It would not apply to those routes. If you take Shannon as category 2, it would not apply to flights between Shannon and Paris, category 1, or vice versa, but from Shannon, category 2, to Bristol, category 3, would be in order.
The Commission base their justification for the Regulation on the theory that there is a need for more regional services which could be viable but which are prevented or restricted from operating owing to the present system of national regulatory barriers. The Joint Committee could find no clear evidence that there was a large area of unsatisfied demand in the air transport field which could be catered for by the Commission's proposal. Furthermore the Commission state that they invited experts to provide an evaluation of the effects of liberalising market access for inter-regional air services and that the opinions expressed in the meetings ranged widely.
In our discussions we differentiated between demand and a need for stimulating a demand. We have to be careful about this.
Aer Lingus with whom we had a lot of discussion on this point, pointed out that the European Civil Aviation Conference addressed this question in 1978 — and concluded:
The European network between 1965 and 1977 has by no means been static. On the contrary, a significant increase of new routes has been recorded . . . . . The overall size of the European international network seems to be about right and one can expect a certain development. There does not seem to be any general need for linking regional airports of two countries with each other.
On the other hand, the Commission state that on the basis of this study and of another study it "seems possible to conclude that there is at present a certain distortion in favour of trunk routes and that a potential demand for more direct inter-regional services exists".
The Joint Committee would have thought that airlines whose financial success depended significantly on growth, would be keen to develop such opportunities. They would also expect that new routes would be opened whenever market evaluation pointed to potential traffic demands.
Sections 7 and 8 of the Air Navigation and Transport Act, 1965 invested power in the Minister to authorise by order the operation of air services and to exercise absolute discretion.
Sections 9 and 10 empower the Minister to fix by order fares and rates charged on air services and to approve or refuse to approve any proposed changes.
The adoption of the present proposal may involve supplementary legislation to bring national legislation into line with Community law depending on the final form of the proposal. This means supplementary legislation will be required.
Under present conditions Government negotiators, at bilateral discussions, take account of the totality of the routes both "prime" and "thin" enjoyed by the two countries concerned. This is what I said earlier. We use everything in the bank to make a deal.
From the airline point of view, Aer Lingus are concerned at the suggestion that the fundamentals of the present IATA system might be undermined and are also concerned that the multilateral co-ordination of tariffs, which is organised under the aegis of IATA, would be weakened through the withdrawal of some of the flexibility associated with that system. They consider that multilateral tariff co-ordination, through the IATA Conference system, subject to Government approval, remains the most efficient, stable, equitable, economic and market-responsive system which is practicable. They go on to show the various allowances and schemes for dealing on a bilateral basis under IATA agreements.
The Joint Committee in their 72nd Report stated:
In the Committee's view the company (i.e. Aer Lingus) can justly claim that it does not fear competition. However it has expressed a fear that the Commission liberalisation proposals could lead to the predatory entry by a carrier on its prime routes who takes only what suits him and for as long as it suits him. The Commission itself recognises the need to avoid predatory market entry but the Committee doubts if the control it envisages is adequate. In the Committee's view safeguards are essential to ensure that the public service aspects of airline operations in terms of routes, frequencies and spread of fares are maintained.
The fresh evidence offered to the Joint Committee would lead to a reinforcement of those views. For example, Aer Lingus point out, inter alia, that on the Liverpool route they have outlasted no fewer than three UK carriers. However, they are concerned that there may not be a fair and equitable balance of opportunity between all States. If there is to be an opening of routes between Ireland and other Member States, Aer Lingus would wish to have access to fifth freedom traffic between those other more populated States and accordingly they welcome the fifth freedom aspect of the draft Regulation.
I draw your attention to this important aspect. If the Regulation included the right for Aer Lingus at all times to be able to go from Lourdes to Rome, which was stopped recently, that must be taken into account in arriving at a view of the value of these regulations to Ireland and the effects they would have on Ireland and, in particular, Aer Lingus. The fifth freedom is an important negotiating point.
The Joint Committee could find no evidence that the Irish authorities were anything but liberal in granting operating rights to foreign airlines. The Committee also understand that Aer Lingus generally do not object to other airlines operating on a route which they do not serve, but dis-economies associated with the fragmentation of traffic and diversion of traffic from existing routes need to be taken into account before allowing a proliferation of minor routes operated by carriers who have no commitment to public service. Anybody who has operated in Shannon will see that the advantage of the communication potential that goes with an airport is important. We must take this into account.
Regional development is very important. The Commission emphasise that the availability and easy accessibility of air services are in many cases major considerations in business decisions whether to choose a site in an outlying region for setting up a new industrial plant.
Thus the expansion of inter-regional air services becomes an integral part of a policy designed to encourage industrial investment in the regions. This aspect could be important for Ireland. In Ireland, the new airports scheduled or built at Donegal, Kerry, Mayo, Sligo and Waterford could have services to airports in other Member States which under the terms of the proposal would be largely outside the control of the Minister for Transport. In effect, Castlebar could link up with Bristol, Liverpool and so on.
The Minister for Transport stated in the Dáil on 4 February last that "the Government see local airports as forming an important part of the infrastructure required for the fuller development of relatively remote areas . . . . I am arranging to have such a review undertaken, so as to provide the basis for a co-ordinated approach to the development of local airports throughout the country". Arising from that the Joint Committee recommend that the review should include consideration of the implications of the proposal for the development of such services. If the proposal is adopted, the Joint Committee recommend that the Commission should provide financial incentives for the development of such inter-regional services, in the context of the Community regional policy.
If they are keen on providing an advantage for regional development through this regulatory mechanism they might put some money where their mouths are and help the airports concerned. Paragraph 23 goes into some legal aspects of the treaty provisions and refers to the use of this qualified majority as a way to get things through the Council.
The point Aer Lingus made to us is that just because you have a light aircraft which is turboprop driven, it does not necessarily mean that the per seat cost is any less than in a craft like the 737 jet. The economies of scale and size of aircraft must be taken into account if a direct comparison is to be made. We were reminded that many businessmen complained that it seems to be costing them more and more to travel their bread-and-butter routes, like Dublin-London, Dublin-Paris, Dublin-Brussels and so on. Therefore we tried to make a sound judgment before making our recommendations.
The views of the Sub-Committee are polarised in paragraph 28 which we considered in some detail: there is a possibility that the fifth freedom aspect may eventually be excluded from the proposal. We are suspicious that the Commission may be trying to add a little cream to the proposal so as to seduce airlines like Aer Lingus to go along with them because there is a possibility of getting back routes like Lourdes-Rome and so on. We feel it is a negotiating point and we therefore highlight it.
The Commission look to businessmen and tourists as being the main users of the proposed inter-regional services. They imply that lower fares may be achievable through energy saving factors resulting from (a) more direct routes, (b) more use of turboprop aircraft and (c) diversions from road and rail traffic. However, Aer Lingus question the basis for some of the Commission's most important assumptions, e.g. type of aircraft to be used, fuel efficiency. The Joint Committee understand that an ECAC Study Report concluded that the European airlines have reasonable fares on Community routes.
Some of the flexibility associated with the present system, e.g., stopover, "add-on" allowance and "mileage deviation" referred to at paragraph 18, could well be jeopardised under the terms of the regulation. For example, it is provided in the regulation that the fares shall be charged solely on the basis of the route flown, with the right of stopover at any intermediate point being charged for separately. However, in the final analysis the Joint Committee are not in a position to comment adequately on the likely fares and how they would compare with existing fares, as the Commission do not provide sufficient conclusive data.
The Joint Committee wish to stress that though they generally welcome the efforts to remove national barriers in the area of inter-regional air transport, they are concerned that the proposal could unbalance the fair and equal opportunities enshrined in many bilateral agreements. The Joint Committee acknowledge their indebtedness to Aer Lingus for the considerable help they provided in order to enable the committee to consider fully the Commission's proposal.
A point to be considered is that the UK and the Netherlands were mostly anxious to push this, as far as we can gather. The Netherlands have the Commission Presidency at the moment and the UK are about to take it over. What is likely to happen is that Amsterdam is flooded and London is becoming even more congested, with all the consequent disadvantages. Therefore, our recommendation that Category 1 be removed is soundly based.
