get access to that hub for as long as possible; otherwise it will be a huge disincentive, and negate a lot of regional policies and the purposes for which they were introduced.

To work effectively and protect the regions’ access to Heathrow, the Bill gives the Secretary of State power to direct airport operators, as well as requiring the Civil Aviation Authority to take these connectivity issues into account when exercising its functions. This may be deemed a power to ring-fence slots at Heathrow, which would have a knock-on effect on their value. However, given that Heathrow is operating at full capacity, there is simply no other way in the UK of guaranteeing adequate access from the regions to the hub.

I believe our European partners will see the logic of this argument. It is, after all, consistent with the thrust of what has been EU policy for many years: to protect and promote the regions. The report of the task force chaired by the noble Lord, Lord Shipley, demonstrates that many European countries support this point and, as a former member of the EU Committee of the Regions, I know this to be a fact. Mr Giommaria Uggias, a former member of the EU Transport and Tourism Committee, drafted a legislative report specifically on the slots issue, which was brought forward in 2011.

This Bill is not region-specific: it applies to the whole of the UK. While I come from Northern Ireland, where the effects of inadequate air links to Heathrow would be felt most acutely, I am very aware that other regions would also be badly affected. I have corresponded and spoken with a number of interested groups in Northern Ireland, and I know that the Minister in the Northern Ireland Executive with responsibility for airports, Mr Danny Kennedy MLA, supports ensuring adequate access. I have a letter from him to that effect, received this week. I believe he has written to the Secretary of State for Transport in support and that the relevant Assembly committee in Belfast takes a similar view. But the point remains that communications are the key to growth in the regions and leaving the Government as spectators, unable to intervene if things go wrong with landing slots at Heathrow, is unacceptable.

This Bill amends the Airports Act 1986 to confer on the Secretary of State the power to direct airport operators in the interests of ensuring sufficient national air infrastructure between hub and regional airports. Further, it would ensure that the Civil Aviation Authority had to take into account the need to ensure adequate services between hub and regional airports when exercising its functions. I believe that these proposals are entirely consistent with current and previous government policies and with the intention of the European Union’s policy, albeit that such policy would have to be modified to avoid a legal conflict with Brussels.

I thank the noble Lord, Lord Ahmad, and the noble Viscount, Lord Younger, and their officials for meeting me last week to discuss this important issue. We share the view that connectivity between the regions and our hub airport is a critical part of national infrastructure and consistent with the Government’s desire to encourage regional economic growth. I ask your Lordships to consider how they would develop and sustain a northern powerhouse if it was proved to be difficult, if not impossible, to get from the northern powerhouse to the national hub airport. What impact on the success and credibility of such a policy would not having that fundamental piece of connectivity have? While I fully understand the position that the Government are in vis-à-vis the situation in Brussels, I urge the Minister to recall that if we approach our European partners with a coherent and logical case that is entirely consistent with the general thrust of European policies, I can see no reason why the logic of the argument that we put forward should find difficulty or opposition. While I understand the Minister will be limited in what support he can offer the Bill, if the Government are prepared to support and argue the case with our European partners I can see no reason whatever why this power cannot effectively be vested in the Secretary of State. Given these facts, I believe there is a unique opportunity to deal with this issue in the immediate future, and I trust that the noble Viscount, Lord Younger, will give these proposals a fair hearing and a fair wind.

My Lords, I support this Bill because it is an important element in what the noble Lord, Lord Empey, outlined so nicely: the need to ensure connectivity between the regions and hubs, as he calls them, over the whole country. This stems from the fact that this country has a structure of airports which are largely in the private sector, or at least act in the private sector, whereas on the continent most of them are not. That is a bit of a generality, but I think it is the same in the ports industry and there is a similar debate going on about the port services directive in Brussels. The involvement of the private sector is most evident in the competition we have seen over recent years. I welcome the competition between Heathrow and Gatwick in terms of services, destinations and general operational capability. Much of that is to be welcomed but it will be interesting to see how the Government—if and when they ever make a statement on the need for expansion of Heathrow or Gatwick, or neither—will take forward the necessary permissions that are obviously required to implement their decision when there are two competing private sector operators. It will be interesting to see how much funding, if any, the Government put into it.

I want to talk a little about hubs. The noble Lord, Lord Empey, made a speech in favour of Heathrow as a hub, and I can see why, but I know many passengers who avoid Heathrow like the plague if they want a hub through which to travel from the regions of the UK to elsewhere. Travelling through Heathrow takes a long time and is less convenient. I always go to Stansted or Gatwick if I want to travel through a hub, but that is just a personal preference.

There are several types of hub. A hub can be between one international flight and another. Heathrow says that it is very good at that and that it is the most important thing that it does. I often question who benefits, apart from the duty-free shops in the terminals. Does the UK economy benefit enormously if someone coming from South America to Moscow changes planes at Heathrow? I do not know. Then there are hubs between the regions of a European country or the UK and the centre. That is a sort of halfway hub. In the definition in the Bill there is a hub within the region. The noble Lord mentioned Newquay. I live in Cornwall, and Newquay is a hub between the Scilly Isles and the nice new PSO service to Gatwick. The fact that the two airlines never co-operate on timetables or when there is a delay and any compensation has to be paid is a slightly different issue, but according to the definition in the Bill, Newquay is a hub.

I question how much support we need to give to one airport as a hub. If someone is making an international transfer, there is no reason why they should not fly from a region of the UK to Schiphol, Paris or anywhere else. It does not make much difference to the local economy; the important thing is convenience.

The Bill leaves the definition of a hub wide open, and that is a good thing. I cannot see any reason why the European Commission or the Government should oppose this. When you have the equivalent of a PSO, that is good. Let us make a comparison with the rail system. The Government specify rail services. I know that that is in a franchise, but they specify minimum services on particular routes. If they let a train franchise operator decide where it would run trains, they would find that many of the regions, away from the money-making inter-city routes and London, would be pretty well starved of trains because those regional routes do not make money.

Take First Great Western. It makes money on the inter-city routes and, I suspect, on the commuter routes, but I am sure that it would not make money on routes in places such as Cornwall and beyond Swansea if they were separate. It is reasonable for the Government to take a view on this. Whether it should be done through a PSO or something else, I do not know, but it is reasonable for a number of slots at airports in the centre—not just Heathrow but some other airports; maybe Manchester as well as a hub—to have some process of allocation to ensure connectivity to the regions. That would bring aviation in line with public transport on the railways. I do not think that there is such a system for shipping yet, but there might have to be in the future. It is part of the policy of ensuring that the regions are connected.

I use the PSO service from Newquay to Gatwick quite often. It is a good service. If it had closed, as looked likely, at the time when the Dawlish railway line collapsed two years ago, 2 million people in Devon and Cornwall would have been cut off from travelling to the rest of the country except by motorway. That is not a good regional policy. I know that the noble Lord cannot have a train service to the centre in Northern Ireland—that is a great shame, but it is a long way ahead—but his Bill is good, and I fully support it.

My Lords, the noble Lord has just explained that in his view the airport at Newquay is a hub airport. As I read the Bill, Clause 1(4) defines a hub airport as providing a connection between flights. There is no flight that I know of to the Isles of Scilly, and certainly no airport there.

Well, I must invite the noble Lord to come to the Isles of Scilly some time because there is a very good airport at St Mary’s. The runway is not that long because of the cliff at one end and a bit of a hill at the other end, but it does take two types of aeroplane: an eight-seater and a 16-seater. There are very regular flights between St Mary’s and Land’s End Airport, which has now been surfaced; it is no longer a grass strip. But the flights also go to Newquay and, in the summer, to Exeter. Newquay has an enormously long runway. It used to be a US Air Force station. The flights to Newquay go two or three times a day. In the summer there are other flights from Newquay to other parts of the country. So I invite the noble Lord to move a little bit further west from where I believe he lives and visit Newquay. Its land connections are awful because it is miles from the railway; there is a good taxi service. But it is a good airport and it provides a very important link to the Scillies—in fact, the only link to the Scillies when the “Scillonian” does not run through the winter.

My Lords, I support the noble Lord, Lord Empey, not because I have a grasp of the technical details of the issues that he raised—far less the flight schedules from Newquay—but because I believe there is an additional reason why everyone in this House should support the general thrust of the Bill. The noble Lord outlined the reasons, the rationale and the logic in terms of transport, the economy, business facilities, infrastructure and the general thrust of the European Union’s view on these matters. All those factors are central and pertinent. I want briefly to mention something that is much wider but, I believe, central to many deliberations of this kind for the future of the United Kingdom.

It will be obvious to everyone, from the past five to 10 years, that there is a considerable alienation of many people in this country from what is seen as the metropolitan bubble hub of politics, commerce and decision-making in London. It will also be very plain from the recent election results from my own part of the country in Scotland that there is a real questioning of what it now means to be British. I believe that that will not be responded to merely by constitutional provisions but by the application of our minds to what practical measures the Government can introduce that in real, practical terms mean that people feel more British, more part of the United Kingdom, than they do today.

I have no doubt that there will be a plethora of discussions about this subject, but I believe it should be intrinsic to consideration of the type of issue that the noble Lord, Lord Empey, has raised today. If we do not, on each one of these subjects, bear in mind that we have to reconstitute the feeling of being part of a wider entity, the sovereign state of the United Kingdom, in all our deliberations—cultural, sporting, transport, employment—ultimately, whatever constitutional arrangements we make will not be underpinned by that feeling of belonging. Central to that, surely, is the facility to move, whether in leisure or business, between parts of the United Kingdom, whether it is to stay in that part or for onward transmission to the wider world. For that wider political reason, I hope that there is a sympathetic look from the Government and a self-interested understanding that this is a matter not just of transport policy, but of the United Kingdom’s cohesion in many other dimensions too.

My Lords, I congratulate the noble Lord, Lord Empey, on his perseverance and I apologise to the House for not putting my name down to speak. I spoke against his Bill before and I speak against it now. It is sheer protectionism by the noble Lord. I understand the reason: he wants to be able to fly into Heathrow from Northern Ireland. I remember bringing the 1986 Bill before your Lordships’ House. I also remember the long discussions we had—that it would be the end of the world when the Inverness-Heathrow flights stopped, but it was not. There is an Inverness-Luton flight and an Inverness-Gatwick flight that work very well.

If we force private operators to bring uncommercial flights into their operations at Heathrow, it is a very bad trend for operations and a bad signal to send out to the private sector, which is there to produce growth and improve the economy of this country. There are plenty of international airport links for people in Scotland. I could not agree more with the noble Lord, Lord Reid, about the links to the south but the links exist and they work perfectly well. A lot of people I know in Scotland actually fly to Schiphol because they get better connections there than at Heathrow. Do not let us impose this on the private sector. I congratulate the noble Lord on trying hard again, but I hope that my noble friend on the Front Bench will have no truck with this Bill at all.

My Lords, we have had a somewhat interesting mini-debate in the gap between the issue the Bill raises concerning national unity and connectivity, and the suggestion that everything should be left to the market: if Schiphol is a better option, why should we worry about a region? Well, I worry about regions and their development and I hope that the Government do, too. They should particularly recognise the significance of Belfast Airport and its connection with Heathrow to the Northern Ireland region. I hesitate to call Northern Ireland a region but the noble Lord, Lord Empey, pursued that route in being consistent with the nomenclature that we use for these debates.

Northern Ireland has unique issues. Think of the other forms of transport—the connections apart from that by air—between Northern Ireland and the rest of the UK, but particularly south-east England and London. If the air connection was taken away then the significance for Northern Ireland would be much more profound, dare I say it, than it would for the good people of Inverness, who can enjoy the flights which the noble Earl, Lord Caithness, recommends. I take a very strong view on this, along with my noble friend Lord Reid, and I therefore hope that the House appreciates that the Bill is about a significant part of government policy regarding regional activities and the development of all parts of the United Kingdom in economic and, for that matter, cultural terms.

The noble Lord, Lord Empey, is to be congratulated on his persistence and the amount of work he has done on this issue. It does not matter how many barriers are put before him; he seeks to scale them each time. I greatly applaud his efforts in 2012 and 2013 with regard to a Bill of this kind, his constant talks with government, his frequent personal negotiations with Members of the European Parliament and his attempts to bring these issues before the House today. He is to be greatly commended on that.

In his speech, the noble Lord covered all the points which can be adduced in support of the Bill. Of course he wants the Minister to make some kind of positive reply, but he was far too gentle with the Government on their policy. Surely we all recognise that the extraordinary delay in even taking a decision on a second runway in the south-east is costing this country dear. We know that you can use Schiphol easily, as the noble Earl, Lord Caithness, said with great approval. Well, you might be able to use Schiphol easily, but that kind of thought speaks very ill of the prospects for the British economy if we solve all our problems through successful continental economic activity. The noble Lord, Lord Empey, is gentle about how the delays over the decision on the second runway complicate this matter and perpetuate the threat that the connection with Belfast could disappear from Heathrow. As the noble Lord mentioned, we have already seen the number of connections with Heathrow for cities in the mainland UK reduced from 18 to seven. That is why we need decisions. We want an assurance from the Government that they want to see the report on the second runway as soon as possible, and we want the most prompt action consequent to the report.

On the more general issue, obviously the anxiety is that Heathrow will concentrate on the more profitable international flights, and its role serving the rest of the UK will therefore be considerably diminished. Delay has already cost Heathrow the title of being the biggest airport in the world, because Dubai now has greater activity. Dubai is some distance away and not a direct competitor in other terms, as far as economic development in this country is concerned, but it is indicative of the fact that everything is being left to a Government who believe in the market and who take no significant action at all. As a result, this country will potentially become a loser. This area requires government action.

I know the problem the Government face, because the noble Lord, Lord Empey, has already identified it for the House. He has persisted with these cogently put arguments for a number of years. It has even got to the stage where the Government are somewhat positive in their response, but they then throw up their hands when they find that European law is against the concept in this particular Bill. The noble Lord is asking for a potential exemption from European Community rules because of the rather specific nature of Northern Ireland’s relationship with the United Kingdom. We should all, surely, have some sympathy with that.

I know the Government have a few troubles with the European Community. We all understand that the Prime Minister has a few arduous tasks at the moment, visiting what looks like all the member states of the European Union to persuade them of the virtues of certain aspects of the British case for change in the Community. I do not know how hopeful Lords are about the outcome of that exercise; suffice it to say that quite a few members of the Conservative Party represented in the House of Commons have severe doubts about whether this exercise is anything but a face-saving formula for the Prime Minister.

Put into that context, the prospects of this modest little Bill look somewhat forlorn. But that has not deterred the noble Lord, Lord Empey, and it should not deter the Minister from going to Brussels again and arguing for the uniqueness of this representation and its great significance to a particular part of the UK for which the issues of connectivity loom as large as anywhere, and where links by air are of the greatest significance. That is why I hope that the Minister will speak favourably about the Bill, but also indicate that he and perhaps more senior members of his department will take these issues to Europe and get more success than they did last time.

My Lords, I offer my congratulations to the noble Lord, Lord Empey, on securing a Second Reading for his Airports Act 1986 (Amendment) Bill. The Bill’s aims are admirable. In essence, it proposes powers for the Secretary of State for Transport to direct airport operators, in the interest of national air infrastructure, to ensure adequate services between the UK’s hub airport, Heathrow, and regional airports.

By way of background, it is important to emphasise that the UK has excellent aviation connectivity. The five airports serving London offer at least weekly direct services to over 360 destinations worldwide, more than Paris, Frankfurt or Amsterdam. We have the third largest aviation network in the world after only the USA and China. Although Dubai International Airport has overtaken Heathrow to become the world’s top airport for international travel, it is still behind Heathrow in overall passenger numbers: some 70.5 million passengers travelled through Dubai’s terminal last year, compared with over 73 million at Heathrow. As has been mentioned today, the UK is also well connected by air domestically, with at least 54 weekly air services between UK cities in 2014, and 13 cities with services to a least one London airport. This includes seven cities with services to Heathrow.

The previous Government’s aviation policy framework sets out the importance of aviation to the UK economy and the Government’s proposals on how aviation can deliver for the UK economy while meeting its environmental obligations, both global and local. It stated that airports are in some ways cities in themselves, creating local jobs and fuelling opportunities for economic rebalancing in their wider region or area. New or more frequent international connections attract business activity, boosting the economy of the region and providing new opportunities and better access to new markets for existing businesses.

The aviation policy framework also recognises that airports in Northern Ireland, Scotland, Wales and the English regions make a vital contribution to local economies, and that air connectivity across the UK—and to the UK’s hub airport, Heathrow—is very important. As the noble Lord, Lord Davies, said, this is particularly so for Northern Ireland, given its geographical circumstances, which means that air connectivity for Northern Ireland is an essential means of ensuring its continued links to the remainder of the UK, and is of course crucial for its developing economy. I therefore acknowledge the noble Lord’s concern that the Government have limited powers—for example, in the public service obligation, to which I shall refer later—to intervene to ensure that regional air connectivity is maintained in an air services market that operates almost entirely on commercial lines. As the noble Lord, Lord Berkeley, succinctly put it, they are largely in private hands.

Ultimately this Government believe that air passengers are best served by a commercial airline market that is able to operate in a competitive environment. This allows airlines to determine the routes that they operate, and from which airports, based on their assessment of routes’ viability. In this context, it remains possible that airlines currently operating domestic air services between Heathrow and the UK’s regional airports could in future decide to reduce or withdraw them and use the relevant Heathrow slots for alternative services.

Noble Lords will know that the International Airlines Group, IAG, owner of British Airways, is in negotiations to acquire Irish airline Aer Lingus. Both British Airways and Aer Lingus operate services on the Belfast-London route, and the negotiations have raised some concerns that the merger may see a rationalisation of services. However, under the proposed acquisition deal, IAG has agreed with the Irish Government to include a number of connectivity commitments on services between Irish airports and Heathrow, as well as between Belfast and Heathrow.

The noble Lord, Lord Empey, has suggested that some form of intervention is necessary to protect such services from commercial market pressures that could see them discontinued not just to and from Northern Ireland but from airports in Scotland and the English regions. However, there is healthy demand for services from airports in Northern Ireland, Scotland and the English regions to London. For Northern Ireland, in 2014 there were nearly 1 million passenger journeys between the two Belfast airports and the five main London airports, of which nearly 350,000 were between Belfast and Heathrow. British Airways and Aer Lingus together operated an average of 59 flights per week between Belfast and Heathrow.

Airline competition is also provided by services that operate from Belfast airports to the other London airports; Belfast City Airport has services to Gatwick and London City airports, in addition to Heathrow. Belfast International Airport hosts services to Gatwick, Luton and Stansted airports. We see this demand as continuing, given that Northern Ireland is a competitive destination in its own right. Noble Lords may be surprised to hear that outside London Northern Ireland is the leading UK region for attracting inward investment. This success has been seen across a range of knowledge-intensive sectors. Belfast in particular is the world’s top destination city for financial services technology investments. This continued success has led to over 800 international companies locating in Northern Ireland, employing in excess of 75,000 people. The level of demand that this generates justifies the daily services that both Belfast airports maintain to London and to other European airport hubs and their connecting networks. Belfast International Airport has existing services to Amsterdam Schiphol and Paris Charles de Gaulle, and just last month Belfast City Airport commenced a service to Schiphol.

On the long-haul front, Belfast International Airport has a daily direct flight to Newark, New Jersey, operated by United/Continental airlines. It recently celebrated its 10th year of operation, flying nearly 83,000 passengers. Later this month, Virgin Atlantic will begin operating a seasonal weekly flight to Orlando International Airport. Scotland is also well connected, with 62,000 flights in 2014 between Scottish airports and the five main London airports, carrying nearly 7 million passengers. Of these, around 25,000 flights—that is, 41%—were to and from Heathrow, carrying 3.1 million passengers.

In the broader UK context, the following airports in the English regions currently have air services to Heathrow. For 2014, the last full year of statistics that are available, Manchester had 8,500 flights, Newcastle 4,000, and Leeds-Bradford 1,900. In addition, Newcastle Airport had 500 flights to and from London Stansted and 1,200 to and from Gatwick. Again, the operators of these services have not indicated any intention to withdraw from them.

In the context of these healthy traffic levels on commercially viable and attractive routes, we do not consider that air connectivity between London and these airports is under threat. For the airlines, these domestic air services are important in feeding passengers through to their long-haul services from Heathrow. It is of course open to other airlines to introduce services to compete with incumbent airlines on these routes if they conclude that doing so would provide a commercial return.

The Minister has explained that there are lots of services around the country, which is wonderful, but this Bill is actually about slots at hubs, whether at Heathrow or elsewhere. Is there a precedent anywhere else in Europe for slots being reserved in hub airports for regional services? I suspect there is not because there is no shortage of slots in most other airports. Could the Minister address the issue of slots? If it is peculiar to the UK, which I suspect it is, surely the European Commission should look at this with special favour.

I do not have any statistics about slots around the European Union, but the noble Lord will be aware that the allocation of slots at EU airports is governed by the European Union and associated UK slot regulations. It is true that Heathrow has more of an issue because, as various noble Lords mentioned, it is at 99% capacity and other airports around Europe are at not such great capacity. Under the regulations, the process of slot allocation at Heathrow, Gatwick and other slot-co-ordinated airports in the UK is undertaken, as the noble Lord will know, by an slot co-ordinator entirely independent of the Government, the CAA or other interested parties. I will write to the noble Lord with details about other airports around the UK.

As I said, it is open to other airlines to introduce services to compete with incumbent airlines on these routes if they conclude that doing so would provide a commercial return. However, introducing provisions for the Government to direct the UK’s internal aviation market to ensure domestic services to a hub airport could set up distortive effects on airline competition and would be contrary to general EU and wider competition principles. Such intervention therefore carries a high risk of a legal challenge to the UK Government being raised with the European Commission by airport operators and airlines as well by the Commission itself. The consequences of a successful challenge would be substantial fines.

Government intervention to direct particular services from a regional airport to a hub airport would require the ring-fencing of specific take-off and landing slots at the hub. As the noble Lord, Lord Empey, understands, the UK’s major airports, including Heathrow and Gatwick, have constrained capacity, which I have just alluded to. They are therefore subject to EU slot regulations transposed into UK law. These regulations govern the allocation, transfer and exchange of slots at congested airports in the UK. Within these regulations there is some limited scope to allow for the ring-fencing of slots at a congested airport to serve a particular route, provided that this meets the criteria for a public service obligation. However, to do this there would need to be an unused slot at the congested airport. In Heathrow’s case, given that 99% of slots are currently used, as I said, it is unlikely that the regulations would enable slots to be ring-fenced.

Public service obligations are also governed by EU regulation and provide some scope to protect regional air services that may become economically unviable. They can be used to protect air services to airports serving a peripheral or development region or on low traffic routes considered vital for a region’s economic and social development. The aviation policy framework made clear that the Government would be inclined to support applications by devolved and regional bodies to establish PSOs that comply with the specific EU law to protect vital air connections between other UK airports and London and help economic and social development in peripheral regions.

The previous Government announced in the 2013 spending round that £20 million would be made available over two years until 2016 to maintain regional air access to London, where there was the probability that an existing air service would be lost, by establishing a PSO on the route. The 2014 Budget increased and extended this support, which means that government can step in where necessary to maintain existing regional air links to London. As the noble Lord, Lord Empey, has mentioned, the Government have already stepped in to secure the Dundee to London Stansted route—not to Heathrow, as a noble Lord mentioned—and more recently the Newquay-London air route, which the noble Lord, Lord Berkeley, mentioned, after its operator announced last year that it would no longer operate the route, and no other airline came forward to take it on commercially.

Cornwall Council provided evidence that the route met the EU PSO requirements and undertook a tendering process to find an airline to operate the route. Subsequently, in October 2014, the previous Government announced a four-year PSO funding deal for three weekday rotations and two weekend rotations between Newquay Airport and London Gatwick airport, providing certainty for the far south-west region. It is worth giving some background, because the Newquay-Gatwick service carried nearly 44,000 passengers in the first five months of operation, exceeding the projected take-up level by almost 10%. Therefore, it would be open to the devolved Governments in Northern Ireland, Scotland and Wales, and local authorities and other organisations in England, to apply to the Secretary of State for Transport to establish a PSO on a particular air route, should they feel that a business and legal case can be made that satisfies the PSO regulation.

There is no other mechanism for the Government to intervene in the allocation of slots at capacity-constrained UK airports. Noble Lords will therefore appreciate that under European and UK law, the potential for ring-fencing slots at Heathrow to protect regional services could be dealt with only by reference to the PSO rules alone. Again, that was raised by the noble Lord, Lord Berkeley.

One of the principal effects of the Airports Act 1986 (Amendment) Bill is therefore contrary to EU and UK slot regulations, because it would override the strict criteria and process by which European Governments can intervene in route operations. Again, the possibility exists that intervention to ring-fence slots at a hub airport in contravention of an EU obligation could lead to a successful legal challenge.

More generally, I remind noble Lords that a key part of the Government’s approach to aviation is to maintain the UK’s status as a leading global aviation hub as fundamental to our long-term international competitiveness and economic growth. We are also mindful of the need to take full account of the social, environmental and other impacts of any expansions in airport capacity. We therefore look forward to the publication shortly of the final report from the independent Airports Commission. Just to reassure the noble Lord, Lord Davies, it will indeed be published shortly. Once the Airports Commission has published its final report and set out its recommendations, it will be for government to consider the full body of work. We will look carefully at all the evidence and analysis before deciding on an appropriate timetable for a decision on increasing airport capacity.

The noble Lord, Lord Empey, raised the matter of the EU airports package, quoting that it was essential for regional airports to have connectivity to hub airports. The Government are aware of the European Commission’s proposed Better Airports package from 2011 and its slot provisions. Progress stalled in 2012 because of a lack of agreement over other matters. To give the noble Lord some reassurance, should an EU presidency decide to revive the package, the EU would be involved in the negotiations.

In summary, while I understand the noble Lord’s commendable motivations in proposing his Airports Act 1986 (Amendment) Bill, I must conclude, on the basis that its proposals could set up distortive effects on aviation competition and would run counter to EU and UK regulations on allocations of slots at congested airports, that the Government must express their reservations and will not be able to support the Bill into legislation. I know that the noble Lord considers this to be a highly important issue and, as the noble Lord, Lord Davies, said, that he has already undertaken a great deal of hard work at the European level to press for changes that will allow greater member-state intervention in maintaining regional air connectivity. I therefore respect his intentions to pursue the issue further with the European authorities.

I am most grateful to noble Lords who have participated in this debate. Indeed, with people intervening in the gap, one or two issues have arisen which I think have caught us all by surprise.

The noble Lord, Lord Berkeley, has a reputation in this House which is second to none. Every time you see a train or go into a railway station, you automatically connect that with the noble Lord. He raised the question of Heathrow. I am very happy at all times to take on difficult issues, but he implied that I was adopting a Heathrow-backing tactic. Actually, I was not; I was merely making the point that at this point in time, whatever the owners of other airports may think, Heathrow is the national hub. That may change with time and is another matter, but that is where the action is and therefore that is the issue.

The noble Lord, Lord Reid of Cardowan, introduced a very interesting point—one which, to be honest, I had not considered in this context. The Bill is not Northern Ireland-specific—deliberately so because I believe that connectivity is equally important in all parts of the United Kingdom. It is true that there is a widespread feeling—no more so than in the noble Lord’s home country—that this is a sort of metropolitan issue, with people feeling isolated and pushed further and further away. That is a very serious political issue which, to some extent, is paralleled here. I very much appreciated his point about UK-wide cohesion. That is vital and something to which both Houses will have to give really serious consideration during this Parliament. It has to be said that our constitutional Rake’s Progress in recent years has not exactly been working, and we have to look closely at that.

I hope that the noble Earl, Lord Caithness—I emphasise “Caithness”—does not get what he wishes for. I am not looking at this matter from the point of view of public money going to subsidise airports. It is not the PSO issue that bothers me. There is good, strong market demand for air services at present, as the noble Viscount pointed out, so it is not a matter of trying to seek access to the London area alone; it is a very much narrower issue than that, and it is not a PSO issue.

In many respects, the noble Viscount made my case for me. There is a specific issue that I am addressing with this legislation. To take the Belfast example, when I had ministerial responsibility in that area, I created an air route development fund, which laid the ground for the link between Belfast and Europe. Subsequently, because that link was so important, the Northern Ireland Executive negotiated with the Treasury and got control of the air passenger duty rate on that route. Part of the Northern Ireland block grant effectively goes to subsidise that air passenger duty, so that it is at a much lower level than it would otherwise be.

The Minister went on to point out that Northern Ireland has attracted very high levels of inward investment in specific areas. What we are trying to protect with that one route I want to try to protect with this legislation. The Minister has conceded that the Government have no power to intervene. We have a unique problem in the UK, with one hub airport which is full. All our European partners can solve their problem by having extra slots because they have lots of runways. We do not. We have a long, stringy island that goes from north to south and there is only one show in town at this point in time.

We need to achieve and maintain inward investment. I am pleased to say that we have significant amounts of new start-ups and job creation in Northern Ireland and we are continuously trying to get foreign direct investment. However, can we really expect the people who provide the know-how, the money and the ability to set up such companies to come from another part of the world, land at Heathrow, catch a bus out of Heathrow and drive to another, obscure airport around the London area to catch a flight to Belfast—and perhaps not even get to the airport in Northern Ireland that they want to go to in the first place? This would add hours to their journey. We are simply spectating in this. Currently there is no problem—there is good service and high demand.

The Minister made the point that BA is trying to buy Aer Lingus. The last time I introduced a similar Bill, BA was trying to buy British Midland. Perhaps the next time I introduce a Bill into the House, Emirates will be trying to buy BA. In those circumstances, do we really expect that such a big international airline, which faces in the other direction on the other side of the world, will be the slightest bit interested in flying to regional airports in the UK? Not at all.

Therefore, because I am aiming at a particular niche and because this is a unique issue in this country and in Europe, I do not believe that our European partners, if the case is put to them, will be found wanting. However, we have to want to put it to them with enthusiasm and logic. This is not about subsidies but about building, where there is high demand, a fundamental piece of national infrastructure—just as the noble Lord, Lord Berkeley, would argue that HS2 and HS3 are fundamental pieces of national infrastructure. Sadly, no one has yet invented a means whereby those in Belfast can get on a train to go to London—but I have no doubt that the noble Lord, Lord Berkeley, will pay attention to that and come up with an idea in due course which will allow us to do so.

Perhaps the Minister and his colleagues in the Government will say to our representatives in Brussels—to UKREP and so on—that if this poor soul comes knocking at the door in Brussels, yet again, at least you will not stand in the way but give him a fair wind. That is all I am asking. I understand and appreciate the legal position and also the purpose of legislation. The Minister has conceded that that they do not have the power to intervene and I have to ask the question: why not? It concerns our airports, our infrastructure and it is vital. I believe that because it is a unique situation our European partners will be sympathetic. Bearing in mind that our Prime Minister is travelling around the capitals of Europe at the moment explaining the unique problems that we have, I see no reason why we cannot extend that to include this issue. In those circumstances, I ask the House to give this Bill a Second Reading.

Bill read a second time and committed to a Committee of the Whole House.