EASYJET PLC Introduction
Thank you for the kind introduction Rigas, and thank you to the European Aviation Club for welcoming me here today.
It is great to see so many friendly faces in the room.
It's good to be back in Brussels, especially at this particular time.
Last year's European elections showed that Europe is ready for change, and there is a real opportunity there that we should now grasp.
Nearly half of the 751 Members of the European Parliament are new.
The new European Commission has also adopted a different tone: less regulation and a stronger focus on the big issues of jobs and growth.
At easyJet we believe that the EU's political and legislative objectives should be translated into concrete benefits for citizens.
I don't need to tell you that aviation provides connectivity and that it is a major contributor to economic growth and jobs.
But as a sector, we do have a tendency to stand here and state what we want Europe to do for us, rather than ask the question the other way around.
easyJet, itself a product of the liberalisation of the airline sector, firmly agrees with the EU's main raison d'etre: to bring down walls and barriers and complete the Single Market.
The Single Market celebrated its 20th anniversary back in 2012, around the time I last spoke at the European Aviation Club.
Update on easyJet
Since that speech, easyJet has continued to grow sustainably, hired another 1,400 employees across Europe, all on local contracts, and generated industry-leading returns for our shareholders.
Our cause is to make travel easy and affordable for passengers, and we are continuing to do that by offering low fares and friendly service on Europe's leading network.
This year, it is us who will celebrate our 20th birthday.
Next month we will officially open our new bases in Amsterdam and Porto.
The new bases will create jobs, boost tourism and enable those early morning departures which are crucial to business passengers, who today constitute around 20% of those travelling with easyJet.
We also hit the 65 million passenger mark this year. 300 million Europeans live within an hour's drive of an easyJet airport.
In short, we have continued our path of sustainable growth and market-leading returns.
Slots and ground handling
But I find myself here today, about to discuss a lot of the same policy issues that were also on the agenda two years ago:
The increasing threat of protectionism, the rise in government-imposed taxes and charges, and the overarching question of European competitiveness.
In 2012 we spoke about the Airports Package, which included the revision of slots, ground handling, and noise legislation.
Our view remains that it is critical that airlines are allowed to trade slots to ensure they are used as efficiently as possible.
As you may know, easyJet bought Flybe's slots at London Gatwick.
We acquired 24 slot pairs and started operating them in summer 2014.
They have enabled us to add additional frequencies and new routes to and from Gatwick, carrying around half a million more passengers than were carried by FlyBe previously.
This example clearly illustrates the benefits of slot trading.
We hope that work in this direction will continue.
Ground handling is a different scenario.
It is a shame that the proposal to increase competition in each airport was dropped, although we understand the Commission's rationale for doing so.
It does not mean that we should not continue to push for liberalisation.
There is not enough competition on ground handling services which means passengers still pay too much and do not receive the right level of service.
Finally, member states are currently in the middle of discussions on the revision of EU 261.
This revision is about clarifying the legal framework and in our view, about providing the level of protection that passengers value, without being punitive to airlines.
A new Aviation Package
We know a new Aviation Package is in the pipeline.
We have already heard the legacy carriers' calls for protection against the Gulf Carriers.
We have also heard trade unions' calls for fair competition and action on employment issues.
So we know those subjects are likely to be tackled by the Commission.
We believe that first of all, everyone should first look at themselves to identify areas of improvement.
Because of liberalisation and the introduction of more competition between airlines in recent years, European airlines have already reduced costs by 1-2% per year on average.
These reductions have not been mirrored by a reduction in costs in airports and in airspace management.
easyJet works hard to achieve a low cost base, to be able to provide low fares to consumers.
Almost half of the costs associated with an average easyJet ticket are effectively influenced by governments.
These costs include passenger taxes, airspace and navigation charges, as well as charges at regulated airports.
That premise was the starting point for our thinking on some of the specific areas that we believe the EU should tackle in the coming months, either as part of the Aviation Package or independently:
1. Reform how airport monopolies are regulated
2. Rethink how we deliver the Single European Sky
I will go into each of these in a bit of detail.
Airport charges
On airport charges, there is no effective control of charges and services at many monopoly airports across Europe, with consumers paying more than they should.
Where major airports enjoy a monopoly, tight regulation is essential to prevent abuse of power and excessive charging.
On the other hand, competitive airports should be free from unnecessary regulation.
Former Competition Commissioner Neelie Kroes (pronounced Neeley Cruise) once said of mobile roaming charges:
"If operators were actually competing with each other seriously, then we could consider ending regulatory intervention."
We see a clear parallel with airport charges. And look how successful the EU has been in tackling roaming to the benefit of consumers!
We believe that progress on airport charges can only be achieved through revising the Airport Charges Directive which was adopted in 2009.
This means stronger regulatory oversight.
Today, the main European airports are often left to set their own charges.
Frontier Economics has just published a report that demonstrates the need to take action.
The report focuses on the 15 largest airports in Europe - many familiar to you all.
Just four key changes. They are:
1) The move from dual till to single till - when all revenues both aeronautical and commercial are taken into account when charges are set.
2) The reduction of airports' return on capital by just 0.5%.
3) An increase in airports' operating efficiency by 10% - a figure which would match that achieved by airlines.
4) The removal of the subsidy of transfer passengers - the charges for whom are often half that of point to point passengers.
If all of these elements are addressed in a revised Directive, passengers in Europe could save up to 1.5 billion Euros in charges.
This would stimulate demand and lead to an additional 12 million trips made, boosting tourist spending and total trade.
In turn, this has the potential to create 37 bn EUR in GDP and nearly half a million jobs.
Single European Sky
Turning to the Single European Sky, we believe a full rethink on how it is delivered is necessary.
We fully support the objectives of the Single European Sky and recognise that many parties are working hard to make progress.
But a lot of aspects of the SES simply aren't happening or are happening very slowly:
- Charges reductions have been lower than expected
- The performance targets for 2015 onward are delayed
- Environmental efficiency gains are limited
- Strikes continue to take place across Europe, with a disproportionate impact on passengers
In short, there are clear social concerns around the project and they need to be confronted and resolved or nothing will progress.
Finally, airspace costs have come down less than expected - with charges in 2019 forecast to only be 7% lower than in 2009.
To address this and to achieve much-needed progress, we believe that governments should renew their commitment on the key high level principles and objectives of the SES.
Most importantly, they should address the social and other issues head-on.
We suggest a rethink based on three key principles:
1. Stakeholders' core underlying concerns are addressed
- For example, there will be no compulsory redundancies
- Airspace sovereignty is guaranteed and Member States can ensure they have control over their airspace
2. Governance is shared, so airspace users have an equal seat at the table
3. SES should be on an opt-in basis, but with EU funding only available for those who opt in
- Being part of SES is an all or nothing commitment - entry into SES requires participation in all its aspects
- EU funding for airspace improvements, including SESAR programmes, is only available for those who opt-in to the SES framework
- Minimum standards should determine the level of equipment airlines must have to fly in SES airspace
These concerns must be resolved with firm political will, or they will prevent the project from resulting in any meaningful improvements.
Employment
An issue on which I know concerns have been raised is the way certain airlines employ their crew.
I would like to address this because I know it is front of mind of many people.
But unlike the other topics I have covered today this requires better enforcement, rather than new legislation.
At easyJet we aim to be a good corporate citizen and to operate a model of responsible profitability.
To put it concretely, that means that we employ people on local contracts and in line with local conditions and legislation, according to where they are based.
We also work with trade unions, right across Europe.
The current framework enables us to do the right thing.
What we need is for this framework to be enforced equally and fairly across countries.
Enforcement is where we see the strongest role for the EU in this regard.
Concluding remarks
To conclude, I just want to reiterate how solving some of these issues can generate significant benefits for consumers:
Reforming airport charges has the potential to generate € 37 billion in GDP as well as nearly half a million jobs.
€ 5 billion of potential annual efficiency gains are tied up in the Single European Sky.
We have summed up these thoughts and more in a leaflet with our vision on European aviation policy, which you will find in the room.
It follows along the passenger journey, from booking up until the moment of arrival.
At each step of the way, we asked ourselves: "What policy framework would help make the passenger journey easier and more affordable?"
Because in the end, it is the passenger who is at the heart of everything we do.
And it is passengers who should ultimately be at the heart of aviation policy-making.
Thanks very much for your time this afternoon and once again thanks to Rigas, Mia, Ingrid and all the members for hosting us.
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