New Government

On 6th May 2010 there was a general election which resulted in a new Conservative/Liberal Democrat coalition government. All references to the Government on this page in relation to happenings before that are references to the previous Labour Government first elected in 1997.

The new Secretary of State for Transport was Philip Hammond, MP for Runnymede and Weybridge which is very close of Heathrow Airport. In October 2011 Philip Hammond was moved to the Department of Defence and his place as Secretary of State for Transport was taken over by Justine Greening MP. She is the MP for Putney in London, a constituencey much affected by aircraft bound to and from Heathrow.

The Minister of State in the Department is Theresa Villiers (Con - Chipping Barnet) who will also be responsible for aviation including the AAIB.  The Parliamentary Under Secretaries of State are Norman Baker and Mike Penning representing Lewes and Hemel Hempstead respectively. For short biographical information on these new ministers visit the DfT’s website. The new Secretary of State and Ministers are all Conservatives except Norman Baker who is a Lib-Dem. Theresa Villiers was formerly the Conservative shadow Secretary of State for Transport.

Other new Ministers with interests in Aviation are:

• Caroline Spelman, Secretary of State for Environment, Food and Rural Affairs, is the Conservative MP for  Meriden in the West Midlands not far from Birmingham Airport
• Chris Huhne, Secretary of State for Energy and Climate Change, is the Liberal Democrat MP for Eastleigh which is close to Southampton Airport. 
• Dr Vincent Cable, Secretary of State for Business, Innovation and Skills, is the Liberal Democrat MP for Twickenham which is close to Heathrow Airport.

The flavour of the intitial policy of the new Government towards aviation and airports can be gained from the note issued on 11th May 2010 of the agreements reached by the two parties in their coalition discussions and in the new Government's subsequent programme document The Coalition: our programme for government:-

• the cancellation of the third runway at Heathrow;
• the refusal of additional runways at Gatwick and Stansted
• the establishment of a high-speed rail network
• reform the taxation of air travel by switching from a per-passenger to a per-plane dutywith a proportion of any increased revenues helping over time to fund increases in the personal allowance
• scrapping the UK ID Card scheme
• abolish the unelected Infrastructure Planning Commission and replace it with a fast-track process for major infrastructure projects - see our Planning Page for details

Some idea of the attitudes of the parties can be gained from their election manifestos.

In the Lib Dem election manifesto there is an explicit statement that “aviation is important for the economy as a whole”. However the manifesto goes on to say that the Lib-Dems would ‘do all we can to ensure people use alternatives where that makes sense’ and that they would impose a higher rate of tax on domestic flights ‘for which alternative and less polluting travel is readily available’. However, they recognise that for some of the more remote parts of the UK flights are a ‘vital lifeline’.

On Surface Access the Conservative manifesto says they would focus on making Heathrow better not bigger, bringing it directly into a new high speed rail network.  They say there would be a high speed rail line linking London, Heathrow, Birmingham, Manchester and Leeds with the Continent via the Channel Tunnel with construction to start in five years' time.  Later there would be two new lines bringing the North-East, Scotland and Wales into the high speed rail network. There is more information on High Speed Rail on our Planning Page.

The expansion of Heathrow is clearly an issue. The election manifestos of both the Conservatives and the Lib Dems say they would block plans to provide more runway capacity there.  The Conservatives manifesto pledge also extends to Gatwick and Stansted and the Lib Dems say they will cancel any expansion of other airports in the South East. The Conservatives say their proposed new rail network would 'provide a high speed rail alternative to thousands of short haul flights at Heathrow, freeing up landing slots at the airport and helping to deal with overcrowding problems’.  On 15th June 2010 the new Government announced the setting up of a South East Airports Taskforce. See our Planning Page for more for more information.

On Air Passenger Duty (APD) the Conservatives said that if elected they would “reform” Air Passenger Duty to encourage a switch to fuller and cleaner planes but there is no detail.  The Lib Dems said they would replace per-passenger APD with a per-plane duty (PPD) “so capturing freight movements by air for the first time”.  They say they would impose a higher PPD for domestic flights “for which alternative and less polluting travel is already available”.  See below for more detail.

The new Government’s legislative programme for the first session of Parliament was announced in the Queen’s Speech on Tuesday 25th May 2010.  Among the bills announced then was an Airport Economic Regulation Bill which will replace the existing system for setting price caps at airports subject to economic regulation with a more flexible framework focused on the outcomes which matter to passengers.  See below for more information on the last Government's Review of the Economic Regulation of Airport's and the ongoing story of the new Government's proposed legislation.

Attached is the text of a speech made by Philip Hammond, Secertary of State for Transport, to the Airport Operators Association on 25 October 2010. He speaks about a number of current aviation issues. It is worth also looking at the speech to the Transport Times Aviation Conference given on 26th January 2011 by Theresa Villiers. At the same conference somewhat different views were given in a speech by former civil servant Sir David Rowlands who is now Chairman of Gatwick Airport Limited.

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Civil Aviation Act 2006

The Civil Aviation Act 2006, which received the Royal Assent on 8th November 2006, implements important Future of Air Transport White Paper commitments to sustainable aviation and protection of passenger interests. Thus the Act:

• Clarifies and strengthens the measures available to airports for dealing with aircraft noise. This includes a greater ability to introduce and enforce noise amelioration measures beyond airport boundaries and an ability to take economic measures to reflect aircraft straying from routes designed to minimise noise. [See paras 3.10 to 3.27 of the White Paper and Control of Noise below]
• Provides explicit powers for airports to set charges which reflect local emissions from aircraft. The Secretary of State also has powers to direct airports to levy such charges. [See paras 3.28 to 3.31 of the White Paper]
• Provides powers for a levy to replenish the Air Travel Trust Fund, the purpose of which is to benefit customers of failed tour operators. This removes the need for the Government guarantee in place since 1992, and ensures the Government meets its obligations under EU law.
• Authorises local authority airport companies to undertake specified activities - such as making their expertise available to other airports and taking part in joint ventures - which are at present outside their powers. It thus makes a modest contribution to enabling local authority airports to compete on a more level playing field with privately owned airports.
• Enables the Civil Aviation Authority to recoup the costs of its Aviation Health Unit - which offers advice to air passengers, the aviation industry and to Government - by a levy from the aviation industry. This will save the taxpayer approximately £200,000 a year.
• Removes airlines' existing right of appeal to the Secretary of State in aviation route licensing cases decided by the Civil Aviation Authority thereby eliminating a layer of bureaucracy and speeding up the process.
• Clarifies the responsibilities of airport managers and police in relation to the protection and policing of airports which have been designated by the Secretary of State under section 25 of the Aviation Security Act 1982. This provision was added as an amendment to the Bill in November 2005

In the Commons stages of the Bill there were unsuccessful amendments to make the local authority responsible for setting up airport consultative committees rather than the airport operator.

The text of the Act can be seen on the OPSI website - there is a range of further information on the Act on the Department's website

In the DfT's December 2006 Progress Report on the White Paper The Future of Air Transport it is recommended (on page 32) that airport consultative committees should monitor how well the new powers in the 2006 Act are being implemented by airports. The Department wrote to all committees about this on 8th April 2008 (MSWord - 160kb)

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BAA Market Investigation

On 12th December 2006 the Office of Fair Trading signalled its intention to refer the supply of airport services by BAA to the Competition Commission (CC) for more detailed investigation. It also made a recommendation that the airports regulator advise the Government on the case for the de-regulation of Manchester airport.

BAA owns Heathrow, Gatwick, Stansted and Southampton in South East England, and Edinburgh, Glasgow and Aberdeen in Scotland. These airports have an annual turnover of £2 billion and handle over 60 per cent of all air passengers in the UK.

The OFT market study found:

• in the South East, BAA's airports handle ninety per cent of passenger trips, and these airports could under separate ownership compete to attract air passengers
• evidence of poor customer satisfaction
• significant investment at airports in the South East of England is planned. Without competition - investment could be inefficient - costly for air passengers and for the UK
• BAA's Scottish airports which carry over 80 per cent of Scottish air passengers, are not price regulated, and charges to airlines are higher than Gatwick and Stansted
• Glasgow, which faces some competition from Prestwick, has had the largest price decreases of BAA's airports in Scotland, and
• the study also found further evidence that competition between independently owned airports - such as Liverpool and Manchester - leads to improved value for air travellers.

The OFT Market Study can be downloaded from their website [OFT Market Study (pdf 2.8mb)].

Having studied the results of the consultation, the OFT on 30th March 2007 referred to the Competition Commission (CC) for further investigation the supply of airport services by the BAA in the UK [More Information]. The CC said it would like to hear from all interested parties, in writing, by 27 April 2007.

Following an initial period of information gathering, including visits to airports and holding hearings with interested parties, the Competition Commission in August 2007 published an Issues Statement which identifies the key questions to be addressed. [Issues Statement and Press Release]

On 22nd April 2008 the CC published a report on its ‘emerging thinking' on the investigation in which it set out its current view on competition in the relevant UK airports markets on the basis of the evidence (responses) it received and also identified areas where it was seeking further evidence by 30th May 2008. [CC Press Release]

Among the respondents to the CCs "emerging thinking" paper was the Civil Aviation Authority who sent in a paper on 24th May 2008. The CAA said it agreed that the common ownership of Heathrow, Gatwick and Stansted by BAA "is likely to prevent, restrict and/or distort competition". It was "now important to consider the appropriate ‘remedy' to the adverse effects of this common ownership, including divestment of airports and consequent reforms to the framework of economic regulation". [CAA Press Release]

On 20th August 2008 the CC published its provisional findings. [News release, notice of provisional findings, provisional findings report and notice of possible remedies].

The provisional findings were that there are competition problems at each of BAA’s seven UK airports (Heathrow, Gatwick, Stansted and Southampton in England, and Edinburgh, Glasgow and Aberdeen in Scotland) with adverse consequences for passengers and airlines. A principal cause is their common ownership by BAA. There were also competition problems arising from the planning system, aspects of Government policy and the system of regulation.

On 17th December 2008 the CC confirmed that, subject to final consultation, it would require BAA to sell both Gatwick and Stansted airports as well as Edinburgh airport. It also proposed to introduce measures to ensure that investment and levels of service at Heathrow, and possibly Gatwick and Stansted, meet more effectively the needs of airlines, passengers and other airport users. At Aberdeen airport, it proposed measures to promote investment linked to rebates on charges but in response to local pressure the CC in February proposed remedies thought to be more appropriate. The CC said also it intended to make recommendations to the Government on a more effective, and ultimately more flexible, system of airport regulation and also on aspects of government airports policy.

The CC’s provisional findings were considered by the UKACCs Working Group at its meeting on 12th January 2009 and it was agreed that a letter should be sent to the CC on behalf of the Liaison Group.

Having considered the responses to its provisional decision document the CC published its final report on 19th March 2009. The main points were that BAA should sell Gatwick, Stansted and either Edinburgh or Glasgow within two years. They should be sold in sequence, beginning with Gatwick, then Stansted, followed by either Edinburgh or Glasgow. The sale of Gatwick was initiated by BAA in September 2008 and the sales process is already under way.

The CC also said it would require the BAA at Aberdeen to improve consultation with airlines as well as to publish certain financial and other information. In addition, the CC is recommending to the airports’ regulator, the Civil Aviation Authority (CAA), that it should take certain specified action at Heathrow, the UK’s only hub airport, where BAA will continue to have substantial market power even after the sale of Gatwick and Stansted. Further, the CC is making recommendations to the Government on aspects of government airports’ policy as well as the present review of the airports regulatory regime.

In fact the BAA had already decided to sell Gatwick and in October 2009 it agreed terms for the sale of the airport, the UK's second busiest, to Global Infrastructure Partners (GIP) for £1.51bn.  The sale was completed early in December 2009.  GIP – set up by Credit Suisse and America's General Electric but operated independently – is also the principal owner of London City Airport.

Meanwhile BAA felt it had been treated unfairly because one of the CC airports' inquiry panel had "a powerful connection" with the Manchester Airport Group, which had been interested in buying Gatwick. The BAA appealed to the Competition Appeal Tribunal who in December 2009 concluded "with the greatest reluctance" that the BAA’s claim of "apparent bias" was justified.  The tribunal president Mr Justice Barling said it was the unanimous decision of the panel that BAA would not be forced to sell more airports - see judgement.

But the CC decided to appeal and the whole question has been argued in the Court of AppeaI (which overturned the Tribunal's judgement) and in the Supreme Court which on 18th February 2011 refused BAA permission to appeal against the CC’s decisions, including the requirement that BAA should sell Stansted and either Edinburgh or Glasgow airports, Gatwick having already been sold.

Meanwhile the CC had been considering whether there had been any change in circumstances following the completion of the BAA investigation in March 2009 which might cause them to reconsider implementing the original decision. The results of this were announced on 30th March 2011 when the CC issued a press release saying it had provisionally concluded (see summary report) that the sale of the airports is fully justified and that "passengers and airlines would still benefit from greater competition with the airports under separate ownership, despite the current Government’s decision to rule out new runways at any of the London airports". The CC has also concluded that there is no reason to change the original timescale with the Stansted sale followed by sale of one of the Scottish airports. The CC said it would now invite responses before publishing its final verdict in May/June.

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Price Controls at BAA's London Airports and Manchester

Under the Airports Act 1986, the CAA is charged with setting price controls every five years at the BAA's London Airports (Heathrow, Gatwick and Stanstead) as well as at Manchester. The most recent set of price controls for the London Airports was for the period from April 2008 to March 2013. On 20th December 2005 the CAA published a consultation paper on its policy for this review and describing also the regulatory policy likely to be relevant to the subsequent Manchester Airport review where the next set of price constrols will cover the period April 2009 to March 2014. The consultation document can be obtained from the CAA's website along with an Executive Summary and a 4 page non techncial guide. The closing date for consultation responses was Monday 20 March 2006

On 5th December 2006 the CAA published, for consultation, its initial regulatory proposals for Heathrow, Gatwick and Stansted. There were separate proposals for the regulation of each airport grounded in the market circumstances of each:

• a continuation of the current price cap framework for Heathrow and Gatwick; and
• for Stansted, a recommendation to Government that it consider removing the requirement on the CAA to set price controls

Click this link to see the consultation document and associated papers - including a non-technical summary.The closing date for responses was Monday 5 February 2007.

The consultation did not cover control of airport charges at Manchester Airport. In January 2007 the CAA issued a policy consultation on price control at Manchester and there was an industry seminar. From the related documents it was clear that the CAA planned during 2007 to consider whether there remains a need to regulate prices at Manchester and also at Stansted.

On 30th March 2007 the CAA, as part of it review, referred Heathrow and Gatwick Airports to the Competition Commission along with a document setting out it's recommendations for price controls – click this link to pick up the relevant [CAA Info Alert and links to the key documents].

The Competition Commission issued its full report to the CAA on 28 September 2007, following a six-month inquiry. The CAA published the Commission's report, excised of commercially confidential information, on 3 October 2007.

On 20th November 2007 the CAA's published proposals for a final round of consultation.

On 15th January 2008 the Secretary of State for Transport, Ruth Kelly, announced:

• Manchester would be de-designated so that at the end of the present (extended) price review period in April 2009 the Airport will be able to set its own charges .
• Stansted would continue to have the maximum level of its charges set by the Civil Aviation Authority (CAA). The Government, she said, believes that this remains the best way of protecting passengers who use the airport

The Secretary of State's decision letters and accompanying documents can be found on the Department's website

The CAA on 11th March 2008 published its decisions for price controls for Heathrow and Gatwick airports for the five years ending on 31 March 2013. The CAA's package of price caps and incentives aimed to “encourage BAA to deliver genuine service quality improvements and to invest to raise the level of facilities and service that can be delivered to passengers and airlines. The outcome for passengers should be decently modern airports and consistently high service standards”.

The maximum charges set by the CAA were:

• Heathrow: £12.80 per passenger in 2008/09, an increase of £2.44 on a like-for-like basis, representing a 23.5 per cent increase in real terms from the current (2007/08) price cap, with allowed charges subsequently increasing in each of the following four years by no more than retail price index (RPI) inflation plus 7.5 per cent each year.
• Gatwick £6.79 per passenger in 2008/09, an increase of £1.18 on a like-for-like basis, representing a 21.0 per cent increase in real terms from the current (2007/08) price cap, with allowed charges subsequently increasing in each of the following four years by no more than RPI inflation plus 2.0 per cent.

The pre-April 2008 price controls applicable at Stansted Airport were extended for a further year until April 2009. On 29th April 2008 the CAA made a formal, mandatory reference to the Competition Commission (CC) and set out a number of options for the price control design.  The same day the CC invited evidence from interested parties to be submitted by 13th May. On 4th November 2008 the CC’s report and recommendations were made public and on 9th December 2008 and on 9th December 2008 the CAA published its proposals for Stansted's Price Controls for 2009-14. The proposals can be seen on the CAA's website along with a four page briefing.

The CAA's decision on the Economic Regulation of Stansted Airport 2009-2014 was published in March 2009. The Airport's owner, the BAA commented that it recognised the cost pressures facing the entire industry today, and that it had agreed realistic capital spending plans with airlines over the coming five years. Looking to the long-term, the BAA felt the regulator should not discourage future important investment which it accepts is necessary and they were disappointed that a large element of the full cost of developing new capacity has been retrospectively disallowed.

On 31st March 2011 the CAA announced it planned to extend the current price controls at Heathrow and Gatwick Airports by one year until 31st March 2014. This decision follows consultation with industry stakeholders and will provide an opportunity for the next price controls to be developed in line with the Government’s proposed reforms for airport economic regulation - see below. A copy of the CAA's decision can be seen on therir website

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Review of the economic regulation of UK airports

On 22nd April 2008 the Secretary of State for Transport, Ruth Kelly, announced a review of the economic regulation of the UK airport system. Te review will be carried out by the Department supported by a panel of experts.

The work is expected to cover three key areas:

What should be the objectives of effective economic regulation of airports?

What are the weaknesses in the current systems of regulation?

What lessons can be learned from alternative regulatory systems?

The Review will “take into account the Department's commitment to the aims of the Government's better regulation strategy and the work will ensure that the need for sector-specific regulation and the administrative costs of that regulation are kept to the minimum necessary”.

If legislation is required as a result of the Review it will be taken forward in a future legislative session. There will thus be no changes to the basis on which the current price caps at Heathrow and Gatwick airports are set. This applies also to the cap which will take effect at Stansted from 1 April 2009.

On 18th June 2008 the Secretary of State invited passengers, businesses and environment groups to provide evidence to the Department for Transport to consider as part of the review which will look at how best to provide incentives to:

* improve the passenger experience
* encourage appropriate and timely investment in additional capacity to help deliver economic growth in line with wider Government policy
* address the wider environmental impacts of aviation on airport development.

The Secretary of State also announced the names of the panel of experts who will join the Chair, Professor Martin Cave of Warwick University, in undertaking the review. The panel members were described as experts in their fields of economic regulation, business and consumer representatio.

On 18th June 2008 the Secretary of State also published a document which aimed to clarify the purpose of the review including the type of information which the Department was seeking and how to respond.

On 16th July and 10th September 2008 there were Seminars at which a number of interested orgnisations made presentations. These can also be seen on the Department's website.

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Review Group's Emerging Thinking

On 27th November 2008 the Department published a letter from the Review Group enclosing a Note of the Review Group's Emerging Thinking on the issues covered by the Review. The Panel said it favoured regulation by licence, with airports of different size and market power having different licence obligations.

Consultative committees noted that the Group was also thinking that one licence condition might be to require (some) airports to have consultation procedures with local authorities and the community in relation to noise and other local impacts, such as land use and congestion.  It was not clear how this sat with the legislation with respect to consultative committees. It is thought the Department for Transport also noted this point and took steps to ensure the Panel was informed about the present network of consultative committees.

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Report of the Independent Panel - Consultation on the Department's Proposals

Having received and considered the report of the Independent Panel the Secretary of State for Transport on 9th March announced in a press release plans to give the Civil Aviation Authority (CAA) a new primary duty to promote the interests of passengers. The plans also provide that Passenger Focus should represent air passengers as they do rail and bus users. Also announced was

• A switch to a new licensing regime for larger airports: licensing - which is common in many regulated industries - allows greater flexibility than the current system and will enable the CAA to target regulatory activity where and when it is needed to protect the interests of consumers. There would be three tiers of licence which place varying levels of control on airports depending on their market power.
• New and streamlined appeal processes to improve access to justice for those affected by regulatory decisions.
• Measures to improve outcomes for consumers by promoting the financial and operational resilience of airports, including a specific financing duty on CAA, and new licence conditions for larger airports

Full details of the proposals are to be found in the Department’s consultation document which can be seen on the Department’s website.  The 12 week consultation came to an end on 5th June 2009 .Details of the the consultation, including information about the Review and the full report of the Independent Panel, can be seen on the Department's website. See also the report prepared for the UKACCs Annual Meeting on 27/28 May 2009 in Belfast.

One of the Government's suggestions is that Passenger Focus should take over from the Air Transport Users Council (AUC)  the latter’s role as the national body responsible for airline and airport consumer matters. Passenger Focus currently handles complaints about rail and bus services outside London. This stirred up considerable controversy among consultatative committees and at the Belfast meeting it was agreed to submit an alternative proposal. See also the responses submitted by Passenger Focus and AUC.

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Response to Consultation

On 13 October 2009 Transport Minister Paul Clark issued a statement about the introduction of a new duty on the Civil Aviation Authority to ensure that airports can finance their licensed activities; a package of licence conditions to introduce financial ring-fencing; and a licence condition requiring airport operators to maintain a minimum creditworthiness. The text of the statement can be seen on the Department's website.

It will be noted from the statement that the Government promised to publish its response to the remaining elements of the March consultation later in 2009 and that at the same time it would begin consulting on the possible additional measures outlined in the statement. The follow up response was published in December 2009 when the Government announced its decisions. The decision document and accompanying impact assessment (as well as other related documents) can be found on the Department for Transport’s website along with a summary of the consultation responses and a Government Statement. In connection with the Review the Government is seeking advice from the CAA under Section 16 of the Civil Aviation Act 1982, on the drafting of conditions to be included in the new licences. Click here to see the document which outlines the content from the Secretary of State's letter that sets out the framework for that advice.

The highlights of the Government's response are:

• Modernise the statutory duties of the Civil Aviation Authority (CAA) in this area. The Government will replace the CAA’s existing duties with a single primary duty to promote the interests of end consumers of passenger and freight services at airports. In order to provide clarity about the additional factors the CAA need to take into account when making decision, the Government will also be introducing new subordinate duties.
• Introduce a new licensing regime that is flexible and targeted. The new regime gives the regulator sanctions and enforcement powers to incentivise licensee compliance.
• Introduce a new framework of merit based appeals to ensure the regulator is accountable for the decisions it makes.
• Enhance passenger representation within the aviation sector. To ensure that passengers have an independent and influential advocate with an end-to-end journey perspective, the Government will introduce legislation to make Passenger Focus the passenger representative body for aviation.  Passenger Focus will build on the firm foundations established by the Air Transport Users Council.
• Promote the financial resilience of major airports in order to provide as much certainty as possible for the industry and its investors, and support sustained investment. In it's October 2009 announcement the Government said it intended to consult on two further financial aspects - see below.
• A few responses to the Consultation raised the importance of connecting regional economies to London airports and international destinations. The Government says it recognises this issue and will commission research to gather further evidence.

The Independent Panel on Airport Regulation has had an opportunity to discuss the Consultation responses with officials, and advise on the content of the Decision Letter. The Panel has also been invited to deliver an opinion on what the Secretary of State has decided. You can see this on the Department’s website.

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Further Consultations

As noted in the response documents the Government launched consultations on:

• Promoting financial resilience for major airports - the documents can be found on the Department's website site, along with accompanying impact assessments.This consultation closed on 4th February 2010.
• Further proposals to modernise the regulatory framework for aviation including proposals to reform the CAA’s legislative framework; the Air Travel Operators’ Licensing (ATOL) scheme and the procedure for making airport byelaws. These documents can also be found on the Department’s website together with a standard response form. This consultation closed on 18th March 2010.

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Consultation - Preparing for a more competitive airports sector

On 8th November 2009 the CAA published a consultation document setting out the rationale, objectives and proposed approach to two complementary projects whihc are intended to support the transition towards a more competitive UK airports industry. The closing date for comments was 8 January 2010.

New Government

The new Government’s legislative programme for the first session of Parliament was announced in the Queen’s Speech on Tuesday 25th May 2010.  Among the bills announced then was an Airport Economic Regulation Bill which will replace the existing system for setting price caps at airports subject to economic regulation with a more flexible framework focused on the outcomes which matter to passengers.  The new Government is considering the detailed content of these reforms and will say more in due course. The bill would apply across the UK, except Northern Ireland, which regulates its own airports. The government is in discussions with Northern Ireland over whether to adopt the reforms there. Click here to see a DfT note about the new Bill.

On 21 July 2010 the new Secretary of State made a statement in which he said the new Government planned to introduce a new set of duties for the Civil Aviation Authority's (CAA) economic regulation of airports which will put the interests of passengers unambiguously at the heart of the regime. Under these proposals the CAA's primary duty will be to promote the interests of existing and future passengers.

In the same statement the Secretary of State said that after careful consideration, he had decided not to give a new remit to Passenger Focus to represent air passengers as had previously been proposed. "Whilst it is important to have strong passenger representation," he said "this is not the time to be make additional structural changes which would add to the regulatory burden on industry." He would therefore be exploring other options for strengthening existing passenger representation arrangements.

in a letter dated 15th October 2010, the Minister of State at the Department for Transport, Theresa Villiers, told UKACCS "We believe that the Airport Consultative Committees, particularly those with passenger service committees, can play an important role in helping take this work forward. We are therefore considering how to make better use of existing arrangements and the future role of Airport Consultative Committees in liaison with the national consumer representation body. I understand that at UKACCS’s recent annual meeting the Civil Aviation Authority explained that they are working on some best practice guidelines which could be incorporated in the revision of the Department’s guidelines for Airport Consultative Committees. As you know my officials have recently met with UKACCS and a number of Chairmen from individual Airport Consultative Committees to progress this. I understand that this was a most constructive meting. The next step is for officials to meet with representatives of a selection of airports for their input."

In a written statement on 3 March 2011 the Government confirmed it would introduce legislation to implement these reforms early in the next Parliamentary session. This  would replace the existing statutory framework for regulation at designated airports with a more flexible licence based system.  The CAA would be given "the powers it needs to become a more responsive regulator, for example to deal with events such as the severe weather this winter. The reforms will also strip out unnecessary regulation and support passenger-focussed investment in existing airport infrastructure." The statement went that the Government was "keen to ensure that there is a smooth transition to the new regime and we will work with the CAA and industry to achieve this. In particular, the Government will not be making changes to the basis on which the current price caps at Heathrow, Gatwick and Stansted are set." The statement noted that the reforms follow an independent review of airport economic regulation and subsequent consultation carried out by the last Government - see above.

It is understood that the new Bill will be published first in draft form to allow consultation before the Bill is formally is introduced.  It is planned also to issue draft licences so that stakeholders and the public can more fully understand the Government's intentions.

More information

Please see the paper prepared for the UKACCS Annual Meeting on 2/3rd June 2010

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Air passenger experience at Heathrow, Gatwick, Stansted and Manchester - CAA Study

In November 2007, the Secretary of State for Transport commissioned advice from CAA on improving the through-airport passenger experience. Concern was expressed about particular pinch points where there is potential for delay and where the responsibility for delivering a good service lies with a combination of bodies.

As part of its work the CAA commissioned a passenger survey. The resulting reports can be accessed via this link to the DfT’s website. Paper 1 sets out the results of the Survey while in Paper 2 the CAA’s gives its advice on improving the through airport journey.

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Charges for Airport Services

There is growing concern among passengers and in the media about the recent trend among some airports to introduce charges for services which were once provided free of charge as part of the airport service. A Which article on airport charges published in January 2011 includes a list ofthe extra charges levied on passengers at the UK's most used airports.

The new charges have to be seen in the context of the economic downturn. A letter sent to the Government in April 2009 by the Airport Operators Association (AOA) details how abruptly the airports' fortunes had reversed. According to the Association several airports were already making a loss, and more would become loss-making as the year progressed.  The AOA’s letter called on the Government not to press ahead with new policies and legislation including Ofcom’s proposals which would mean airport’s paying significantly more for radar and VHF systems, and the Policing and Crime Bill which will mean that many airports will have to pay, or pay more,  towards the cost of airport policing.

According to many observers the financial situation leaves airports with little choice but to consider new revenue streams with many  following the example of the budget airlines' in seeking out new ways of charging passengers. The AOA says that many of the new schemes are not mandatory but give passengers “additional choice”.  That, of course begs the question whether the standard of the ordinary service is acceptable.

According to a report received by one consultative committee passenger research suggests that one of the key drivers for people using the new fast track security facility is that it offers a simple, hassle free environment and ease of navigation.  The report says that passengers using low cost carriers are generally willing to pay small supplements for ‘added benefits’ such as fast track security and airline innovations such as ‘Speedy Boarding’ and Web Check-in.

The Air Transport Users Council certainly believes passengers will be targeted with more charges and they are resolved to take up increases with the airports concerned. The budget airlines have complained that the charges are driving more passengers away and they may stop operating out of airports which have excessive charges.

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Air Passenger Duty

In the pre-Budget Report in 2007, the Government announced that it intended to replace air passenger duty with a duty payable per plane, rather than per passenger. This it was thought would send better environmental signals and ensure “that aviation makes a greater contribution to covering its environmental costs, while ensuring that a fair level of revenue continues to be raised from the sector in order to support public services”.

In the event the Government decided not to proceed with new tax.  Instead Air Passenger Duty (APD) was reformed from a two-band system, to a four-band system. The four distance bands were set at 2,000 mile intervals from London, and destinations were categorised based on the distance from London to the capital city of the destination country/territory concerned.  The reformed APD took effect on 1st November 2009 with a second round of increases on 1st November 2010.

The travel trade is less than happy about the changes and the changes have stirred up a good deal of opposition overseas.  Among the countries complaining about the new system are those in the Caribbean.  This is because the new banding system discriminates in favour of the United States over the Caribbean. It does so by determining that the whole of the US is closer to London than the Caribbean.  This is because air passengers bound for, say, California or Hawaii pay the same tax as those flying to, say, St. Kitts and Nevis in the eastern Caribbean even though the US destinations are considerably further away.  Starting in November 2009 the APD payable by a visitor to the Caribbean travelling in economy class increased by 25 percent. From November 2010, the increase was 87 percent. And for passengers traveling in Premium Economy and Business Class, the corresponding increases were 25 percent and 94 percent respectively. Caribbean tourism experts and government officials believed  the impact of the increased APD on UK visitors to the Caribbean would be immediate and a negative effect on the economies of Caribbean countries was expected. Last year, the region received over one million British visitors. There has been talk that the Caribbean countries concerned may challenge the increased tax in the courts.  Many believe the discrimination was deliberate in favour of the US but the Treasury insist  that while distance bands will leave some countries “disappointed”, they are  “administratively simple”

The note issued on  11th May 2010 of the agreements reached by the two parties in the new coalition Government formed following the general election on 6th May 2010 says the new Government would replace Air Passenger Duty with a per flight duty. This stance was subsequently confirmed in Government's programme document The Coalition: our programme for government issued later in May 2010. The programme added that a proportion of any increased revenues would be used to help over time to fund increases in the personal allowance. The new Government's stance on APD was to be expected. The Conservative election manifesto says if elected they would “reform” Air Passenger Duty to encourage a switch to fuller and cleaner planes.  Although there was no detail it is thought that the Conservatives were thinking of a per-plane tax.  And In their election manifesto the Lib Dems said they would replace per-passenger APD with a per-plane duty (PPD) “so capturing freight movements by air for the first time”.  They said they would impose a higher PPD for domestic flights “for which alternative and less polluting travel is already available”.  Again, there is no detail.

But in his first Budget Speech the new Chancellor said the Government would “explore changes to the aviation tax system, including switching from a per-passenger to a per-plane duty, and consult on major changes." This would help “reduce our carbon emissions.” Originally it was planned to open consultation on the proposed changes in the Autumn of 2010 but there were delays and the consultation was not launched until March 2011. Meanwhile the November 2010 increase in the Air Passenger Duty approved by the last Government were implemented. For more information please see the paper prepared for the UKACCS Annual Meeting on 2/3rd June 2010. At the meeting it was agreed to write to the Economic Secretary to the Treasury, Justine Greening MP, about the new Government's proposed per plane tax and in fact a letter was sent to her on 9th June 2010. Her reply was received the following month. Later, in a letter dated 15th October 2010, the Minister of State at the Department for Transport, Theresa Villiers, told UKACCS "I would encourage you to maintain your discussions with HM Treasury and participate in any consultation on the issue, should the Chancellor decide to consult on major changes to Air Passenger Duty."

In the run up to the Budget on 23 March 2011 there was a rising chorus of concern in the pess and elsewhere about the impact of APD. Attached for example is a letter which the Consultative Committee at Aberdeen sent to the Chancellor, George Osborne, on 11th March 2011. The Chancellor seems to have listened. In his Budget speech he confirmed a delay to this year’s APD rise to next year and said the Government would seek to change international law to allow a per plane tax to be brought in. He noted that the government had “tried every possible option” to adopt a per plane APD, but had had to conclude that it was "illegal in international law." And he said that the Government would also look to change the "rather arbitrary banding system of APD that appears to consider the Caribbean to be further away than part of the US and Hawaii," and also bring private jets into the taxation system. That afternoon the Government issued a consultation cocument on APD and a copy of this has been posted to this site. It should be noted in particular that paras 5.7 to 5.10 deal with possible regional variations in the rate of APD.  And elsewhere there is reference to the possible devolution of APD to Scotland.

At the Annual Meeting of UKACCS, at Aberdeen on 9th June 2011, delegates considered a paper about APD at and agreed to respond on the following lines:

• support the principle of including business jets for the first time but sought clarification on what constituted a business jet flight. As well as exemptions for emergency flights there needed to be an exemption for flights transferring key personnel/workers to remote destinations where surface transport does not exist such as offshore oil fields.
• urge the Government to review the need/level of APD when aviation joins the EU ETS next year. Must offset APD against ETS or even abolish APD if financial burdens placed on the industry are not sustainable.
• did not support a regional variation in the rate of APD but suggested an alternative approach whereby the rate of APD be halved for domestic point to point flights where the surface transport journey time is greater than 4 hours.

The consultation closed on 17 June 2011. More than 500 responses were received from the aviation sector, domestic and international tourism, other business sectors and consumers.  As part of the consultation process, a number of meetings were also held with stakeholders.

On 6 December 2011 the Government issued its response. The response document summarises the responses to the consultation and addresses each of the five questions raised in the consultation as well as other relevant issues highlighted by stakeholders.  The response document shows that the Government has changed little or nothing in response to the comments it received - “a sham and a waste of taxpayers' money” as one group of airline heads put it!

The Autumn Statement 2011 confirmed the Government’s plans to extend APD to business jets of 5.7 tonnes or more, effective from 1 April 2013.  It also confirmed that APD rates will increase from 1 April 2012, as announced at Budget 2011.

Since 1 November 2011, APD rates for passengers travelling on direct long-haul routes departing from airports in Northern Ireland have been cut to the short-haul rate – currently £12 per passenger in economy and £24 for business and first class passengers.  This change was announced by the Chancellor, in consultation with the Secretary of State for Northern Ireland and the Northern Ireland Executive, on 27 September, in recognition of the unique challenges faced by Northern Ireland in attracting air traffic into its airports.  To provide a lasting solution, the Government has launched a parallel process to devolve aspects of APD to the Northern Ireland Assembly.

Meanwhile there is no indication that any of the proceeds from APD (which some reports say might be as much as £6bn) would be used directly for environmental mitigation measures perhaps by way of a Trust Fund. Such arrangements have been made in other industries, for example the taxes from landfill and quarrying activities are used to mitigate the detrimental effect on local communities.

And there is ongoing disquiet about the practice of some airlines of charging fees for reclaiming APD when a passenger has to cancel a flight.  A report by Which?Holiday published in March 2009 found Jet2.com charged £40 per APD reclaim transaction, while Flybe and bmi charged £25 per person, BA between £15 and £30 per person and Ryanair £15 per person.  This compares with the current APD charge of £10 on short-haul economy flights. In some instances passengers are thus worse off if they make a claim. “Airlines should not be the automatic beneficiary of any unclaimed APD,” said the report, “we think that any administration fees that put people off claiming back the APD are unfair."  This is an issue taken up by the AUC some time ago but without success.  

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Public Service Obligations

The White Paper Future of Air Transport, talked about the protection of regional air access to London. It proposed clarification of the circumstances in which the Government is prepared to intervene in order to guarantee a minimum level of scheduled air services on these routes.  Specifically it proposed:

• The introduction of a voluntary early warning system whereby airlines would agree to give notice of their intention to withdraw services from a route. This would give regional bodies and the Government time to consider whether and how the route concerned could be protected.
• The clarification of criteria, which are set out, but not defined in European Regulations governing mechanisms to protect regional air services. This will allow airlines, regional bodies and the Government to make better-informed decisions when considering their policy towards air services from regional airports to London.
  

In connection with the clarification of the European criteria the Government on 7th July 2004 issued a consultation paper seeking views on the interpretation of EU Regulation 2408/92 which deals with the imposition of Public Service Obligations for the protection of such services. Specifically it asks for views on the interpretation of the following terms:

"peripheral region";
"development region";
"thin route"; and
"adequate provision of services"

Additionally views were invited on how the case for the economic necessity of imposing a PSO should be judged.

The consultation period was extended and finally closed on 8th November 2004. [2004 Consultation Paper].

On 21st February 2005 the Department published a report on the responses to the consultation paper - which it said would be very helpful in informing the Government's thinking on this policy.

Apart from detailed comments on the various definitions proposed by the Department a recurring theme among the responses showed that concern in the regions is focussed not just on air services to London generally but, more specifically, on services to Heathrow (and to a lesser extent Gatwick) as a major international hub - this is a particularly sore point for those regional airports which have lost their connections to Heathrow where the number of domestic destinations over the last decade has declined from 11 to 8. The proposals described in the consultation paper did not fully address these concerns. As the consultation paper made clear, according to European case law, if a region has services to any one of Heathrow, Gatwick, Stansted, London City or Luton airports, it will be considered as having a service to London. The withdrawal or reduction of a service to Heathrow would not be enough to trigger the consideration of a PSO if together the services to other London airports were considered to be adequate. Nor would questions of interconnectivity or the final destination of passengers be part of the consideration of what is deemed an 'adequate' service.

For very similar reasons there was regret in the regions that the proposals dealt only with the protection of existing services and did not include the creation of new London services, particularly to and from Heathrow.

At the other end of the spectrum there was a feeling, typified by the response submitted by the BAA, that the imposition of PSOs might “lead to the benefits to the particular region being significantly lower than the losses to the South-East region and to the UK as a whole. The understandable desire for air access to the UK regions had to be balanced by the desire to maintain and strengthen access from the UK as a whole to the rest of the world.” The submission concluded“…a better solution would be to focus on providing sufficient capacity so that the choice between domestic and international services does not have to be made. Where such a choice does have to be made, then it would be better to consider transparent financial support for those air services which are needed and for which a clear case can be made.”

The Government's formal Guidance on PSOs was finally issued on 15th December 2005. Sadly the constraints of the PSO arrangements meant that it was not possible to address some of the key concerns outlined in the responses to the consultation.

in a letter dated 15th October 2010, the Minister of State at the Department for Transport, Theresa Villiers, told UKACCS:

"On the question of preserving slots for domestic services at Heathrow, you have noted that it remains open for regional stakeholders to apply to the Secretary of State for the imposition of a Public Service Obligation (PS0) on a given route. However, you have expressed concern that PSOs can only be used to secure a link to a “London” airport rather than a specific airport such as Heathrow, which makes it difficult to feed into other international services.

"As you will be aware, if a decision were taken to try to modify the PSO rules so as to secure slots at specific airports, this would give rise to some difficult legal obstacles to overcome. Even if it proved to be possible to get over these legal hurdles, caution would be needed because what you propose would involve Government intervention in the use of very valuable slots. You will appreciate that such intervention could be controversial.

"That said, I would be interested to hear any ideas you have regarding how routes can be preserved to serve regional airports from Heathrow and other London airports in an efficient way for air passengers."

Meanwhile, there have been developments at European level - see our European Round-up page for more information. See also the attached report on developing and preserving regional air services (MS Word 91kb) prepared for the UKACCs Annual Liaison Meeting at Manchester Airport on 21/22 June 2006. The issues were considered again at the Annual Meeting on 11/12 June 2008 when the members debated a paper submitted by Aberdeen Airport Consultative Committee and at a meeting of of the UKACCs Working Group on 12th January 2009 - see attached paper and the letter sent to the Department for Transport after the meeting. The issue was considered again at the UKACCs Annual Meeting at Belfast on 27/28 May 2009 - paper for discussion at that meeting is attached.

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Route Development Funds

In the White Paper Future of Air Transport the Government said it believed the establishment of further RDFs in Wales and in English regions (outside the South East and East of England) could play a valuable role in establishing new direct business links from both primary and secondary airports in these areas, thus stimulating inward investment and tourism. It therefore asked the Welsh Assembly Government and the relevant English Regional Development Agencies “to consider whether they would wish to set up a route development fund to encourage the establishment of new services at airports in their respective areas, and to consider what priority they would attach to such a fund.”

The European Commission has issued new Guidelines on the financing of airports and start-up aid to airlines departing from regional airports - see our Euro Page for details.   The Guidelines above have an impact on the way in which Route Development Funds (RDFs) are operated at national level, in particular in relation to the size of airport eligible for start-up aid, and the restriction on ex-EU routes and carriers. The UK Government has obtained state aid approval from the Commission for the UK's RDF scheme wherepon it published a national protocol for UK route development fundsgoverning the operation by devolved administrations and regional development agencies of funds to provide start-up aid. The rules do not apply to funds operated by private bodies such at the BAA.

The European Commission state aid is valid for five years until 17th May 2011. No new route eligible for funding under the RDF scheme can commence operations later than that date.

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UK Regional Airports - Fifth Freedom Passenger Services

In June 2005 the UK Civil Aviation Authority (CAA) published a report the impact of granting "fifth freedom" passenger services to foreign (i.e. non EU) airlines at UK regional airports.

Fifth-freedom rights are the rights of an airline of one nationality to pick up and drop passengers and cargo between airports in two other countries on a flight that originates in its own country.

The Report finds that the balance of benefits to the UK from greater liberalisation of fifth freedoms to and from regional airports is likely to be positive. This assessment is based on seven representative case studies. The report was undertaken with the agreement of the Department for Transport, which is now considering it.

The report recommends that the Government adopt a new policy presumption that favours the granting of fifth-freedom rights at regional airports subject to their impact on certain key issues. These include the UK's bilateral negotiating position with the country in question and the viability of more economically valuable UK-originating direct services.

The report also recommends that, so as to increase certainty for the airports and airlines involved, there should be a streamlined and transparent five-week procedure to make decisions about regional fifths.

The Government's response was announced on 17th October 2005. In future there will be a general presumption in favour of allowing such services, for both passenger and cargo services

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Access to Air Travel for Disabled People

For more information visit our Passenger Rights page

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