Proposal for a Regulation of the European Parliament and of the Council on common rules for the allocation of slots at European Union airports

Transcription

1 Proposal for a Regulation of the European Parliament and of the Council on common rules for the allocation of slots at European Union airports 23 January 2012

2 Contents Executive Summary Introduction Consistency with EU Policy Objectives Evidence of Impacts on Regional Services The EC s Impact Assessment & Recommendations Economic Impact Arguments Against Specific Recommendations 2

3 Executive Summary 3

4 Executive Summary The common rules for the allocation of slots at European airports are being changed The intention of the proposed amendments and draft Regulation has been in the context of making best use of scarce EU community resources and assets However due to incomplete and faulty analysis in the EC s impact assessment, the unforeseen outcome would be a detrimental impact on the less well off regions of the EU with most of the generated economic and social benefits leaking out of the EU At the same time, access to European hub airports and the wider aviation system from peripheral regions of the Community by regional carriers and Business Aviation operators will be placed at risk We believe that a robust analysis would have demonstrated these serious economic and social consequences to the EU peripheral regions We believe that the EC Study on proposed changes to Airport Slot Allocation rules is seriously flawed. Much of the economic analysis is at best superficial 4

5 Introduction 5

6 DG MOVE is planning to change the airport slot allocation system GDP per capita EU? Non EU? Who will gain? Who will lose? 6

7 Why the regions of Europe should be concerned The member companies of ERA and EBAA have studied the EC s impact assessment on airport slot allocation If adopted these proposed amendments would lead to a severe decline in air services between the regions and the major hub airports of the EU. This report describes why. There are major implications for local and regional economic development and prosperity in the poorer parts of the EU We have severe reservations about the quality of the economic impact study upon which these amendments are based 7

8 Changes are designed to increase throughput at a handful of congested airports Located in the more prosperous parts of the Community The EU should not adopt policies that may benefit prosperous areas to the certain disadvantage of peripheral areas The airports shown are where demand exceeds capacity for most of the day or is high in peak hours LIS FAO MAD CDG ORY LHR LGW LCY DUS ZRH LIN FCO CIA 8

9 but a large number of other airports and their regions will also be affected 9

10 Air Iceland RKV The European Regions Airlines Association (ERA) has 60 members based throughout the EU Red diamond = ERA member base at a coordinated airport Green diamond = ERA member base at a noncoordinated airport Binta Canerias LPA Air Contractors DUB CityJet DUB Portugalia LIS Aer Arann DUB Isles of Scilly Skybus ISC SATA PDL Aurigny GCI Atlantic Air FAE Aigle Azur, Airlin Air ORY Brit Air LYS Air Nostrum VLC DOT LT OSL Scot Airways/Suckling DND Eastern HUY Titan Airways STN Danish Air VDP Darwin LGO Wideroe BGO City Airline, West Air GOT Cimber CPH Amapola, Skyways ARN KLM OLT Express BRE Cityhopper Avanti SGE AMS Luxair LUX Farnair BSL Skywork BRN Malmo Air MMX Golden Air BMA Contact Air Augsburg STR MUC Innsbruck INN Mistral Air CIA OLT Express, EuroLOT, Jet Air WAW Trade Air ZAG Blue 1, Finncomm, Golden Air HEL Estonian TLL Air Baltic RIX Belavi MSQ Air Urga KGO Montenegro Airlines TGD Belle Air TIA Carpatair TSR Aegean, Epsilon, Olympic ATH Sky Express VNO Nordavia SVO Astra SKG 10

11 Business flights can link ALL peripheral airports with major hub airports Business flights link all of Europe s airports, but the strongest flows are to and from the major cities which have the most congested airports. Most of these flights are operated by member companies of European Business Aviation Association (EBAA) 11

12 These air services perform vital functions Not only do they provide vital connectivity to the peripheral regions to the hubs and the wider world: they invest heavily in purchasing European aircraft they employ significant numbers of staff, many of them in peripheral regions they invest heavily in the key hub airports they serve, in terminals and in overhaul facilities; yet have no guarantee that they will be able to continue flying to those same airports 12

13 The purpose of this presentation We believe that those representing the peripheral regions of the Community should be aware that: The Commission is proposing to amend the regulations regarding slot access at major European hub airports This policy will reduce the number of flights between the EC s remote regions and the major hub airports of Europe These services link more remote regions with the global economy These proposed changes must be amended to ensure vital regional air service connectivity is maintained and EC regional economic and air service policies remain consistent 13

14 Consistency with EU Policy Objectives 14

15 EU aviation policy needs to agree with regional policy The purpose of EU regional policy is to reduce the significant economic, social and territorial disparities that still exist between Europe s regions. Maintaining air service connectivity is critical for the regions Road and rail transport can only contribute over shorter distances and where geographic features permit But the regions and their citizens need fast, frequent connections to Europe s major hub airports to provide access to the global network of air services All EU policies including aviation should seek to optimise benefits for EU citizens, rather than non EU companies and citizens beyond its borders 15

16 Is the EU White Paper on Transport consistent with regional policy? The White Paper was published on 28 March 2011 Roadmap to a Single European Transport Area Towards a competitive and resource efficient transport system It looks at all transport modes air, rail, road and sea It seeks to improve the EU s economy while minimising environmental impact 16

17 It has aspirations to improve connectivity for the more remote regions Transport is fundamental to our economy and society. Mobility is vital for the internal market and for the quality of life of citizens as they enjoy their freedom to travel The future prosperity of our continent will depend on the ability of all of its regions to remain fully and competitively integrated in the world economy A lot needs to be done to complete the internal market for transport, where considerable bottlenecks and other barriers remain. We need to readdress these issues how to better respond to the desire of our citizens to travel, and the needs of our economy to transport goods while anticipating resource and environmental constraints. The transport systems of the eastern and western parts of Europe must be united to fully reflect the transport needs of almost the whole continent and our 500 million citizens Looking 40 years ahead... it is clear that transport cannot develop along the same path. If we stick to the business as usual approach... the accessibility gap between central and peripheral areas will widen 17

18 ... and yet more aspirations In line with the flagship initiative Resource Efficient Europe set up in the Europe 2020 Strategy and the new Energy Efficiency Plan 2011, the paramount goal of European transport policy is to help establish a system that underpins European economic progress, enhances competitiveness and offers high quality mobility services while using resources more efficiently Curbing mobility is not an option attention is needed however to avoid imposing excessive burdens on EU operations which could compromise the EU s role as global aviation hub. Airport capacity needs to be optimised and, where necessary, increased to face growing demand for travel to and from third countries and areas of Europe otherwise poorly connected... 18

19 ... but these aspirations are not reflected in the White Paper s approach to aviation The White Paper s approach to airport capacity is straightforward: In its List of initiatives (Annex 1), under the section headed Capacity and Quality of Airports it seeks only to make more efficient use of capacity transfer shorter feeder routes from congested airports on to rail services There is no intention to encourage further capacity at the hubs through airport expansion either new airports, additional runways, or use of advanced technology (e.g. SESAR, EGNOS, ATFM procedures)... or even to increase the movement rates at all airports to match the best in class 19

20 ... unlike its approach to other (carbon emitting) transport modes The Transport White Paper s conclusions for air transport run counter to its proposals for other modes: [European] seaports have a major role their development is vital to handle increased volumes of freight By 2050, complete a European high speed rail network Triple the length of the existing high speed rail network by 2030 and maintain a dense railway network in all Member States. By 2050 the majority of medium distance passenger transport should go by rail If demand warrants it, the White Paper is content for the Commission to invest in additional capacity rail or ports; but not airports And yet the economies of the peripheral regions are more reliant on aviation than they are on rail or sea transport 20

21 The White Paper is inconsistent with EU policy objectives The White Paper proposes just two solutions to the problems of aviation: Revise the Slot Regulation to favour more efficient use of airport capacity ; and develop an approach to deal with future capacity problems It recognises many problems with the current airport infrastructure, but in trying to match the accepted environmental problems caused by aircraft in and around airports and the additional CO 2 burden, it is putting at risk the achievement of the equally important economic objectives for its 500 million citizens The Transport White Paper s solutions are at odds with other major instruments of EU policy: The Lisbon Treaty Europe 2020 Europe s growth strategy and the objective of DG Regional Policy: to reduce the significant economic, social and territorial disparities that still exist between Europe s regions 21

22 ...but it formed the basis of the EC s impact assessment In line with the conclusions of the White Paper, the European Commission appointed Steer Davies Gleave (SDG) to undertake impact assessments of various options for revision to Regulation (EEC) 95/93 (as amended by Regulation (EC) 793/2004) and their report was published in March 2011 The sole aim of the study was to Revise the Slot Regulation to favour more efficient use of airport capacity without ever defining how efficiency was to be measured No other, broader objectives for airports or passengers were considered, such as the benefits to the EU economy or its citizens Most of the recommendations of this impact assessment have now been adopted in the proposed amendments to current legislation, published in December

23 ... and yet, as the impact assessment states: The study for DG MOVE freely admits: The issues that are not addressed are the issues of access for regional service and business aviation. These are not addressed because, at capacity constrained airports, there is no way of achieving this access without displacing other flights that are a more economically efficient use of scarce capacity. The only way to provide this access whilst not displacing other flights would be to increase capacity. No attempt has been made to measure the impact that these recommendations have upon the diverse areas of the European Community which lie distant from congested airports in wealthier parts of the EU and yet the substantial negative impact on these peripheral areas is in contradiction of EU regional development policy. 23

24 Evidence of Impacts on Regional Services 24

25 Air links between the peripheral regions & Europe s hub airports are already suffering Less More 25

26 ... and hub airports are already losing smaller aircraft types used for regional services A detailed analysis was made of scheduled services to twelve hub airports, comparing departures during a September week in 2002 with departures the same week in 2011 (data supplied by OAG) The 12 airports included: One of the six Category 1 airports congested all day (London LHR) Four of the seven Category 2 airports, heavily congested in peak hours (Madrid, Paris CDG, Rome FCO and Zurich) Five of the 22 Category 3 airports fairly congested in peak hours (Amsterdam, Brussels, Frankfurt, Geneva and Munich) Two Category 4 coordinated airports out of 18 (Copenhagen & Stockholm ARN) which are not classed as being congested 26

27 Average aircraft sizes rose, as long haul wide bodied jets continued to replace regional flights using smaller aircraft Across the 12 airports, the average aircraft size rose by 7.2% from 143 to 157 seats The average aircraft size at London LHR, Frankfurt and Paris CDG is now over 170 seats Airport Cat 2002 flights 2002 seats 2002 average seats 2011 flights 2011 seats 2011 average seats % var. flights % var. seats % var. average seats LHR 1 4, , , , % 6.7% 3.8% MAD 2 3, , , , % 27.8% 7.6% CDG 2 4, , , , % 15.9% 12.2% FCO 2 2, , , , % 26.9% 0.7% ZRH 2 2, , , , % 20.8% 20.7% AMS 3 3, , , , % 21.2% 10.7% BRU 3 2, , , , % 8.9% 32.5% FRA 3 4, , , , % 7.4% 2.0% GVA 3 1, , , , % 47.3% 26.7% MUC 3 3, , , , % 48.6% 19.0% CPH 4 2, , , , % 11.2% 14.5% ARN 4 2, , , , % 4.7% 16.2% Total 36,717 5,248, ,353 6,192, % 18.0% 10.1% Source: OAG 27

28 Small aircraft reduced by more than a third while large aircraft increased by three quarters 14,000 12, % 11,825 10,000 9,119 8,000 6, % 4,000 3, % 2,000 1, ,517 0 NO. OF FLIGHTS WITH LESS THAN 100 SEATS NO OF FLIGHTS WITH SEATS NO. OF FLIGHTS WITH MORE THAN 300 SEATS

29 Destinations served are changing as short haul services reduce Overall at the 12 airports analysed: Total flights grew by 7.2% over the nine year period Flights from these 12 to other congested airports in Europe grew by 2.2% Flights to other coordinated (but uncongested) airports (18 classified as uncongested and a further 14, for which no categorisation was possible) declined by 4.5% Flights to other airports in Western Europe (the original EU15 plus the three EAA countries) declined by 11.1% Flights to the 12 new accession countries in Eastern Europe grew by 50.3%, but there were few flights in 2002 before these Member States joined the EU Flights to non EU countries on EU airlines grew by 51.6% Flights to non EU countries by non EU airlines grew by 59.4% Overall growth in frequencies by EU airlines on all routes grew by only 3.0% 29

30 Shown graphically it is clear that non EU airlines have been the winners, European regions the losers Total 12 Airports Departing Flights by Category 2002 vs TOTAL ALL FLIGHTS TOTAL EU AIRLINES 7.2% 3.0% (Non EU Dest) NON EU AIRLINES (Non EU Dest) EU AIRLINES Eastern Europe Regional Airports 50.3% 59.4% 51.6% Western Europe Regional Airports 11.1% 4 N Other Coordinated 4.5% 1 3 Congested Coordinated 2.2% 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 Total Flights Source: OAG 30

31 These figures have also been analysed for each of the 12 selected hub airports % chg 2002 vs Flights to W. Europe Regional Airports Flights by Non EU Airlines Total All Flights Amsterdam 0.1% 51.4% 9.5% Stockholm ARN 30.8% 137.8% 9.9% Brussels 62.5% 110.6% 17.8% Paris CDG 12.4% 50.4% 3.4% Copenhagen 26.0% 200.0% 2.9% Rome FCO 32.2% 102.5% 26.1% Frankfurt 18.5% 32.0% 9.6% Geneva 19.7% 192.9% 16.3% London LHR 9.9% 32.6% 2.8% Madrid 9.7% 103.9% 18.7% Munich 1.1% 151.5% 24.9% Zurich 23.0% 50.0% 0.1% TOTAL 11.1% +59.4% +7.2% 31

32 Air services have declined between peripheral regions and hub airports We also analysed flights from non coordinated airports in six major Western European Member States (Germany, the UK, Sweden, Italy France & Spain) plus the other nine original Member States and the 3 EAA nations Flights from these non coordinated airports to all 18 Category 1, 2 and 3 coordinated airports (plus Copenhagen and Stockholm ARN) fell by 10% during the period 2002 to Regions in Sweden and the UK suffered the most Meanwhile, the average aircraft size grew 20%, suggesting that smaller destinations lost more links than larger cities With these reductions in air links, peripheral regions will suffer increasing economic disbenefits while the weaker airports may not survive it places more pressure on the remaining regional transport network 32

33 Declining air links between the regions and hub airports Country 2002 flights 2002 seats 2002 average seats 2011 flights 2011 seats 2011 average seats % var. flights % var. seats % var. average seats Germany 2, , , , % 15.9% 27.4% UK 1, , , , % 12.2% 9.2% Sweden 1, , , , % 13.7% 11.9% Italy 1, , , , ,5% 18.7% 26.9% France , , % 31.1% 25.0% Spain , , % 12.6% 2.5% Subtotal 8, , , , % 5.7% 17.9% Others 2, , , , % 21.5% 31.7% Total EU , , ,196 1,074, % 8.8% 20.7% Links between non coordinated airports in selected countries & 20 major coordinated airports in Europe (source: OAG) 33

34 EC proposals will worsen this situation The EC impact assessment looked at all possible revisions to the current slot regulation to favour passenger throughput at Europe s congested hub airports Everything was analysed in the most simple terms how could the last amount of slot availability be filled; and how could each slot be used to the maximum in terms of passenger kilometres and therefore economic benefit These proposed amendments have been accepted by DG MOVE and incorporated in a draft Regulation Peripheral regions are already losing out to non EU destinations and airlines under the free market; we believe that adoption of these recommendations will further exacerbate these trends, placing greater pressure on regional carriers and operators of regional aircraft 34

35 EC proposals will worsen this situation The EC is proposing to tighten up slot allocation procedures at congested airports to extract the last amount of utilisation The impact assessment calculates that the amendments could result in an increase of 0.2% in flights at all coordinated airports and around 2% in passengers (this is equivalent to less than 1 year s average growth) Operators using large aircraft deployed on long haul routes will benefit from these changes; those using small aircraft and business jets operating on short haul routes will lose out. Business Aviation currently serves 100,000 city pairs, versus some 30,000 by commercial airlines We believe that the proposed amendments are a suboptimal approach to addressing capacity problems at congested airports and result in unnecessarily penalising regional airports 35

36 There is another solution Peripheral regions would benefit more from policies that: guarantee a proportion of slots for regional services (e.g. via further adoption of PSO rules) provide additional runways at major airports increase the runway movement rates at all coordinated airports to match the best in class achieved in Europe If all of Europe s congested airports were expected to achieve the same hourly throughput of movements as Europe s two best in class airports, a much greater increase in slot availability could be achieved Some of these new slots could be made available for extra regional services or as practised at Geneva an allocation made for vital Business Aviation flights As the next slide shows, slots could be increased at most airports by around 20%, as opposed to 0.2% predicted by the impact assessment for its own proposals 36

37 Clearly there are better ways of increasing capacity at congested airports e.g. best in class 4 runway airport with highest movements in 2010 = Los Angeles (source: NATS) Innovative solutions to resolve the crucial runway capacity crisis are required Even without additional runways, most major EC airports could achieve much higher hourly throughputs if they were to match the best in class, and offer more slots for regional services. SESAR will also make improvements 37

38 The EC s Impact Assessment & Recommendations 38

39 What are the new EC proposals? Some of them are non contentious and will probably find general favour amongst airlines, airports and airport coordinators. They deal with a range of small, practical problems and tidy up minor discrepancies in the way airports currently handle slot allocations. However, there is a major concern that many additional processes are now mandatory often involving Member States, the Commission, and the new Network Manager; which will all increase cost for no obvious benefit to the air carriers Additionally, there are four crucial proposed amendments which have attracted the attention of regional airlines and the Business Aviation community, which we believe will unduly penalise the peripheral regions and contradict Europe s regional policies 39

40 New processes bring additional complexity & cost There are a large number of references throughout the draft Regulation which require new reporting and approval processes to the EC, the network manager, coordinators and other involved parties. For example: Article 3.5 The Commission CAN ask the network manager to deliver an opinion on how the capacity [at any coordinated airport] is set in relation to the network operating needs. The Commission CAN make recommendations. The Member State SHALL give reasons for any decision that does not follow these recommendations. The decision SHALL be communicated to the Commission Article 6 At the end of EACH scheduling period The report SHALL also contain the results of a survey conducted among interested parties on the quality of services provided by the coordinator Article 7.1 For all other airports with no particular designation status, the air carriers operating or intending to operate from that airport SHALL provide, when requested by a coordinator, any information in their possession about the planned services of air carriers. On request from the network manager, the schedules facilitator and the coordinator SHALL send the network manager all the information referred to in this paragraph Article 8.1 At a coordinated airport membership of this committee SHALL be open to the network manager, the performance review body and the national supervisory authority Article 17 When an air carrier submits a flight plan it SHALL include a reference to the slot allocated The benefits versus the cost of these new process and powers are not adequately justified in the proposal. They will undoubtedly add complexity and cost, yet the benefits are not detailed 40

41 The Proposed Regulation has not brought forward the most contentious ideas in the impact analysis The airline industry as a whole objected strongly to two very contentious recommendations of the impact analysis: To introduce the concept of withdrawing slots from airlines on a random basis And the auctioning of slots to the highest bidder And these did not become enshrined in the proposed regulations However, the threat remains: during the future assessment of the application of this Regulation, a gradual introduction of other market mechanisms could be envisaged, such as withdrawing and auctioning historical slots (Para 4 of the preamble) Auctioning of slots would seriously impact upon operations to regional airports that could not compete with the deep pockets of long haul airlines Slot withdrawal after a specified time, followed by auction, would cause a rapid and profound decline in intra European regional services, which would be priced out 41

42 Nevertheless, several proposed changes to the EC Regulation on slot allocation cause much concern Some of the detailed proposals are non contentious, are acceptable to the industry and generate benefits But our analysis of the following EU proposed amendments confirms that they could have a seriously adverse impact upon the level of air service from the peripheral regions and on their economic performance: The proposal to allow airports to charge slot reservation fees (Article 11) will be proportionately more expensive for airlines with small aircraft than for those operating long haul wide bodied aircraft The proposal to increase the usage of historic slots from 80% to 85% (Article 10) is not needed and is expected to lead to disruption of many valuable services, both regional and long haul The proposal to extend the minimum series length from 5 consecutive weeks to 10 (winter period) and 15 (summer period) will make it more difficult for regional airlines and Business Aviation operators to maintain operations and will generally prove disruptive. The proposal NOT to grant Business Aviation and other non scheduled operations grandfather rights, for fear of misusing existing capacity, is both inequitable and highly damaging for airports, operators and handling agents which have invested millions of euros and created high value jobs in support of these long established operations 42

43 Specific objections to these proposals The main objection relates to the EC s brief as given to their consultants to ensure that the efficient use of airport capacity is the sole criterion in bringing forward proposals to favour more efficient use of airport capacity The impact assessment makes two simplistic assumptions on how to measure efficiency : Volume Value and does not even seek to measure the impact on Europe s peripheral regions, or to determine where the net benefits fall, whether in the EU or outside 43

44 Measurement of volume The impact assessment has used one single metric throughput of passengers at congested and coordinated airports It has assumed that maximisation is the only policy driver for the EU There is no recognition of the difference between: business passengers & leisure passengers travel within the EU & travel outside the EU extra EU inbound passengers (exports) & residents travelling out of the EU (imports) passengers travelling to peripheral areas & those travelling to hubs passengers originating/terminating at coordinated airports (1 journey) & those transferring between flights (2 journeys) In each of these pairings, the impact assessment has assumed an equal valuation 44

45 Measurement of value The impact assessment has made the assumption of standard economic values so that every: short haul passenger is valued at 23 long haul passenger is valued at 92 It is based solely on fare paid, and therefore the distance flown It results in the assumption that long haul passengers are four times more valuable to the EU economy than short haul passengers It only shows the value of passengers to airlines, and therefore of revenue to airports It cannot be a determinant of the wider value of passengers to the EU Recent analysis undertaken by Mott MacDonald for the Farnborough Airport public planning inquiry demonstrated the direct economic benefit per business jet passenger is in the region of 1,010 Statement of Evidence of Mr Martin Shenfield, TAG/S/6, APP/P1750/A/09/ , April

46 Maximising throughput Both measurements eventually result in: every flight becomes long haul no short haul flights from Europe s leading hub airports no intra EU flights from these airports No other economic measurements have been considered, such as The benefit to the EU in linking each country with its major hubs The fact that an intra EU flight generates 23 at the hub AND at the regional airport, i.e. value to EU using impact assessment method is 46 And particularly the impact on regional GDPs of losing their links to the global network 46

47 If this logic were to be applied to other modes All railway stations would be restricted to their current number of platforms Long distance trains with higher fares per passenger would be favoured for using existing infrastructure Short distance commuter trains with fewer carriages would be priced out Bus stations would be refused permission to expand to meet demand Local bus services would eventually be replaced by long distance coaches The same logic implies that: air cargo flights have no value whatsoever private and business flights carrying heads of state or high net worth individuals have no value 47

48 Some airports favour another measure of efficiency Amsterdam Schiphol Airport works hard to optimise the mix of short and long haul flights to assist its own (highly successful) hub strategy It recognises the importance of the co dependence between regional feeds and onward long haul connections Instead of seeking to maximise the value of every single slot, Amsterdam s management seeks instead to add runway capacity to meet demand 48

49 Economic Impact 49

50 All passengers are NOT equal Average fare levels and assumed revenue per passenger are not in themselves enough. They need to be balanced against: access by EU citizens to major European centres ability to make onward flights to rest of world the full economic value of aviation to local airports and communities, not just those accruing to hub airports in prosperous parts of Europe The logic proposed is that a EU resident flying on a low cost airline to a holiday resort is valued four times more highly than an investor flying from a major EU hub to a peripheral city in Europe. This must be challenged 50

51 The Impact Analysis is flawed The analysis is incomplete and partial, and fails to follow current EU agreed practice for impact evaluation The overall assessment is sub sectoral and fails to provide full EU sectoral and regional perspectives There is a complete avoidance of distribution of benefits (and disbenefits) in effect who are the winners and losers? As a result of failing to disaggregate benefits, there is an absence of interand intra regional benefits that consequently fail to address the displacement of benefits from peripheral areas to prosperous regions and totally omits the scale of benefit leakage to points outside the EU. The existing analysis contains flaws in terms of the application of growth factors and multipliers 51

52 Ask a loaded question... How am I to get in? asked Alice again, in a louder tone. Are you to get in at all? said the Footman, That s the first question, you know. Alice s Adventures in Wonderland, Lewis Carroll 52

53 Ask a loaded question... The impact assessment recognises that regional accessibility is a significant issue, but claims that the objective of ensuring economically efficient use of capacity is incompatible with the objective of ensuring regional accessibility and it is essentially a political judgement as to whether this is appropriate The above is based on a presupposition that EU policy should be based upon the efficient use of capacity at coordinated airports This is at best a suboptimal sectoral and EU wide approach which presupposes that the efficient use of capacity at coordinated airports as measured by passenger kilometres and air traffic movements will ipso facto result in increased economic and social benefits within the EU This is a flawed approach as it fails to address distribution and spatial considerations within the EU 53

54 Where is the critical EU Regional Policy context? The impact assessment accepts that regional air services would be detrimentally affected It fails to follow this through and assess the impacts on regional airports and regional development in peripheral areas Such impacts will reduce transport connectivity to the less well off peripheral regions whose prosperity would be prejudiced by not only the impacts upon the regional airports, but also the knock on consequences to regional economies Failure to address these downstream effects is inexplicable in terms of EU regional policy The recommended options could lead to the eventual closure of a number of peripheral airports as they lose their key thin routes connecting them to hub and spoke operations at major airports 54

55 Where is the critical EU Regional Policy context? There is no explanation of the reasons why the assessment has failed to address regional policy issues. Apparently it has neither engaged the DG of Regional Policy nor any regional development agencies in peripheral regions within a very extensive interview programme The Commission is clearly concerned that decision making has failed in the past to take account of the consequences of policy on the operation of the transport system as a whole The purpose of EU regional policy is to reduce the significant economic, social and territorial disparities that still exist between Europe s regions Clearly the recommended options would result in a severe deterioration in connectivity and run counter to EU policy The analysis fails to address benefits on a system wide basis by failing to differentiate localised benefits at the expense of system wide and EU wide benefits and non EU benefits 55

56 Who are the Winners and Losers? The EC impact assessment fails to differentiate what benefits will accrue to EU and non EU economic players It is our view that the majority of economic benefits will leak out of the EU The assessment estimates that up to 75,000 jobs will be generated. We calculate that there will be a net loss of jobs in the EU primarily suffered by the peripheral regions The overwhelming proportion of social benefits will accrue to non EU citizens Major losers of the proposed policies will be: Citizens in EU peripheral areas EU Regional Airports EU Regional Carriers EU Business Aviation Operators Overall, the winners will be non EU citizens this must be contrary to what EC policies are designed to achieve 56

57 The assessment is not comprehensive 1 It omits the calculation of Wider Economic Benefits (WEBs) that cover the impacts of transport policy upon: Agglomeration (benefits to firms of clustering) Imperfect Competition Some elements of the labour market impacts It is normal for impact assessments to include such calculations in their reports These issues are particularly relevant in the event that aviation growth is effectively displaced from a peripheral locality or sub region which is characterised by higher levels of spare resources to a locality or subregion with low levels of spare resources 57

58 The assessment is not comprehensive 2 The importance of WEBs to this exercise is that, whilst increased transport capacity regularly leads to increased WEBs, the loss of transport capacity will necessarily lead to decreased WEBs Many other studies have demonstrated that increased capacity at transport infrastructure can lead to an increase of between 10% and 40% in conventional economic benefits. Similarly, the loss of capacity such as the closure of a regional airport would lead to a significant loss of WEBs The catalytic impact of airports has not been addressed. Again this would be a potentially severe consequence at a small regional airport losing traffic as compared with a similar level of traffic gained at a large coordinated airport the benefits are significant for the former and marginal for the latter 58

59 The assessed economic benefits are incorrect The impact assessment s reason for using the DfT figures for economic benefits for air travellers is that it was not generated by or on behalf of the aviation industry, and therefore it is most likely to be neutral This is a disingenuous statement it suggests that no consultant that provides reports for the aviation industry can be relied upon to provide unbiased results. Are we to assume that no study for the aviation industry can be neutral? The assessment fails to split economic benefits between EU and non EU citizens. The EU policy maker is simply not interested in benefits to non EU citizens It also fails to differentiate between leisure and business passengers The consequences of these incorrect applications is concerning. Simply put, the values applied to the economic impact assessment are unreliable. We believe that the net economic benefits estimated as between 2.8bn to 5.0bn are considerable overestimates, as they fail to take account of disbenefits generated by the reduction of regional and business services We assess that if these disbenefits had been properly factored into the assessments, the net economic benefits within the EU would be negative 59

60 Social benefits are miscalculated 1 As with economic benefits, the assessment fails to differentiate between EU and non EU impacts and hence there is an absence of guidance regarding jobs created inside and outside the EU Whilst airport jobs will be created in the EU, the switch from regional air services and business jet operation to some long haul carriers will certainly result in the vast majority of airline jobs being captured by non EU citizens No account is taken of the loss of jobs with EU regional carriers and EU regional airports in peripheral areas No account is taken of the downward pressures on indirect, induced & catalytic jobs in peripheral areas as a result of the decline and even closure of a number of regional airports 60

61 Social benefits are miscalculated 2 The impact assessment claims that 72,000 to 75,000 jobs will be generated As stated above, we estimate that employment within the EU will actually decline as a result of the proposed policies We estimate that virtually all the net social benefits will leak out of the EU Overall, we assess that job losses in the peripheral areas would exceed any job gains in the areas in and around the coordinated airports, and that the net EU situation in terms of social benefits would be a loss of jobs in excess of some 10,000. It could be considerably more over time with some peripheral regions suffering severe disinvestments 61

62 No robust projections of economic and social benefits 1 We are surprised that in a report of such consequence there appears to be no evidence of an independent peer review The approach and methodology is fraught with omissions and partiality that clearly favour the generation of positive benefits where none actually exist or largely leak out of the EU Failure to disaggregate between EU and non EU impacts is alone a sufficient condition to discount the relevance of benefits within an EU context Failure to place the consequence of proposed policy within EU Regional Policy on connectivity; and the need to ensure that benefits are not displaced from peripheral regions to well off regions, is alone a sufficient condition to invalidate the conclusions of this research 62

63 No robust projections of economic and social benefits 2 The assessment appears to avoid addressing the core issue that increased passenger numbers and flights at coordinated airports in the EU does not ipso facto result in increased economic and social benefits within the EU Lars Roglien a leading transport consultant at SDG stated recently in their promotional magazine that: the distribution of economic benefits between significant groups such as employers, employees, investors and travellers, as well as spatially, is important to decision makers as well as supplementing the existing appraisal framework with tools that allow an investigation of local impacts Unfortunately, all local impacts have been omitted from the assessment in this instance; the consequences to EU policy are significant 63

64 Arguments Against Specific Recommendations 64

65 Arguments against the four major proposals ERA and EBAA will continue to seek to object to the four specific areas of the current slot allocation proposals that cause most concern, both for the airlines and for the regions they serve Any support given to these arguments from regional bodies will be very valuable, and as a result, the next section analyses the detailed problems that each recommendation is expected to cause Firstly, it is important to recognise the criteria against which the impact assessment was meant to measure each suggested recommendation (next slide) However, it is clear that only the most easy to measure criteria were actually analysed 65

66 EC Criteria for Evaluation of Options The EC s impact assessment criteria applied to agreed policy objectives: Category Objective Economic Environmental Social General Ensure the competitiveness of operators Enhance competition in order to better serve the interests of consumers Minimise CO 2 emissions and local airport pollution from air transport, both on a per passenger and per passenger kilometre basis Maintain a wide range of direct air services including to regional airports Ensure optimal allocation of capacity at each congested airport Maximise the use of capacity at each congested airport Ensure neutral and non discriminatory slot allocation Comply with the EU and Member States international obligations Ensure better implementation of the Regulation There was no assessment made on the remaining EC criteria of efficiency or coherence 66

67 Article 11 Slot Reservation Fees 1 The managing body of a coordinated airport may decide to use the airport charge system with the aim of dissuading air carriers from belatedly returning slots to the pool referred to in Article 9 and to hold them liable for having reserved airport infrastructure without using it. The following principles shall be respected: (c) this decision shall not discourage air carriers from developing services or entering the market and it shall be limited to covering the costs incurred by the airport for reserving the airport capacity corresponding to the slots which remained unused 67

68 Article 11 Slot Reservation Fees 2 The proposal is based on a very short lived experiment at Düsseldorf Airport The airport s objective is to have un needed slots returned to the pool by a set deadline It is objected to by most airlines additional cost, administration, inability to foresee cancellations It is potentially illegal bilateral agreements may lead to non EU airlines objecting Fees would be related to the number of slots NOT to aircraft size, number of passengers, or passenger kilometres smaller aircraft operators would be more strongly impacted 68

69 80/20 Rule Change Paragraph 32 of the preamble reads In order for airlines to be granted priority for the allocation of a given slot in the next corresponding scheduling season, they need to have used at least 85% of the allocated series of slots (instead of 80% at present). The current 80% rule already sees airlines often operating near empty flights in order to retain their right to fly next year At 85%, a single cancellation may result in the loss of an entire slot series Increasing individual day slots to 85% will increase empty flights, and bring instability for operators; it will not improve overall airport throughput Result: seat/kms will increase; pax and pax/kms may not increase 69

70 Article 10 Extending the minimum length of Slot Series A series of slots shall mean at least 15 slots having been requested for a summer scheduling period for the same time on the same day of the week for consecutive weeks and allocated on that basis or, if that is not possible, allocated at approximately the same time (Article 2 Para 13). Currently the minimum is five flights for both summer and winter. By nature, demand for many air services is seasonal Slot series have differing lengths to match demand Markets are often complementary a shorter series can allow supply to be better matched with demand A regional business route may have much lower demand in July/August when leisure demand peaks so airport capacity can be released for other operators using shorter series Increasing series length and utilisation requirements may mean carriers operating uneconomic flights simply to maintain grandfather rights it could force supply of seats to be inappropriately matched to market demand; and it could deny viable routes with short seasonal demand Many respondents argued that such a radical change should not be introduced without the support of further detailed study we fully agree 70

71 Slots for Business Aviation 1 If any change to [slot regulations] made it possible for Business Aviation to gain historic rights at the most congested airports, this would not be an efficient use of constrained capacity and therefore we recommend that no change is made Impact Assessment, Para no significant change has been made in the final document DG MOVE stated in January 2008 in An Agenda for Sustainable Future in General and Business Aviation that: The Commission will closely monitor future developments in order to make sure that the specific needs of all categories of airspace users are taken into account in the policy processes. It is not clear how DG MOVE can put forward these recommendations when the needs of Business Aviation are so comprehensively ignored by these proposals, while every advantage is given to non EU airlines seeking to acquire slots to link the hubs with non EU destinations 71

72 Slots for Business Aviation 2 ICAO said in its 2005 report on International General and Business Aviation Access to Airports : States, in recognition of the distinct nature of international general and business aviation, and their contribution to the national economy, should endeavour to facilitate business aviation s access to their major international airports and, in case of heavy congestion, to nearby airports. There is no evidence that this recommendation has been taken on board in Europe In 2008 PricewaterhouseCoopers estimated that every Business Aviation passenger was worth some 26,000 to the European economy, taking into full account their wider economic impact By comparison, the EC s impact assessment valued them at 23 72

73 Slots for Business Aviation the example at Geneva At Geneva, the allocation of slots is managed by a ground handling agent, a single point of contact at the airport for all aspects of operations The Coordinator updates the agent with available capacity every 2 to 3 hours Operators apply for prior permission to land or depart the allocation is on a first come first served basis Four movements per hour are reserved solely for Business Aviation It is an obvious success story: It solves the problem of historic rights Airports can continue to legally host Business Aviation operators Protects historic investments in capital, time & effort It should be used as a template Europe wide 73

74 Slots for Business Aviation examples elsewhere At all coordinated airports in the USA, slots are reserved and protected for Business Aviation New York (JFK & LGA), Chicago ORD, Washington DCA Similar arrangement at Vienna VIE 74

75 Next Steps 75

76 Next Steps A campaign is needed to remove those parts of the proposed Regulation that strongly impact the peripheral regions of the community and its airports and airlines ERA and EBAA members are exposing these facts to the national and regional representatives across the Community to remove those aspects of the proposed Regulation that will adversely affect, not just the local airports and airlines, but the whole of the regional economies This is not the way forward for the welfare and development of the whole European Community, where poorer regions will become disadvantaged and disenfranchised The MEPs and others who represent the peripheral regions should work together to bring about changes and improvements to the proposed Regulation 76

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