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04 May 2022

New House of Commons Report proposes significant aviation sector reforms

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On 25 April 2022, the House of Commons Transport Committee's (the "Committee") report, titled "UK aviation: reform for take-off" (the "Report") was published to propose actions the Government can take to help the UK aviation sector in its recovery from the COVID-19 pandemic. We highlight below the key areas examined in the Report and the most significant proposals put forward by the Committee, which may provide clues as to the Government's legislative priorities in the next Parliamentary session.

1. International Travel Restrictions

The Report looks at how the Government implemented international travel restrictions during the pandemic and is generally very critical of how this was done. The Report finds that the Government's approach and measures were disproportionate to the risks posed by the pandemic. For example, the 'traffic light system' which was put in place in the summer of 2021 was found by the Committee  to be "opaque, ambiguous and inconsistent."

The Report recognises that the most recent decision to remove all international travel requirements makes the UK a more attractive destination compared to other countries. However, given that COVID-19 greatly affected the aviation industry and was the worst financial crisis experienced in two centuries, the Committee believes that the Government should have been and continue to be more proactive in taking steps to ensure the recoverability of the airline industry by: i) publishing a recovery plan by 1 June 2022; ii) convening a global taskforce to introduce standardisation of travel requirements; iii) developing a transparent, predictable system to facilitate safe international travel during future health crises; and iv) ensuring that any potential future restrictions are transparent and proportionate to those across the rest of the UK economy.

2. Consumer rights

On the topic of consumer rights the Report looks in particular at the travel testing market, airline insolvency and consumer redress.

Travel testing market

The Report finds that the proliferation in international travel restrictions caused travellers serious issues with the navigability and pricing structure of the travel testing market. The Committee partially blames this on the lack of proper protections and recourse in place for consumers.

To produce a better travel testing market with greater protections for consumers, the Report calls for greater Government intervention and sets out eight specific recommendations, including, for example, enhancing the rules that test providers must comply with to be listed (and maintain their position) on the GOV.UK website list, and monitoring and gathering evidence on price levels (falling short of introducing a price cap).

Airline Insolvency Bill

According to an analysis conducted by the Department for Transport ("DfT"), only 80% of UK-originating passengers have protection from financial loss due to airline failure. The Report finds that despite the collapse of Monarch, Thomas Cook and Flybe in recent years, all of which left tens of thousands passengers stranded abroad who then needed to be repatriated at the taxpayers' expense by the CAA, no serious efforts have been made to improve this protection since the review published by the Secretary of State for Transport in May 2019.

The Report therefore urges the Government to put in place an Airline Insolvency Bill in the next session of Parliament, to handle future airline insolvencies with an aim to protect consumers, employees and taxpayers.

Consumer redress

The Report calls for urgently giving the CAA powers to impose penalties on airlines for not refunding consumers when they are legally required to do so. In the absence of such powers however, the Report urges the CAA to use its existing powers to challenge airlines and pursue enforcement orders to address consumer rights infringements. In a move that is bound to be considered controversial the Report also proposes introducing a mechanism to grant passengers automatic compensation in the event of a delay, removing the need for passengers to apply to the relevant airline.

The Report also refers to the DfT's recent consultation, which proposes a post-Brexit shake up of airline passenger compensation regime as well as greater powers for the CAA and the CMA to enforce breaches of consumer law. One of the key proposals under consideration by the DfT is reform of the compensation payable for domestic flight delays in the UK to bring it in line with compensation payable for other domestic modes of transport, such as the rail sector, by basing compensation payable on a percentage of the fare price. The Report criticises this proposal for failing to take into account the fact that flight delays are more costly to consumers than delayed rail journeys as they often result in missed holidays, increased travel time and accommodation costs. More information on the DfT's consultation can be found in our recent article here.

3. Domestic air connectivity

Given the role that domestic air connectivity plays in providing employment and helping to connect the UK's nations and regions, the Report stresses that it should not be overlooked when discussing the UK's recovery from the COVID-19 pandemic. The Report recognises the importance of domestic air travel and states that the Government "must introduce measures to facilitate a competitive domestic aviation industry based on key regional routes", including by implementing more flexible rules on the provision of public service obligation routes and by bringing forward the effective date of the upcoming 50% cut to domestic APD from 1 April 2023 to 1 July 2022.

4. Sustainable aviation

The Report observes that aviation sector is unlikely to achieve the zero-carbon goal by 2050 and notes that the House of Commons Climate Change Committee recommended limiting passenger numbers and not expanding net airport capacity in an effort to curb the sector's carbon emissions. However, the Report also notes that the Government's Jet Zero Consultation has stated that "the sector can achieve Jet Zero without the Government needing to intervene directly to limit aviation growth."

The Report focusses on two areas in which progress can be made towards net zero: airspace modernisation and the development of new technology. On airspace, the Report stresses the urgent need for  the CAA to complete its modernisation programme. On new technology, the Report welcomes the introduction of new sustainability policies (including the Government's ongoing consultation on the possibility of mandating jet fuel suppliers to blend increasing amounts of sustainable aviation fuels by 2025) while also calling for the CAA to be granted the necessary powers to enforce breaches of any environmental laws that may be introduced in the future. Additionally the Report calls for a continuation in the Government's efforts and investment in new aviation decarbonisation technologies and recommends a market mechanism to support investment in sustainable aviation technologies. 

5. Slots

The Report endorses the suspension of the 80:20 rule on slots utilisation by the EU during the pandemic. The Report also agrees with the announcement by the DfT to adjust the ratio to 70:30 for the summer 2022 season to provide further support for the aviation sector as it starts to recover and to avoid the environmental and economic damage caused by airlines being forced to operate 'ghost flights'. The Report recognises the widespread impact of the Russian invasion of Ukraine and calls for the 70:30 rule adjustment to remain in place "until the effects of the Russian invasion of Ukraine on the UK market are apparent."

The Report also calls for a review of the current slot allocation system, which considers alternatives to the current system in favour of encouraging new entrants and reviewing how 'ghost flights' might be mitigated.

6. Heathrow price control review

In light of the upcoming plans to amend the price control on airport charges for the period beginning in the summer of 2022 until 2026 and the proposals in the CAA's consultation paper on the issue, which highlighted plans to increase charges per passenger, the Report recommends that the price control proposals for Heathrow Airport should be postponed to aid in the industry's recovery. The Report also stresses that the CAA must bear in mind that Heathrow is one of the most expensive airports globally.

7. Airport disruption April 2022

The Report proposes that the Government should help airports and airlines manage the sudden increase in demand for aviation post-pandemic to avoid a repeat of the disruptions at major British airports in April 2022. Some recommendations include: i) prioritising the processing of checks for applicants for airport staff positions in a timely fashion; ii) allowing applicants to commence training for airport staff positions upon successful completion of initial security checks; and iii) ensuring Border Force uses all the means at its disposal to minimise queues at airports.

This bulletin was co-authored by Mayss Akasheh, Patrick Bettle and Johnny Champion.

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KEY CONTACT

Johnny Champion

Johnny Champion
Senior associate

T:  +44 20 7809 2358 M:  Email Johnny | Vcard Office:  London

Patrick Bettle

Patrick Bettle
Associate

T:  +44 20 7329 4422 M:  Email Patrick | Vcard Office:  London