Draft Airports Slot Allocation (Alleviation of Usage Requirements) (No. 2) Regulations 2021

Robert Courts Excerpts

Tuesday 19th October 2021 General Committees

[The Chair]

Before we begin, I would like to remind Members to observe social distancing and only to sit in places that are clearly marked. I would also like to remind Members that Mr Speaker has stated that masks should be worn in Committee. Hansard colleagues would be most grateful if Members could send their speaking notes to [e-mail].

[The Parliamentary Under-Secretary of State for Transport (Robert Courts)]

I beg to move,

That the Committee has considered the draft Airports Slot Allocation (Alleviation of Usage Requirements) (No. 2) Regulations 2021.

It is an honour to serve under your chairmanship this morning, Mr Davies.

The draft regulations will be made under the powers conferred by the Air Traffic Management and Unmanned Aircraft Act 2021. The Act created a more flexible set of powers for Ministers to implement slot alleviation measures related to the impact of covid-19, subject to a vote, of course, in both Houses. It allows us to tailor our responses in ways that were not possible before the Act. Ordinarily, airlines must operate slots 80% of the time in order to retain the right to the same slots the following—that is known as the 80:20 rule or the “use it or lose it” rule. However, the powers provided by the Act enable the Secretary of State to provide alleviation from that rule if he is satisfied that there is a reduction in demand due to the covid-19 pandemic, and that the reduction is likely to persist.

Under normal circumstances, the 80:20 rule helps to encourage the efficient use of scarce airport capacity while allowing airlines a degree of flexibility in their operations. In response to the covid-19 pandemic, the EU Commission waived the 80:20 rule for the summer 2020 and winter 2020 seasons. Following the UK’s departure from the EU, the UK Government decided to extend the waiver to cover the summer 2021 season, which runs until 30 October, through the Airports Slot Allocation (Alleviation of Usage Requirements) Regulations 2021, which we debated earlier this year.

By providing airlines with the legal certainty that they would be able to retain their slots even if not operated, the commercial impacts of the covid-19 outbreak on the industry were mitigated. That is because airlines might have otherwise opted to incur the financial costs—the loss—of operating flights at low load factors merely to retain those slots. The policy also supported sustainability by reducing the likelihood of needless emissions from near-empty aircraft.

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[The Chair]

May I inform the Committee that I will call other Members to speak after the Minister and the Opposition spokesperson if anyone wants to elaborate on the matter? I am just making the point to keep interventions short.

[Robert Courts]

Thank you, Mr Davies. If I may, I will make some progress and return to the hon. Gentleman’s point in a moment.

Owing to the continued uncertainty and low passenger demand forecasts, we set out a package of measures on 19 July to alleviate slot usage requirements for the winter 2021 season, which runs from 31 October 2021 to 26 March 2022. That package was developed following consultation with the aviation industry and careful consideration of responses. It is fair to say that there were a range of views, from calls for a full waiver to support for no alleviation.

The draft instrument applies to England, Scotland and Wales. It is a devolved matter for Northern Ireland and does not therefore apply to it.

In the draft instrument, we have set out a package of alleviation measures that are designed to work together. They include changing the minimum usage ratio to 50:50, meaning that airlines are required to sue their slots at least 50% of the time to retain the right to operate those same slots in the following year. The reintroduction of a utilisation rate should encourage efficient slot use while also supporting sector recovery. There is a utilisation rate rather than a full waiver that we have seen in the past.

The draft regulations would also allow airlines that hand back a full series of slots to the slot co-ordinator before the start of the season to retain the right to operate that series of slots the following year. That will provide an opportunity for other airlines, including new entrants, to apply for and operate those slots on a temporary or ad hoc basis. The measure will apply to traded and leased slots, but not to newly allocated slots. That will prevent carriers from acquiring slots with no intention of using them. However, airlines that have announced that they have permanently ceased or will permanently cease operations at an airport before the start of the winter 2022 season will not benefit from the regulations in winter 2022.

The draft regulations expand the reasons that airlines may use to justify not using slots to include covid-19 related restrictions. That provides a guard against the risk of unforeseen covid-19 related measures or restrictions being imposed during the season. It will apply where unforeseen covid-19 related measures, including flight bans, quarantine or self-isolation requirements are applied at either end of a route and have a severe impact on demand for the route or the viability of it. That will apply where restrictions could not reasonably have been foreseen in time to hand back the full slot series. There will be a three-week recovery period during which the provisions, sometimes known as force majeure, may still apply following the end of the covid restrictions. That gives airports and airlines time to respond to any unforeseen restrictions. The measures will cover the winter 2021 scheduling period, from 31 October 2021 to 26 March 2022.

We are currently considering alleviation for summer 2022 and we plan to consult with industry and interested Members to inform our policy later this year.

The instrument provides the necessary relief for the aviation sector for the winter 2021 scheduling period. Through this package of measures we have aimed to strike a balance between supporting the financial health of the sector while encouraging recovery.

[Martin Docherty-Hughes (West Dunbartonshire) (SNP)]

The Minister said that Northern Ireland is excluded from the measure due to devolution. Can he expand on why it is good for them and not good for the rest of us?

[Robert Courts]

The reason is that aerodromes are a devolved matter in relation to Northern Ireland. There are also no co-ordinated slot airports in Northern Ireland, so the Northern Ireland Executive have agreed that it was not necessary for the powers of the 2021 Act to extend to, or apply in relation to, Northern Ireland.

I am conscious that I promised to respond to the query from the hon. Member for Blackley and Broughton.

[Graham Stringer]

The Minister is seeking inspiration.

[The Chair]

It has flown over.

[Robert Courts]

I am grateful to the hon. Gentleman for allowing me time to collect my thoughts. An assessment is always conducted of the impact of any measure that the Government introduce. Obviously, there is also a consultation period that takes into account the views of the sector. In any event that informal assessment is made, but hon. Gentleman asked about a formal impact assessment. In this case, we make provision for a period of less than 24 months, because the winter 2021 season lasts until March 2022 and any alleviation beyond that would require a fresh statutory instrument. I hope that clears up the matter, but I could come back to it later.

I commend the regulation to the Committee and I hope that everyone has found my remarks informative. I can deal with any other points when I reply to the debate.

[The Chair]

I will call the Opposition spokesperson next. There will be an opportunity for others to speak, but this particular slot is limited to one and a half hours and I do not expect it to go on for more than 80% of that.

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[Robert Courts]

I am grateful for the opportunity to respond to the points that hon. Members have made, and I will do my best to go through all of them.

The hon. Member for Wythenshawe and Sale East asked about the hire and refire tactics, and what attitude we would take on slots. As he knows, slot allocation is something that the Government are legally prevented from interfering with or getting involved in; it is a matter for Airport Coordination Limited. I understand the point that he raises, but that is the reason why we cannot do that.

The hon. Gentleman also asked me about the plan for reactivating and re-energising the sector more broadly. He will of course remember that we are due to publish a strategic plan for the recovery of the sector by the end of the year, and I will look to deal with those points in that document. We will be producing that important document in due course. It will also deal with a number of points made by my hon. Friends. My hon. Friend the Member for South Thanet asked about load factors and new entrants. That is an important point and something we should address with a bit of time to breathe and think. What we are dealing with here is essentially an emergency short-term measure. It is not intended to be long-term policy on slots; it is simply providing some alleviation at the current time. He raises important points; we will be considering the matter, and will look to say more about it in the document in due course.

The hon. Member for Rochdale asked a similar question but with regards to the environment. He is familiar with the work of the Jet Zero Council, which has a big part to play. He asked specifically about the environmental impact and slot allocation. We will look at the wider slot policy point in the strategic document on the recovery of the sector and say more about that towards the end of the year. I am not seeking to swerve the question, and the hon. Gentleman has raised an important point, but the regulations are not the right vehicle to consider it, because they are an emergency measure to provide alleviation over the course of the winter season.

My hon. Friend the Member for Bexhill and Battle asked about some of the longer-term implications, and they will be covered in the strategic document. He started by saying that the regulations are essentially a compromise, and he is right. It is a matter of judgment, and to a certain extent that also answers some of the points raised by the hon. Member for Blackley and Broughton. In terms of the financial impact, both hon. Gentlemen will appreciate that that involves an element of judgment. Clearly, the aviation sector has been unable to fly and that has a financial impact. There is a desire for airlines to start to fly their slots again, but without doing so in such a draconian way that it causes them to retrench. That is the challenge.

The Committee will recall that the last time that we debated this issue, it was a matter of full alleviation, so the 80:20 rule did not apply, but now 50% of the time flights are required. There is a judgment and an element of compromise and my hon. Friend for Bexhill and Battle is right to put it in those terms. He also asked about sub-letting, as he put it, and I think he means a full series hand-back, and the ability to come back and to fly some of those slots. If an airline knows that it cannot fly its slots, the intention is to encourage it to hand those slots back rather than to hold on to them and perhaps end up flying them, with all the environmental impact, and the economic impact on that airline. Because we are dealing with an evolving time, airlines may realise that they can fly slots, and that would encourage them to come back to airports where they are already established and start to re-establish services. It may also give an opportunity to new entrants if they are able to fly slots to demonstrate that they are able to do so. It is important to recognise that that would happen over the course of this season, and would not establish a long, historical right to fly slots. The point of the regulations is that airlines will retain their slots for the next season provided that they hand them back in this season.

A wider slot policy issue must be considered, which is why I referred to the strategic document that we will produce and release towards the end of the year. I am keen to stress that we need to look at the policy, but do so with a little bit more time to reflect, and not while the industry is in the midst of the immediate covid challenge.

[Huw Merriman]

I am keen for the Minister to say whether prior notification that an airline is moving away from an airport is indeed the notification that he has cited. Has that airline given the confirmation that it plans no longer to operate from that airport, or will there be a forward, formal date at which to vacate?

[Robert Courts]

I was just about to address that point. I did not mean to give the impression that I was not going to answer. It fundamentally comes down to whether ACL understands that to be a formal revocation. I would have to look at the circumstances to give a proper answer as to exactly what was said. It fundamentally comes down to whether operations have ceased or have been paused.

My hon. Friend also asked about the economic regulation of Heathrow. That is subject to an independent decision taken by the CAA. Obviously, there has been a huge amount of financial challenge over the course of the past 18 months, and that is why a support package, as part of wider economic measures, has been given. When making that independent assessment, the CAA must balance the interests of passengers and the airlines, and the financial viability of the airport. It balances those three factors when it reaches its independent decision.

The hon. Member for Blackley and Broughton asked about the impact assessment, and I apologise for not giving an answer that was quite clear the first time. If I understood him correctly, the November point—he referred to March ’23, which I will address in a second—is about the powers that are conferred by ATMUA, or the Air Traffic Management and Unmanned Aircraft Act 2021, that enable us to introduce this regulation. Although that period is clearly longer than a year, we are dealing here with a shorter period of alleviation. The powers last longer than a year, but the exercise of the powers that we are seeking here is for less than a year. The hon. Gentleman has the draft statutory instrument in front of him. He will see that paragraph 2 refers to a required percentage of

“50 %, in the case of slots with a date falling within the scheduling period from 31 October 2021 until 26 March 2022”.

The start of the period is the date of the end of the month, which I gave in my opening speech, and it will last until 26 March 2022. The powers that we are seeking to exercise apply for this shorter period of less than a year, from the end of October to the end of March.

The hon. Gentleman asked why we did not have an impact assessment for a longer period. That is a perfectly fair and reasonable point, but the difficulty, and the reason why we have not done such an assessment, is that it would depend on the usage ratio that we applied. He will remember that last time we considered this statutory instrument, there was a full alleviation, so there was no requirement to fly the flights at all. That would clearly have one economic impact, whereas we are now talking about a 50% usage rule, which will have a different economic impact. In the next season, there will be another period. I do not know now—we would have to consult—what we would do at that time; clearly that would have another economic impact. We are dealing with a period of less than a year.

The hon. Gentleman also made a point about the end of March 2023. If I understood him correctly, he took that from paragraph 2(4)(b), which is about the entitlement for the air carrier to retain the slots in the next scheduling period. He will remember that the issue we are dealing with here concerns this scheduling period. In normal circumstances, if slots are not flown 80% of the time, they cannot be kept in the next scheduling period. We are operating relief for this scheduling period. New paragraph 2a to the Council regulation states that

“the scheduling period from 31 October 2021 until 26 March 2022 shall entitle the air carrier to the same series of slots for the scheduling period from 30 October 2022 until 25 March 2023”.

If I understood the hon. Gentleman correctly, I think I can answer him by saying that this is not power we are exercising; we are simply pointing out that the airline will get to keep the slot for that scheduling period. I hope that I have explained the detail of the matter, now that I have found the relevant bit of the SI, and that I have understood his point correctly.

The hon. Gentleman asked about a number of other points. He asked about ownership of slots. Slots are a permission to fly, rather than an ownership, and are dealt with by ACL. I understand the substantial point that he makes, which is important, and we will have to look at slots policy, as I have explained, but the slots are a matter that is dealt with by ACL as a process independent of government.

I think I have dealt with the hon. Gentleman’s detailed point. The broader point he made is about assessment of the impact. Clearly there has not been a formal impact assessment, as we have discussed. There is obviously an informal one, but what we are doing here is seeking to allow relief, because if an airline cannot fly, it is quite clearly suffering an economic impact. That is what we are seeking to do. If an airline were not to have this relief, it would be required to fly the flight to keep the slot, and would wasting fuel without a full load factor, and in some cases even empty. Clearly that would have adverse economic impact for the airline, as well as an environmental impact, which I appreciate is separate from the point that he raises.

I think I have dealt with all hon. Members’ points. I am pausing for a second in case anyone thinks I have not. I am grateful for the points that have been made. The regulations are a short-term relief package. If we do not take this action, the default position will accrue and airlines will have to fly 80% of the time or lose the slots. That will mean that an airline either has to lose its slots or fly them empty, with all the adverse financial and environmental consequences that that would have, which I submit to the Committee would be a result that we would all want to avoid. We will, of course, look at the longer-term piece for the aviation industry in more detail at the end of year.

I hope I have covered all the points raised and I urge the Committee to support the regulations.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Airport Slot Allocation (Alleviation of Usage Requirements) (No. 2) Regulations 2021.