Considered in Grand Committee
My Lords, these draft regulations will be made under powers conferred by the Air Traffic Management and Unmanned Aircraft Act 2021, or ATMUA. Following our departure from the European Union, this legislation created a more flexible set of powers for Ministers to implement alleviation measures related to the impacts of Covid, subject to a vote in both Houses. This allows the Government to adopt a bespoke approach to best support the recovery of the aviation sector. Ordinarily, airlines must operate their airport slots 80% of the time to retain the right to them the following year. This is known at the 80:20 rule, or the “use it or lose it” rule. This encourages efficient use of scarce airport capacity.
This summer, we saw a promising recovery in passenger demand. It is welcome that so many people have been able to travel on business, visit family and friends or travel abroad for a much-deserved break. However, demand remains below pre-Covid levels, and this recovery has not been without its challenges. It is well known that the sector struggled to ramp up operations. This caused some disruption at airports in early summer, which abated as the summer progressed, supported by swift action from the Government.
We have designed a package of measures for the winter 2022 season that aims to balance the recovery of the sector with enabling airlines to plan deliverable schedules. When the pandemic struck, the 80:20 rule was fully waived to avoid environmentally damaging and financially costly flights with few or no passengers. We then offered generous alleviations for four seasons while travel restrictions remained and demand was uncertain. Last summer, we implemented a 70% usage ratio, reflecting the more positive outlook in demand. We provided additional alleviation during the summer season in response to the high levels of disruption at airports arising from the continuing impact of Covid-19.
As required by ATMUA, we have determined that there is a continued reduction in demand, which is likely to persist, and we consider further alleviation measures justified for the winter 2022 season, which runs from 30 October 2022 to 25 March 2023. On 20 July we therefore published this draft statutory instrument, setting out the package of measures we propose. This package was developed following consultation with industry and careful consideration of the responses.
The draft instrument being considered applies to England, Scotland and Wales. Aerodromes are a devolved matter in relation to Northern Ireland and, as there are currently no slot co-ordinated airports in Northern Ireland, the Northern Ireland Executive agreed that it was not necessary for the powers in the Act to extend to or apply in relation to Northern Ireland.
In this instrument, the Government have focused measures on encouraging the ongoing recovery in flight traffic while protecting connectivity to destinations where restrictions remain in place and minimising the risk of disruption at airports while the sector recovers. This includes retaining the 70:30 usage requirement, but the regulations also include a justified non-use provision, which provides alleviation for airlines flying in restricted markets.
For this winter, we have expanded the list of Covid-19 restrictions that airlines may use to justify not using slots if they severely reduce demand for the route or, indeed, its viability to include pre-departure testing requirements. Restrictions covered also include flight bans and quarantine or self-isolation requirements applied at either end of any particular route. As was the case for the summer 2022 season, this will apply whether or not the restrictions could reasonably have been foreseen to ensure that we are protecting carriers and markets with long-term restrictions in place.
There will be a three-week recovery period during which the justified non-use might still apply following the end of Covid-19 restrictions. We will also allow early application for justified non-use. By this, I mean where an official government announcement about the duration of restrictions gives rise to a reasonable expectation that they will still be in place on the date of operation of the slots. The carrier will then still be able to apply for justified non-use, otherwise it would have to reapply every three weeks. This allows earlier hand-back of slots so that other carriers can use them. It also removes some of the administrative burden.
In the winter 2021 season we allowed full series hand-back, whereby an airline could retain rights to a series of slots for the following year if it returned the series to the slot co-ordinator before the start of the season. For this winter season, we have included a more limited measure that allows the carriers to claim alleviation for up to 10% of their slots at any airport if they returned them to the slots co-ordinator for reallocation between 1 and 7 September this year.
All this is so that the aviation sector can plan its schedules and make sure that they are deliverable. We are currently considering whether further alleviation is likely to be justified and I will certainly listen very carefully to what noble Lords have to say. I beg to move.
My Lords, I thank the Minister for her comments. Slot alleviation has become routine in the last couple of years. I have always accepted it as an important aspect of ensuring that we do not have unnecessary flights. “Half full” would be an overstatement; “almost empty” would be more accurate during Covid. However, I have got to the point where I question whether it is justified any longer in the current terms that the noble Baroness presents.
The Explanatory Note refers to an expansion of the list of reasons for slot alleviation, but that expansion is still in terms of Covid. Paragraph 7.2 of the Explanatory Memorandum refers to demand being at or around 80% to 85% of 2019 levels during May to July. Does the Minister now have access to figures for August and September?
The irony is that the reduction in demand over the summer was significantly affected by the cancellation of flights because airports instructed airlines not to fly, not because of Covid but because they did not have the ground-handling capacity. That happened at both Gatwick and Heathrow. The impact was, of course, to reduce the number of flights, but it also suppressed demand beyond those who thought that they had booked flights. I am sure we all know people who found that their flights were cancelled or deferred, and people who simply gave up trying to fly abroad as a result of the congestion at airports. There was suppressed demand over the summer, so the alleviation of slot rules could be said to be no longer appropriate for those reasons. It is time the Government reconsidered it, because it distorts the market.
Finally, I point out that there is no impact assessment for this. The grounds given for this are that it is for less than 12 months, but this has actually been going on for years, as the Minister pointed out in her explanation. I draw the Committee’s attention to the 12th report of the Secondary Legislation Scrutiny Committee, Losing Impact: Why the Government’s Impact Assessment System Is Failing Parliament and the Public. At this stage, now that we appear to be through the immediate emergencies of Covid, it is important that the Government restore the standards they once had in legislation, in terms of impact assessments.
My Lords, I congratulate the Minister on taking over full responsibility for air—until the next reshuffle anyway. I think that happened last week.
These are very interesting regulations. As the noble Baroness, Lady Randerson, said, I can see that in the Explanatory Memorandum there is a sort of conflict between wanting not to lose slots at airports, wanting to preserve monopolies and wanting to encourage competition. We do not really like running ghost flights if that is the only way to do it.
The question I would like to ask the Minister relates, as the noble Baroness, Lady Randerson, said, to some of these lists of reasons, which could become cop-outs for just about everything an airline or airport does not want. The noble Baroness mentioned shortage of airline or airport staff and strikes, which have been happening and will probably continue.
Then there is slot limitation. The noble Baroness mentioned Heathrow Airport limiting slots. I looked at the website for Schiphol Airport and it has similar limitations on slots, I suspect for similar reasons. Perhaps the Minister could tell us what is happening to these limitations on slots, certainly at Heathrow, because I think the present one finishes at the end of October. Is that matched with Schiphol and other regional or local airports in Europe? Presumably you have to have similar restraints at either end of a flight, and an awful lot of them go to Schiphol and places such as that.
The other interesting item in the list of reasons, for me, is in paragraph 7.6 of the Explanatory Memorandum, which is to do with the
“closure of airports or hotels”
and the effect that it might have on the passenger. That is a very subjective way in which to decide on slots, if one is relying on the number of people who are complaining, or what you think the solution is. I am not sure that the regulations will help matters much, in that way.
I turn to paragraph 12.2. I do not really understand what it means when it refers to airlines, in order to
“retain their historic rights to the most valuable slots”,
“to consolidate their operations at Heathrow … with adverse consequences for other smaller airports”.
Do the Government actually mind whether that happens? There is lots of debate about Heathrow’s expansion, but surely there is a policy issue here that needs to be taken into account.
The next paragraph talks about “loss-making flights”. Can the Minister give us any indication of how many of those ghost flights take place in a month? Are we talking about hundreds, or thousands, or two—and are they relevant? They are pretty bad for the environment, as the Explanatory Memorandum says, so it would be nice to know how serious a problem it is.
Finally, paragraph 12.4 refers to the concern about negatively impacting
“new entry and competition amongst airlines.”
I shall finish on that note. It is lovely to be able to say that we are encouraging the airlines and making sure that they stay in a good financial state. On the other hand, we have seen over the years how competition has really helped to deliver better services and lower fares. It is a challenge, and I hope that the Minister will keep abreast of those challenges—as well as customer service, at which some airlines are doing very much better than others—when she comes to look again at these regulations in six months’ time.
My Lords, I thank the Minister for her helpful introduction—she got airborne and made height. She might know that there is one airport in Wales, in Cardiff, and that the Welsh Government bought it for some £50 million some years ago. Previously, there were difficulties, and it was thought that the lovely land of Wales needed an airport—at the very least one. So I think that the Welsh Government were right to make their intervention. Cardiff Airport was undoubtedly not congested before purchase.
Could the Minister make a statement here in this Committee about Cardiff and slots—the 80:20 rule? Can she explain the general situation as it might concern Cardiff? One presumes that these regulations apply to Wales—it is there on page 1. Does the Minister have the information? How does the 80:20 rule impact on Wales’s one and only airport? Can she make any remarks of a helpful nature about Cardiff Airport in the context of the pressures on Heathrow and Stansted? What is the impact of the regulations on Cardiff Airport?
My Lords, I thank the noble Baroness for introducing the instrument, which I welcome and which again amends the airport slot usage rules, this time to 70:30, for the winter 2022 season. The aviation industry brings growth and prosperity to the UK and, as we deal with the after-effects of the pandemic, the Government are right to amend rules such as these. However, they must also plan for the long term and provide certainty to airlines, passengers and businesses that rely on the industry.
The airline industry is now recovering from significant challenges and levels are still at around 80%. As a result, airlines would likely operate ghost flights without an amendment to the rules. None the less, I would appreciate clarification of how the department decided that 70:30 is the correct rule for the fall/winter period. Will the Minister confirm what formula was used to decide this? I hope she can confirm whether the Government expect to extend the relaxation further when this instrument expires.
I listened to the case for reconsidering. We do support the extension as it stands, but I recognise that, to some extent, this solution is looking a bit tired—I have a vision of sticking plasters stuck round it to try to make it work. My recommendation to the Minister and the department is to be extremely careful with any modification. It would be very easy to have significant unintended consequences. Ideally, we should hope that growth which allows us to grow out of the need is in sight. Once again, we support this instrument.
My Lords, I am very grateful to all noble Lords who have taken part in this short debate. I will start with the point raised by the noble Lord, Lord Tunnicliffe, about how we got to where we are. There is not a formula per se, but obviously consultation with the industry and other stakeholders was incredibly important. We also looked at detailed data on flights.
It is quite interesting speaking to airlines; I was speaking to one yesterday. They might say, “We’re back up to 100% and are doing brilliantly, thank you for asking”, because they fly the European routes, which have been open for a very long time and where the demand is back. However, we know that there is wide variation in the number of routes that can be flown at the moment. Some of the long-haul routes are still not open, particularly those to China, for example, and Japan has only recently opened up. In aggregate, the picture is looking much better for the airlines, but there are still some places that cannot be flown to, which, to my mind, means that maintaining 70:30 for at least the winter season is the right decision.
The noble Lord went on to ask whether we will be doing it in future. I am not sure; that is what we are doing right at this moment. I take heed of his words that we have to be very careful with slots. We must look at the things we have in our armoury. This 70:30 slot alleviation is potentially a very large hammer to crack a nut. We would potentially look again at justified non-use. Once we and other areas of the world are further out of the pandemic, what does justified non-use look like? It seems to me that it could be a better thing to use, because you want to try to protect some airlines from factors beyond their control. I cannot say where we will go in future. Do I think it will look exactly like this? I do not think so, but I am content with where we are at the moment and where we have got to in the proposals that we have set out.
The noble Baroness, Lady Randerson, talked about demand being suppressed. Obviously, we have quite a lot of data on why demand is being suppressed. There is still a reluctance from some to come back to the skies, because of Covid. They do not particularly want to travel just yet. I agree with her that this summer did not do the aviation sector any favours: I have made the point to many people in the sector that there is a job of work to do on public perception. The sector should make sure that going on holiday, for example, is not a chore but a delight. Airports and travelling should be a delight; you want to join your airline going off to Corfu, or wherever, with the bar fully stocked and everything working. I am focusing on working with the industry on getting the industry working—not only airlines and the airports but third-party suppliers—and then making sure that we somehow get across to the travelling public that some of those terrible Daily Mail front pages from the beginning of last summer are no longer the case at all.
The noble Baroness expressed some doubt over whether the alleviation is needed for the winter season; I think I have managed to explain the Government’s position on that. The pandemic is quite far away in our rear view mirror but not in other parts of the world, some of which are the very valuable long-haul destinations. One would not necessarily want to disrupt the slots for them at this time.
I take the noble Baroness’s point about the impact assessment, although the Government stand by our position that it is for six months. Obviously, we put as much information as we possibly could in the Explanatory Memorandum.
The noble Lord, Lord Berkeley, is right about London Heathrow; it is proposing that the passenger cap comes off at the end of October. I warmly welcome that. Heathrow, like many other airports, is very reliant on third-party suppliers and, as the noble Lord knows, the Government are undertaking a review of ground handling. That is one of the unseen parts of the entire system and if it breaks down, everyone gets very cross because their luggage does not arrive—and quite rightly so. They blame the airline, the airline has contracted the ground handlers and the ground handlers do not really see the anger of the passengers, so there is a bit of work to be done there.
The noble Lord also brought up the question of alleviation at the other end. I had the same question. However, I am reassured—and airlines have not raised this with us—that different alleviation measures in different countries have not caused a problem, so that is not necessarily an issue we need to worry about.
Are we concerned if airlines consolidate at London Heathrow? Yes, I am, actually. I do not want airlines to consolidate at Heathrow unless they have no alternative. If they have slots at other airports, I should very much like them to stay in those other airports. The Government are very much committed to regional airports.
There are no ghost flights—or fewer than 1% in the second quarter of 2022, and they were not caused by slot rules. Because the alleviations have been in place for so long now, the system has managed to adjust to them. All being well, in future, we will have no ghost flights.
I have had quite a lot of deep dives into slots and slot reform, something the Government said we would look at in Flightpath to the Future. It is hugely complicated: there is the balance between wanting the industry to invest for the long term, competition and not, as the noble Lord, Lord Tunnicliffe, pointed out, upsetting the apple cart by doing things that have unintended consequences. We will be looking at that very carefully.
Finally, the noble Lord, Lord Jones, spoke about Cardiff. I am pleased to say that although the regulations cover Wales, Cardiff is not an airport with co-ordinated slots. It is not quite busy enough for there not to be enough slots. We now have to get more airlines flying into Cardiff, then it will have co-ordinated slots and any regulations will cover it. For the time being, however, it has enough slots to go around. I commend the regulations to the Committee.