European Standing
Committee A
Wednesday 18 December 2002
[Mr. Bill Olner in the Chair]
Denied Boarding Compensation
[Relevant documents: European Union Documents Nos. 5129/02 and 13312/02.]
10.30 am
The Minister for Transport (Mr. John Spellar): As the Committee knows, political agreement was reached on the proposal at the Transport Council on 5 December. However, on behalf of the Government, I was unable to give the United Kingdom's agreement to the proposal, and therefore registered a vote against it. I welcome the opportunity to explain why I believe that was necessary, and to explain the benefits of the legislation and set out how we believe it could have been improved.
The existing regulation on denied boarding compensation was one of the first pieces of European legislation to protect air passengers, and it has now been in place for nearly 12 years. The regulation serves a useful function in giving passengers minimum rights to compensation and assistance when denied boarding through overbooking.
It may not be common knowledge that overbooking is a widespread and legitimate practice among scheduled airlines. There is always a proportion of passengers booked on to a flight who do not arrive at the airport, whether through missing connecting flights, or because flexible ticketing allows them to catch a different flight with no penalty. Airlines use past experience and data to estimate that number, and sometimes overbook to avoid flying with empty seats. On most flights, their estimates are correct and no passengers are denied boarding. However, on some occasions, more passengers want to fly than there are seats available. As a result, unfortunately, some are denied boarding. Statistics for European airlines suggest that that happens to about one in every 1,000 passengers. We have to recognise that if airlines were not allowed to overbook, aircraft would be less full and fares would inevitably rise.
Recognising that the regulation needed updating and clarification, the Commission proposed an amendment in 1998. The main changes proposed were an increase to the levels of minimum compensation in line with inflation, and extending the scope of the regulation to include passengers buying seats only on non-scheduled flights. Following the European Parliament's opinion, the proposal was widened still further—for example, to include Community carriers flying from non-Community airports back to Community airports.
The UK supported that, but unfortunately the Transport Council was unable to adopt the proposal because of a disagreement over the regulation's application to Gibraltar airport. The Commission therefore abandoned its 1998 proposal and published a
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new and more ambitious proposal in December 2001. That proposal went considerably further than the 1998 proposal, in particular by aiming actively to deter the practice of overbooking by increasing compensation by a factor of five. The scope of the proposed regulation was extended to cover compensation and assistance in the event of cancellations and delay.
Regrettably, the proposal was brought forward without consultation and without a meaningful impact assessment. Although the UK supported the revision and strengthening of the regulation, we had considerable concerns about the proposal, which were set out in our explanatory memorandum of 26 February 2002. In extending the scope of the regulation into new areas, we felt that the Commission's proposal created complications that would make the legislation difficult to implement.
UK officials participated fully in the several meetings of the Transport Council working group held during the Danish presidency. The work of the group, which also reflected many of the European Parliament's suggested First Reading amendments, resulted in a proposal presented to the December Transport Council that was a significant improvement on the Commission's original proposal. Nevertheless, there remained some fundamental issues of concern to the UK Government as well as to other member states. As those had not been resolved we would have preferred to delay agreement on the proposal. However, the presidency and the Commission decided to seek political agreement at the Council.
As I explained to the Committee in my letter of 4 December, at the Transport Council our overriding objective for the proposal was to reach the right balance between the commercial interests of airlines and the protection of passengers. In seeking that, I was mindful of the need to balance the interests of different groups of passengers and, in particular, to ensure that the proposal did not discriminate against those benefiting from lower fares. I was concerned not to lift the United Kingdom's parliamentary scrutiny, unless absolutely necessary. In the event, I considered that a suitable balance had not been reached. I therefore did not agree to the proposal.
All the other delegations, with the exception of Portugal, were able to accept the proposal, as set out in my letter to the Committee on 10 December. The proposal was therefore agreed and it will be passed back to the European Parliament for its Second Reading consideration in the new year.
The Chairman: We now have until 11.30 to ask the Minister questions. I remind hon. Members that questions should be brief and should be asked one at a time. There will be ample opportunity for all Members to ask several questions. At a meeting of the Chairmen's Panel on 11 December, it was agreed that supplementary questions should be allowed at Committees such as this. I remind Members that supplementary questions should be addressed to the first question that was put, as happens in the Chamber.
Miss Anne McIntosh (Vale of York): Before I put my question, I want to declare my interests. My husband works for a major international airline and I
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have personal interests in British Airways, BAA and BAE Systems. I am a member of the European Scrutiny Committee and I was a member of the European Parliament for 10 years, during the period in which the legislation was drafted.
The Minister alluded to the fact that he envisaged circumstances in which he would be prepared to lift the scrutiny reserve. He is aware that that is a source of some concern to the European Scrutiny Committee, which, regrettably, is meeting at the moment—if it were not, many more hon. Members would be present. In what circumstances would the Minister envisage breaching the scrutiny reserve?
Mr. Spellar: I am grateful that I have been given the opportunity to clarify that point. The European Parliament's First Reading amendments were not received until November. As I indicated in my opening remarks, there was a significant amount of activity during November in Transport Council working groups. It was not until just before the Transport Council that the key issues that were emerging became clearer. It was therefore difficult to fix a point at which it was appropriate to submit an explanatory memorandum in order to get matters resolved. Had we got closer to the position that I outlined as the United Kingdom's preferred option, I might have had to consider lifting the scrutiny. I am pleased that in this instance—although we did not get a result—from the point of view of procedure, those circumstances did not arise.
Dr. Rudi Vis (Finchley and Golders Green): What effect will the proposal have on the competitive position of the airlines involved, compared with, say, airlines in the United States?
Mr. Spellar: It depends which airlines one is talking about. There is a particular issue in relation to no-frills airlines, whose tickets prices tend to be considerably lower than the proposed levels of compensation. The question could be considered in terms of the interests of passengers versus the interests of airlines. It should also be considered in terms of the interests of the great majority of passengers versus the interests of passengers who are denied boarding.
My hon. Friend knows that the Government suggested a level of compensation that would have been greater than the cost of individual tickets, but more proportionate to that cost and so less likely to be seen as adding to airlines' costs. Those added costs would be likely to be reflected in ticket prices for passengers, which in turn might reduce competition, although it would still exist. There must be balance.
In all honesty, there are several other issues relating to the competitive position of American airlines, not least the considerable subsidy elements put into them. My hon. Friend will know that that is of concern to several British carriers.
Matthew Green (Ludlow): Following on from that, I understand that there was an attempt in the European Parliament to pass an amendment to add a fourth tier specifically to deal with the no-frills sector. It proposed that, for flights costing less than €200, compensation should be calculated on the basis of the ticket price plus a 50 per cent. surcharge, which
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would be in line with what the Minister has just said. Would he have liked that amendment to be accepted?
Mr. Spellar: We would have preferred compensation more proportionate to ticket price, and we made point strongly. Ireland, too, thought that that might be preferable, but that view did not get strongly pushed. A number of other countries, which perhaps do not have such a strong no-frills sector at present—although that may change during the next few years—were not minded to accept our position. I regard that as regrettable, which is why, on behalf of the British Government, I voted against the proposal. I stress that updating the scheme had advantages, but it would have been better to incorporate some of the changes that have been mentioned.
Mr. Peter Viggers (Gosport): Although I applaud the stand that the Minister took, as one who is not conversant with the arcane practices of the European Parliament and Commission, I must say that I do not think that the Minister made entirely clear in his opening statement how the situation will now develop, and what legislation we can expect in the future.
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