Official Report: Minutes of Evidence

The Chairperson (Mr McKay): I welcome Ms Katy Best, who is the commercial and marketing director of George Best Belfast City Airport; Mr Graham Keddie, who is the managing director of Belfast International Airport (BIA); and Mr Albert Harrison, who is a non-executive director of City of Derry Airport/CoDA Operations Ltd. Do you want to make some opening comments before we go to questions?

Mr Graham Keddie (Belfast International Airport): If that is possible, Mr Chairman, yes. I thank you for today's invitation. I will start off. Air passenger duty (APD) is a regressive tax. The Republic of Ireland has recognised the harm that it does and has got rid of it. The Netherlands did the same. Scotland wants the power to be devolved so that it can reduce it by half and then get rid of it. Wales wants to follow suit. I am afraid that, in Northern Ireland, we are out of step. We are the only region that is content to have the matter addressed at national level.

There seems to be an apprehension that the block grant will be impacted. To support its reluctance to get the power devolved, the report from the Northern Ireland Centre for Economic Policy (NICEP) was commissioned by DFP and DETI, and it seems to support the thesis that the cost would outweigh the benefits. It is claimed that there would be a £55 million tax shortfall. Needless to say, we disagree with those findings. We consider them superficial, inaccurate and wholly inadequate for the full debate that we feel is required on the matter.

In response, as BIA, we commissioned international consultants Mott MacDonald, and I have a copy of its report. We have submitted it to the Committee Clerk. I apologise that that was done only last night, but it was late coming in from our consultants. Basically, Mott MacDonald is critiquing the NICEP work. It has to be said that the analysis blows the NICEP report out of the water. It shows that it is flawed and unreliable. Consultants have found that there are large, positive economic benefits to doing away with APD. For us, we must get the Ministers to look at it again as a potential for the economy in Northern Ireland.

At best, the study should be looked at seriously. It is from one of the top aviation consultancies in the world. Mott MacDonald said that, if APD were removed, it would support 3,800 additional jobs and another £200 million of gross value added (GVA). Mott MacDonald found that the NICEP report used outdated data, contained calculation errors and delivered unreasonable, unexplained or unsupported assumptions. Instead of delivering a small benefit, Mott MacDonald said that a reduction in APD would be a large positive net economic benefit. We should not run away and hide from securing the APD devolved power. Instead, it is seen as a cost on the block grant. We should be courageous enough to view that as a key to unlocking huge economic potential.

Unfortunately, we are handing revenue, jobs and economic success to competitors on a plate. We view international connectivity as crucial to our economy going forward. We have an opportunity here to follow the Irish experience and what the Scottish Government are determined to achieve. We should grasp it with both hands and move properly and sensibly to exploit a sector that has been overlooked for too long. Thank you very much for allowing me to make that opening statement.

The Chairperson (Mr McKay): Do any of the rest of you want to make any comments?

Ms Katy Best (Belfast City Airport): If I may, Chairperson, in following up on Graham's points, I think that it is important that we have an element of perspective as to why air traffic is so significant to us as a region. We very much rely on air travel for business and tourism in Northern Ireland. As an island off an island, we have to fly to conduct business, generate foreign direct investment (FDI) and trade, attract inbound tourism and enjoy outbound tourism opportunities.

The Northern Ireland Executive are targeting increased levels of FDI, exports, R&D and investment spending. Access to key markets is essential to do that. Some 31% of all Northern Ireland exports go by air, with a total value of £1 billion. Manufacturing companies are particularly reliant on these markets for their success, with nearly 80% of all sales from Northern Ireland manufacturing companies being to companies outside the region.

From a tourism perspective, one in every 18 jobs in Northern Ireland is supported by the tourism economy: that is nearly 5% of the Northern Ireland GVA. Direct air access is vital to grow this industry and allow visitors to spend money in Northern Ireland. It has been proven that, to grow tourism revenue, direct access is key and directly correlates.

If business and tourism are to grow, it is vital that we grow air connectivity. The status quo in the APD situation means that Northern Ireland is at a disadvantage when it comes to business connectivity. It adds cost to doing business in Northern Ireland and stifles inbound tourism potential. It should be noted that recent figures released by the Airports Council International Europe (ACI Europe) have shown that, for every 10% increase in air access, GDP per capita increases by 0·5%, which is a substantial figure.

In addition to the NICEP findings, we are encouraged by the Culture, Media and Sport Committee's report, published in March, which indicated that:

That amounts to an injection of £16 billion of revenue in the first three years.

If we wish to accelerate the process of air route development, which is crucial for taking this economy forward, Belfast City Airport would support a twin-track approach in conjunction with government. The first thing that we would call for is the immediate creation of an air route development fund to help to secure new international routes for as soon as 2016, and we welcome the opportunity to engage on that subject. The second thing would be an engagement of the airports and airlines with the Executive to review the taxation issue, which is stifling passenger growth in the region. It is important that the position of the Northern Ireland Executive is not considered in a vacuum. You have heard what Graham has had to say: APD devolution is being considered across England, Scotland and Wales. Without devolution, Northern Ireland would not be able to control the decisions made regarding APD in this region and hence could become uncompetitive in the UK as well as with the Republic of Ireland. Furthermore, we must consider the risk of further increases in APD, which would have a damaging effect in an already difficult air route development environment.

Belfast City Airport welcomes the opportunity to engage on these issues with the relevant personnel in DFP and DETI.

The Chairperson (Mr McKay): Albert, do you want to add anything?

Mr Albert Harrison (City of Derry Airport): Thank you for giving us the opportunity to talk to you this morning. City of Derry Airport was pleased to hear that the report was being produced. We operate in a very price-sensitive market. We do not have a level playing field in Ireland. Our friends in the South have no airport departure tax. Ryanair stated that, if the Government got rid of airport departure tax, it would pump an additional one million seats into the market, and this it has done. You can see the increase in passenger numbers in Dublin Airport. I think that numbers have increased down there by 47% in the last year. We are in a situation in which the price sensitivity is such that Ryanair has stated to us that, unless airport departure tax goes or it is compensated for it, it will not operate any more flights out of City of Derry Airport. In addition, all three airports have been faced with substantial rate increases over the last two years. Our rates are now 2·4 times more than they had been, and I think that Belfast International suffered something similar. Our ability to go out, compete and bring airlines to Northern Ireland has been affected by airport departure tax and an increase in our cost base.

We find the report to be flawed. Several things are wrong with it. It uses consistently pessimistic assumptions without reason. There was a health warning over the data sources. It always used the downside. The figure for jobs per million passengers is inaccurate; it cites a figure of 400 staff per million passengers, but, in 'Business First' magazine in February 2015, Brian Ambrose said that the 1,600 employees at Belfast City Airport do their best to make going through the facility a pleasant experience. The report has it at 1,000 employees. So the authors of the report cannot even get simple facts like that right. They have grossly underestimated the number of people going to Dublin. We believe it is about 800 jobs per million passengers. At the moment, probably 1·5 million or two million people from Northern Ireland are going to the South. How much would the Assembly invest to try to create 2,000 jobs in Northern Ireland? It would invest a lot. Airport departure tax needs to be looked at.

We believe that four things need to be done right now. First, we should have a look to see whether airport departure tax could be devolved to Northern Ireland. That sort of thing takes time. The Scots are going to do it, and, as soon as they get it, they will reduce APD by 50% in the first year, so we must get it devolved. Secondly, we must resolve the issue with the Treasury as to exactly what it is that the Treasury brings in with APD: is it £55 million or £75 million? There is a mismatch. Thirdly, we need to sit down and have a look at an air route development fund as soon as possible. We would support it. I was involved with Belfast International when we introduced the last air route development fund. It was a success, and it cost only £4 million. For that £4 million investment, we got New York and a raft of destinations across Europe and the UK. Fourthly, we would be more than happy to sit down and talk with the relevant Departments, just like Belfast City Airport, and go through all the mistakes in the report and have them corrected so that the Assembly can have a document with which all the airports and the tourism industry in Northern Ireland agree. At the moment, none of us agrees with it.

The Chairperson (Mr McKay): I certainly get the sense that the conclusions in the Ulster University (UU) report are being pretty much rubbished by you. I am keen, and I am sure that other members are keen, to delve into the detail of that. As I recall, there was a PricewaterhouseCoopers (PwC) report a couple of years ago. I always remember a comment made then that it felt that the economic impact of APD possibly had more potential to improve the economy than corporation tax. That comment stuck in my mind. Do you agree with that? How urgent is the situation, and is it putting businesses and the tourism sector at risk? One in 18 jobs in the North is a significant figure. In a constituency such as North Antrim, I know the benefit of tourism to the economy. How serious is the situation?

Mr Keddie: It is pretty serious. Our growth has been relatively flat over the past three or four years. Airlines are crucial to our development. Look at Germany, the world's largest outbound tourist market. We have zero flights to Germany from Northern Ireland, whereas there are 128 a week from Dublin alone. It is crucial for us to grow our tourism economy. The three of us have over 6,000 people working on our sites. We are a major part of the economy, and we need to grow that economy and balance it. APD is a huge weight behind us. The PwC report suggested that almost 60,000 jobs would be created straight away by getting rid of it. That organisation was initially against APD. That came through very effectively once it did the study. All we need to do is to look at the growth in passengers to and tourism in the Republic of Ireland as a result of its getting rid of APD and dropping the hospitality tax. That has had an enormous impact on the economy.

Ms Best: If I may, Chairperson, I would add that one reason why APD is specifically of concern to us in Northern Ireland is that we depend on the UK market for the vast majority of our business and tourists. If you travel from Northern Ireland to anywhere in the UK, you pay APD in both directions. Anyone travelling around the UK has the option of road and rail, and, if people are travelling to the Republic of Ireland, they do not pay APD in two directions. That has a very significant impact on the cost of a domestic flight, which affects the willingness of people who want to travel here for business or to visit Northern Ireland for a short break.

Mr Harrison: Sorry, we are sounding like the three musketeers. The House of Commons Transport Committee's report on smaller airports, which was published in March this year, refers to airports that handle fewer than five million passengers a year. It states that APD is a threat to small airports across the UK and that Northern Ireland should be treated as a special case with regard to APD because of the land border with Southern Ireland, which means that there is not a level playing field. It is critical that we do something about this quickly.

The Chairperson (Mr McKay): Albert, you said that there was a 47% increase in numbers in Dublin in the past year. Is that Dublin or the South as a whole?

Mr Harrison: That refers to traffic from Northern Ireland. The number of people going from Northern Ireland to the South has increased by 47%. Dublin Airport is growing now —

Mr Keddie: Dublin Airport grew its passenger numbers from Northern Ireland by 47% in the first six months of 2014.

The Chairperson (Mr McKay): I assume that there is a significant corresponding decrease in the three airports in the North.

Mr Keddie: Our growth rates are behind those of the UK mainland, so, essentially, our growth rates are relatively flat.

Mr Harrison: Our numbers are going down next year.

Mr Weir: I presume that the growth in Dublin traffic is not just directly reducing the number of people travelling from here; it is also due to the fact that people are availing themselves of opportunities there that do not exist here. I may be heading to Germany in a couple of months' time, for example, and I have no option but to go through Dublin. It is more of an opportunity cost than a direct reduction in that sense, but it is an opportunity cost for you nonetheless.

It is very useful to have the new report. We have just received it, so it will be difficult for us to digest the figures. You said that you would look for an air route development fund, and Albert mentioned a previous exercise that cost around £4 million. What scale of financing are we talking about for an air development fund for 2016 or 2017? What level of finance are we talking about?

Mr Keddie: I think that I have been quoted as saying £20 million. It is difficult to gauge until you sit down and think about support levels because of the damage of APD. I will stand back a bit. If you compare our domestic traffic to GB to Dublin's GB traffic, it is about seven million to five million if all three airports are included. The figures are reasonably close because we have no real choice. We have to go across to GB because it is our main market. Internationally, the European short-haul ratio is 11:1, so Dublin is £11 million and we are £1 million. That is where you can see the damage.

Mr Weir: You see European short haul as being the key area to target. I appreciate that you are plucking a ballpark figure out of the air with the figure of £20 million. Is it £20 million a year or over a number of years?

Mr Keddie: When routes start off, the first three years are the most critical, so you have to spread it out over time to support a route, get it established and get it running. Another issue that we are probably facing — Albert will agree with me — is that it is a changing environment, and everybody is competing for those airlines. Every airport and every community in Europe is chasing airlines with money in their pockets.

Mr Weir: To some extent, you have answered my next question. If the Executive were to go down that route and fund it, would there be any difficulty in handling that to ensure that it did not fall foul of European competition law?

Ms Best: If I may, Mr Weir, I will follow up on Graham's point and give you some perspective on the economics of an airline starting a new route. Typically, an airline, if it is looking at a service from Northern Ireland to mainland Europe with decent frequency, will lose about £1 million in the first year of operation. You hear time and again from airlines that regional governments across Europe are willing to de-risk that situation by funding and providing support for a new route. There are many examples across Europe of funding being provided and regions demonstrating that they understand that air access is an economic driver by stepping in and de-risking the first year or several years of operation for an airline.

Mr Weir: Can you decode that? What do you mean by "de-risking"?

Ms Best: Providing route development funding.

Mr Weir: If we were following a similar model, we would feel reasonably secure. With Europe, I appreciate that different attitudes can be taken to what is, essentially, state aid in terms of competition. What is happening already in other parts of Europe sounds fairly close to a form of state aid. I suppose, to be fair, if you are replicating that, it probably minimises the risk from our point of view.

Ms Best: The Westminster Department for Transport has looked at that very closely over the last number of years and, in fact, launched an air route development fund for the whole of the UK earlier this year.

Mr Harrison: I have a couple of points. If you look at our ambitions across the three airports, you will see that we do not want a huge number of destinations. We are not looking for an additional 20 airports to fly to in the next two years. It would be nice, but one has to be realistic. There are very few airlines and lots of airports, so everybody is competing for very few assets. In Derry, we are looking at Manchester, because we really need a direct flight into Manchester to help us to connect onwards to the Far East, especially for business, and, possibly, Edinburgh and Newcastle. That is the limit of Derry's ambitions at the moment. I cannot see KLM coming to Derry to fly into Amsterdam; that is not going to happen. For Katy and Graham, Europe is the thing, and long haul is also a possibility for Graham. We are not talking about a huge range of destinations. EU legislation tends to restrict the amount of money that you can get to 50% of all your airport charges. Certain nations seem to get round it by various means. The Welsh Government have given a loan to its airport. It is totally beyond me how Knock airport managed to grow in the way that it has. People find ways and means around things. We follow the rules, and we would be restricted to 50% of our airport charges. The figure for grants is possibly £4 million a year for three or four years. In my opinion, that would go a long way.

Mr Weir: I suggest, just by way of a word of advice, that there is a good case to be made and it fits together but, clearly, as part of that you would need to develop a business case. With respect, Graham has plucked out a figure of £20 million, and you have talked about £4 million over three or four years. It strikes me that —

Mr Harrison: Sorry, £3 million or £4 million a year for three or four years.

Mr Weir: That could be about £9 million or £10 million; it could be £12 million or it could be £20 million. I think that you need to develop something a wee bit more precise, by way of advice on that. In tight economic times, it is something that needs to be tied down a bit.

Mr Harrison: I can give a number for City of Derry Airport that would do us. The number I am giving is a guesstimate for the three airports.

Mr Weir: I could play devil's advocate, but you may take this wrongly: is it sustainable to have three airports in Northern Ireland?

Mr Harrison: Oh, now. [Laughter.]

I am somewhat unique in that I have managed all three airports. I worked for an airline in Hong Kong — we worked for the same airline, funnily enough — and then I came back and ran Belfast City for a couple of years; then I joined TBI and ran a few airports around the world; then I ran Belfast International; and then I ran 10 airports for a short time. I then ran City of Derry airport for a while when I retired, to help them out. Therefore, I can look at the Northern Ireland situation from a unique perspective. If you were starting with a clean sheet of paper, I think we could all agree that you would have one airport for Northern Ireland. We do not; we are where we are. We each could share —

Mr Weir: You have gone a little bit off-topic. I have one final question. There is the issue of the devolution of APD and there is also the issue, as you have indicated, of the wider economic studies that show it is damaging to the whole UK economy. What would the impact of abolition across the UK be, rather than simply devolution? Would that achieve the same impact or is there a particular advantage to devolution? I appreciate that there may not be a choice in the matter, but I am just seeing where the balance lies.

Mr Keddie: It is a political choice. The regions of the UK are more dependent on connectivity. Connectivity already exists in the south-east of England. If you —

Mr Weir: Heathrow and Gatwick tend to —

Mr Keddie: With Heathrow and Gatwick, if you look at the drivers of the southeast of England, all that is happening there is that it is acting like a giant sponge and soaking up everything from the regions. The regions need that connectivity. It would be fantastic if the UK got rid of it nationally. It would suit us all, but if you see what is happening with the Scots and look at our fellow airport management teams in the north of England, they are in something of a panic because they can see what is going to happen when the Scots get APD. Places like Newcastle, Manchester, Leeds Bradford, and Liverpool are in the ears of their MPs saying that this is going to cost jobs because a lot of the flights will move north of the border.

Mr Weir: Although, to be fair, promises and delivery can be two different things.

Mr Keddie: In relation to the Scots, it is already in the Smith report.

Mr Weir: I appreciate that. There is a difference between getting the power to do something and doing it. There would be a concern, shall we say, that there may be a question as to how deliverable some of the economic plans for Scotland are. Maybe that is a separate issue.

Mr Keddie: Alex Salmond has stood up publicly on a number of occasions and said that he will cut it in half straight away.

Mr Weir: Never disbelieve a pledge until it is made publicly.

Mr Cree: Even then, take it with a pinch of salt.

Mr McCallister: Thanks for the presentation. Following on from Peter, I would like to see Northern Ireland as a whole having a commission to look at what taxes we might devolve; at what is most appropriate. Living where I live, broadly between Banbridge and Newry, only a few miles off the main A1, Dublin Airport is a very easy commute. When you throw out figures like 120 or 130 flights to Germany, considering we have none, that is pretty shocking. It is pretty shocking to hear it like that, and about the sheer growth.

Also, there is the interesting point about the tax on both directions. We are even handicapping ourselves and the national government by the fact that, if I go to Dublin to fly to London, I am paying tax one way, but if I go to Belfast to fly to London I am paying it in both directions. It is a pretty shocking way to do it. There is a big difference. My concern about devolving tax-varying powers is that it always ends up being a political decision. There is a question about whether we should devolve anything more into this Assembly without fairly radical changes to it. Do not worry; I do not expect you to comment on reforming the Northern Ireland Assembly. That impact on jobs is worth reinforcing; if you have around 800 jobs per one million passengers and we have between one and a half million and two million people going South, that is a phenomenal rate of jobs and growth. There is no advantage in this for regional airports. Was it originally brought in more for environmental reasons or just to raise money?

Mr Keddie: It was brought in primarily for environmental reasons and the Treasury saw it as a very good tax take. The original tax take was £300 million a year, and by 2017 it will be £3·9 billion.

Mr McCallister: It has become a very considerable tax take. Your argument is that we are seriously disadvantaged; we have that and we have different rates of VAT on tourism and hospitality. Broadly, I suppose the point is that, in devolving this, the Assembly has shown no willingness to look at better places to raise money or where we would want to save it or where you would take the chance on saying that we are going to cut this and repay it in economic growth. The Chairperson made a point — I have forgotten who you were quoting —

The Chairperson (Mr McKay): It was PwC.

Mr McCallister: You made the point that you might have a bigger impact with this than corporation tax. That is huge, and that is why I would like us to go down the road of having a commission to look at all the tax-varying powers that you might want to have in Northern Ireland, including this.

Ms Best: One of the key drivers in the abolition of the tax in the Republic of Ireland was that there was a commitment from the airline industry that there would be new route developments were the tax to be abolished. That commitment came through and the likes of Ryanair, Aer Lingus and others all saw it as an opportunity and made the commitment to start new routes. It had a very direct impact in terms of economic gain. That should be looked at much more closely to see whether it could be an opportunity for Northern Ireland.

Mr McCallister: I take your point. The main target for Belfast City Airport and Belfast International Airport will be to develop routes to continental Europe. City of Derry Airport is primarily concerned with —

Mr Harrison: Great Britain.

Mr McCallister: — the north of England and other regional airports. More work would have to be done. The two together could look at how you might devolve other taxes to Northern Ireland. The caveat was Peter's point that it does not necessarily mean that the Northern Ireland Executive would decide to cut it; they may not be able to cut it as far as you would like, but it would have to go in hand with significant route development.

Mr Keddie: Following on from Katy's point, one of the disadvantages of APD is that the benefits are all around VAT, National Insurance and income tax contributions, which all go to the Treasury in London. That is where the main growth is. If you look at it from that point of view, it is essentially about jobs growth, but it is also about bringing in tourists and spend in your local market. It is about businesses being effective because they can travel out of their home base rather than have to travel some distance.

The other interesting point that everyone forgets is that the outbound travel creates jobs as well.

Without that outbound travel, we would not have Flybe with based aircraft or Jet2, easyJet, Aer Lingus based in our cities. We have crews, engineers and ground staff all employed here. All our airports employ a range of people from the guys who clean them to the managing directors. That is crucial. At Belfast International Airport, we have over 200 companies on our site; I am not sure how many there are at George Best Belfast City Airport or at CoDA. Those are the development areas that we have. We are amongst the largest site employers in Northern Ireland and we employ thousands of people on our sites. That has to be recognised because those job numbers are enormous. We can grow those job numbers relatively easily and quickly if we get air routes in and can continue to grow.

Mr McCallister: I congratulate you on doing the stuff around modern apprenticeships. That is the sort of stuff that we need to see more of. I represent the South Down constituency, and it has a huge factory that makes seats for airlines that bring huge numbers of people in from around the world. The constituency will host the Irish Open in a few weeks, and it will, hopefully, bring huge numbers in. I buy into that but I just come back to the fact that we need to look much more at what the Scots and the Welsh have done in order to create an overall package of what we devolve and what we do here.

Mr Harrison: If we are going to make decisions, we need to make sure that our facts are right. You can sense from this side of the table that we do not believe the facts in this report. It needs to be rethought to make sure that it is right so that you can make decisions on good information rather than false information.

Ms Boyle: Thank you for your presentation. I make no apologies for being parochial, being an elected representative from the north-west —

Mr Weir: Do you want an airport in Strabane?

Ms Boyle: That might be possible. It will come as no surprise to you, Albert, that this was an issue on the doorsteps last year when we were canvassing for the council elections. It has come up this year, now that Strabane has moved into the Derry City Council area. We are now a shareholder of the airport in Derry and there are issues around the financial support for City of Derry Airport, which I fully support. People were saying on the doors that the drop in the euro swayed them towards Dublin and the other airports. We have inherited an airport that we cannot actually use, and APD has come up on the doors when we talk to people about City of Derry Airport. Those issues are there. Was there no input from the airports into this report when it was being devised? Was there little or none at all?

Ms Best: There were briefings from DETI and DFP about the commissioning of the report.

Ms Boyle: Graham said that it is a serious situation and I believe that it is, particularly for us in the north-west. If we are not able to use our airport then we lose it, and people in the north-west see that as a crisis at the moment. I just wanted to make that comment.

Mr Harrison: Just so that you are aware, it is not all bad news at City of Derry Airport. The financial results have improved every year over the last five years, despite the level of traffic. We are probably, touch wood, going to have our lowest loss in this financial year ending, and we produce a positive gross value added for the region of £7 million. It is not all bad news.

Mr McQuillan: On your point about the facts in the report, it is important that, when we get a report, the facts are correct so we can make an informed decision on that report. I encourage the Department to engage with you and ensure that you can iron out those differences and reach some sort of agreement.

I just want to ask you about APD on long-haul flights: when it was at the crucial end and things were looking very bad and poorly, what were the worst results at that time and how have they recovered since APD has been reduced?

Mr Keddie: We have kept the United Airlines flight going. Of the original 10 United Airlines routes that were started throughout Europe, I think that we have the only one remaining. We have held it in there. They took issue earlier this year and cut it for nine weeks. They brought it back, and it is coming on strong. The estimate from our friends in United Airlines is that it will be very profitable this year. There is real positivity. On the long-haul routes, again, we are talking to a number of carriers. Talk is cheap. These days, as Katy so eloquently put it, a number of regions throughout Europe are throwing money at the likes of Etihad Airways, Emirates, Qatar Airways, Turkish Airlines, PriceJet from Canada, Air Transat etc. We cannot compete with them. This is where it is almost, I would suggest, throughout the rest of Europe better to beg for forgiveness than to ask for permission.

Mr McQuillan: What I really want to focus on is how the flight that is there now at the minute. It was at its lowest ebb, the figures had reduced and people were not using it. By abolishing APD, the figures have actually risen. Is that what you are saying?

Mr Keddie: Yes. We would have lost that flight.

Mr McQuillan: You have managed to keep it, and it has grown since.

Mr Keddie: If we still had APD, we would have lost it. Fundamentally, George Osborne made that final decision and made his officials deliver it.

Mr McQuillan: That is fair enough. Thanks.

Mr Cree: There is no doubt that air passenger duty, although it started as a green tax, has certainly now developed into a major fundraiser. The Highlands and Islands example should have applied here. Obviously, that is still the case in Scotland, where they have that advantage. I remember that there were also examples in Europe; I was on the Committee for Enterprise, Trade and Investment at the time. The Netherlands and Belgium had APD and then scrubbed it.

Mr Keddie: The Netherlands did, yes.

Mr Cree: Obviously, I have not read this report yet, having just got it, but is there any reference there to what happened in the European experience?

Mr Keddie: To give you an example, the Netherlands had quite high APD. People were just driving across the border into Germany, Belgium and France to pick up flights. You saw the regional airports, the likes of Eindhoven and Maastricht, absolutely imploding because people would just drive across the border. Guys like Ryanair, easyJet, etc, just made sure that they moved outside those areas. People were driving across international borders to save the tax. It is the same situation that we face here, where you can just drive across a border and the tax changes.

Mr Cree: Did those respective Governments then absorb the duty themselves or did they simply scratch it?

Mr Keddie: They just got rid of it. They said, "Thank you very much. Bye-bye". They stopped it.

Mr Cree: On a slightly different subject — obviously, it is germane to this — have any of the airports considered the use of financial transaction capital for development in the future? Have you ever heard of it?

Mr Keddie: I have heard of it. It is the sort of thing that we would not use unless it was to build terminals, infrastructure or whatever.

Mr Harrison: It is for infrastructure. That is our understanding.

Mr Cree: I am just conducting a bit of market research for myself.

Mr Keddie: We would use something like that only for infrastructure and we have our own internal funding anyway, so we would —

Mr Cree: It is just that it will be an increasing form of available capital.

Mr Keddie: Yes, but capital, for me, is for infrastructure: it is not for funding air routes.

Mr Cree: It is for infrastructure, yes. Thank you.

The Chairperson (Mr McKay): Page 59 of the report states that:

Have you any particular views on that point in the report?

Mr Keddie: We have rejigged the Mott MacDonald figures with NICEP. What they show you is that, if you get rid of it, it actually starts improving the more you go forward. You may, in the short term, be better off economically but, in the longer term, if you actually redo the numbers and factor in the increased number of jobs etc, that dramatically changes it.

Mr Harrison: The conclusions were based on inaccurate conclusions, in the first case, on passenger growth, the number of people going to Dublin and the number of jobs per million passengers. They have come to a conclusion based on a series of things that were inaccurate.

The Chairperson (Mr McKay): I was just coming to that point, Albert. In your submission, you refer to applying a ratio of 400 jobs per million passengers. You state that the universally accepted ratio is 1,000 jobs per million passengers. Where does the universally accepted ratio originate, and what credibility does it have?

Mr Keddie: There is a range. At one stage, the EU was using 986 jobs per million passengers. ACI Europe came out with a report quoting between 850 and 1,200 jobs per million passengers. If you even look at the figures that Albert has quoted, you see that there are 1,600 jobs in George Best Belfast City Airport; I think that 640 was the calculation. We have 1,000 jobs per million passengers. It is very dependent; you can see where the ratio is going. So, 400 is right at the bottom end of any range.

Ms Best: I would like to make one additional comment, Chair. When we are talking about the economic benefits, we need to remember that there are two. One is that we become more competitive as a region with regard to the price that it costs to travel in and out of Northern Ireland. Secondly — you have heard some of this already this morning — when we are trying to attract new airlines to a region like Northern Ireland, we hear time and again that APD is a barrier to airlines starting in Northern Ireland. We cannot improve direct air access when we have APD in place and other European airports do not have what is, essentially, the first obstacle to an airline being profitable.

The Chairperson (Mr McKay): Leslie has already referred to the fact that APD is a very handy tax for Treasury to raise revenue with. A lot of people have probably forgotten that it was an environmental tax in the first place. I suppose that there are options. Do we wait and see whether Westminster will make the right decision, or are you saying now that it is better to be in the hands of local politicians? Scotland is moving ahead to get devolution of the powers to Edinburgh. Can we afford to take the risk that Westminster will make the right decision?

Mr Keddie: David Cameron is already talking about the "Carlisle principle". However, if you look at the issues that we have already faced with the Republic, you will see that, when Scotland has less tax than us, the airlines will obviously look at Edinburgh, Glasgow and Aberdeen as points to operate from. Just to follow on from what Katy said, if APD is £13 on a domestic seat and the average revenue for easyJet on a seat is £68, 20% of a fare is tax. If we do not devolve it, we will be in situation where the economic triggers to grow jobs and tourism are lost to Northern Ireland. Northern Ireland plc will suffer. Our businesses will fight for every revenue, passenger and airline that we can get, but it still stops us. Katy and I were both in Aberdeen at a routes conference, talking to airlines. We heard the same mantra: "£13 APD". Dublin does not have it. Shannon does not have it. Cork does not have it. Knock does not have it. Kerry does not have it.

The Chairperson (Mr McKay): On that grim note, we will end. [Laughter.]

Thank you all very much. It has been a very interesting session.