REPORT OF THE SELECT COMMITTEE ON AIR ROUTE LICENSING REPORT OF THE SELECT COMMITTEE ON AIR ROUTE LICENSING To the Honourable James Anthony Brown SHK, Speaker of the House of Keys, and the Honourable Members of the Keys. PART 1. INTRODUCTION 1. BACKGROUND At the sitting of the House of Keys on 12th March 2002, it was resolved that - That a Select Committee of three Members be established to investigate the feasibility and merit of the Isle of Man Government operating a route licensing system for passenger carrying aircraft using Ronaldsway Airport and to report not later than 25th June 2002. After a ballot Mr Earnshaw, Mr Shimmin and Mr Singer were elected. At the first meeting Mr Singer was elected Chairman. The Committee has held eight meetings. PART 2 STRATEGY 2.1 The Committee has interpreted the Resolution of the House of Keys to mean that it should enquire into the feasibility of establishing a Manx Air Transport Licensing Authority(ATLA) (broadly similar to those operating in Guernsey and Jersey) to grant licences (or permits) to airlines who wish to fly passenger (scheduled and charter) services to or from the Isle of Man. 2.2 The Committee resolved to investigate the feasibility of establishing a route licensing system in the following ways - (a) Construct a list of possible merits and demerits for establishing a Manx ATLA. (b) Prepare a thorough background paper on the current air transport licensing system and scheduled and charter air services within the United Kingdom, Isle of Man and Channel Islands. (c) Seek the views of Members of Tynwald and Government Departments on the merits of creating a Manx ATLA. (d) Seek the views of the air transport industry, including airlines serving Ronaldsway Airport, the Ronaldsway Airport Director, travel agents and travel companies offering package holidays to the Island. (e) Seek views from members of the public by placing advertisements in the local press. (f) Discussion with the Guernsey Transport Board and Jersey Transport Authority which are the Channel Islands bodies that licence airlines to fly into Guernsey and Jersey. 2 PART 3 DELIBERATION 3.1 MERITS AND DEMERITS OF ESTABLISHING A MANX AIR TRANSPORT LICENSING AUTHORITY 3.1.1 The Committee realises that exactly what the Authority would be able to do will depend on the exact powers it was granted under statute law. However, there are a number of possible merits in establishing an ATLA. These include: (a) An Authority might protect a carrier that has invested heavily in developing a route, from a new carrier seeking to come onto that route and cream off the traffic especially during the busier periods. (b) An Authority might threaten a carrier currently offering a poor level of service, or charging high fares, that its licence may not be renewed if the situation did not improve. (c) An Authority might award a licence to a carrier that is proposing to offer more modem operating equipment rather than to another which is proposing a lesser standard of service. (d) An Authority might refuse a licence to a carrier if it was considered that the route in question does not justify more than one operator and one already serves the destination. (e) An Authority might award a licence to a second carrier on a particular route if the existing carrier is not providing an all the year round service or is only offering a poor frequency and the second carrier applies to operate the same route with a better level of service. (f) An Authority might indirectly be able to influence fares. By granting a permit to a second airline on a route, the competition generated may reduce fares. 3.1.2 There are a number of possible demerits in establishing an ATLA. These include: (a) An Authority might not have the power to force an airline to maintain an existing route. (b) An Authority might not have the power to compel a carrier to open a new route. (c) An Authority might have little control over the frequency of service or type of aircraft operated by a carrier once a licence had been awarded. 3 (d) An Authority is unlikely to have a great deal of control over the level of fares charged by a carrier. (e) An Authority might essentially be seen as negative in an environment where competition is regarded as the desirable way ahead. (f) An Authority would require legislation to establish and would have to operate within the framework set by the Civil Aviation Authority(CAA) in the United Kingdom. However with the development of the "Open Skies" policy the CAA framework is minimal. 3.1.3 The Committee will return to these arguments in the course of the Report. 3.2 BRIEFING PAPER 3.2.1 This paper demonstrated the trend towards de-regulation of air transport by introducing an "Open Skies" policy. "Open Skies" already permits airlines to fly routes within the European Union without the need for a specific route licence. Until recently routes from the United Kingdom to the Isle of Man and Channel Islands still required a specific route licence to be issued by the CAA. However the latest CAA proposals will mean that the need to obtain a specific route licence, from the CAA, to operate services between the United Kingdom and Isle of Man or Channel Islands will be removed. This puts these routes on the same footing as routes flown within the European Union (EU) and requires simply that the airline has an Air Operators Certificate and an Operators Licence. The former is chiefly a safety related document and the latter is granted subject to the airline having sufficient financial resources to operate routes within the EU without the need for a specific route licence being issued. 3.2.2 As a consequence the Committee felt that the introduction, at this time, of a Manx ATLA could be viewed as going against the general trend towards an "Open Skies" policy in air transport. The Committee therefore felt that there would need to be compelling reasons to create such a body. 4 3.2.3 The Committee notes that since the Briefing Paper was produced in March 2002 there has been some developments in the number of carriers serving the Isle of Man, principally through a new airline EuroManx commencing operations between the Isle of Man and Dublin and Edinburgh in August 2002 and from October 2002 also serving East Midlands. The service to Dublin is in direct competition with that offered by British Airways CitiExpress. At the beginning of October 2002 Flykeen introduced a scheduled service to Liverpool in competition with BA CitiExpress. In addition British North West Airlines did briefly seek to provide a service between the Island and Belfast (Aldergrove) and Blackpool. However that operator ceased flying after about eight weeks of operation. 3.2.4 A copy of the Briefing Paper is attached to the Report as Appendix 1. 3.3 VIEWS OF MEMBERS OF TYNWALD AND GOVERNMENT DEPARTMENTS 3.3.1 All Members of Tynwald were circulated with a letter inviting them to submit comments on the concept of establishing an ATLA. 3.3.2 Only four submissions were received. These responses divided, with two being in favour and two opposed. 3.3.3 A copy of the letter inviting Members to submit views and the replies received are attached to the Report as Appendix 2. 3.3.4 All Government Departments were circulated with a letter inviting them to submit comments on the concept of establishing an ATLA. 3.3.5 Only one Department replied, the Department of Health and Social Security. The Department did not object to the concept of an ATLA but was concerned that any such Authority should not interfere with the Department's ability to enter into contracts for the provision of emergency air ambulance flights. 3.3.6 A copy of the letter inviting Departments to submit views and the reply received are attached to the Report as Appendix 3. 5 3.4. VIEWS OF THE AIR TRANSPORT INDUSTRY: Including airlines serving Ronaldsway Airport, the Ronaldsway Airport Director, Travel Agents and travel companies offering package holidays to the Island. 3.4.1 In April 2002 the Committee wrote to all the airlines then operating scheduled passenger or freight services to the Isle of Man as of May 2002. These were Manx Airlines (British Airways CitiExpress), British European (now Flybe), Emerald Airways, FlyKeen Airways and British North West Airlines (who have subsequently ceased operations to the Island). 3.4.2 A response was received from Manx Airlines. The response was neutral to establishing a Manx ATLA, indicating to the Committee that the airline does not regard the issue as significant to it in maintaining or developing air services to and from the Island. The fact that several of the airlines did not reply to the request for views underlined to the Committee that it is an issue over which the operators are largely indifferent. 3.4.3 A copy of the letter inviting airlines to submit views and the reply received are attached to the Report as Appendix 4. 3.4.4 The Committee sought the views of the Airport Director. His reply clearly opposed the concept of establishing a Manx ATLA. He believes that such a move would run counter to the growing trend towards "Open Skies" and that a Manx ATLA would not be able to exercise any effective control over airlines since it could not compel them to maintain a particular route or develop new ones. A Licensing Authority could at best control access to Ronaldsway Airport but given that the Airport currently has plenty of spare capacity this is not a necessary control at the present time.