Sky’s the limit in airport revolution

Harry Bush, the head of regulation at the Civil Aviation Authority, is therefore something of a pioneer. In a major lecture last week, he made the case for lighter regulation of the UK airports sector, and in effect paved the way for a world not too far in the future where there might be no regulation at all.

Yesterday, we had results from BAA, the owner of a clutch of Scottish airports plus Heathrow, Stansted and until a few weeks ago Gatwick. They made pretty grim reading, as one would expect, given that we are in probably the most severe aviation downturn since the Second World War. But without wishing to kick the company when it already has enough problems, this could just be the beginning.

For those of us who have only ever known a regulated London airport market, with caps on how much airlines can be charged and restrictions on how much of a return they can earn, the implications of a free market in airports takes a bit of getting used to. But now Gatwick has changed hands and is owned by the owners of London City, the whole thing needs a rethink.

There appears to be no fundamental reason why the regulator should not simply leave them to it and let competition protect the customer. That is not going to happen overnight though. Indeed, much of Harry Bush's speech was devoted to exploring what needs to be done to avoid creating a sudden vacuum and to maintain sufficient market knowledge subsequently to be able to intervene in the future should it be required.

That said, competition, not regulation, appears to be the future even before Stansted is sold. Just as well perhaps, because that might take a long time, not because of the credit crunch, or because it is an unattractive asset, but because well over half its business comes from one airline, Ryanair. People tempted to buy are told by their advisers to go and lie in a darkened room until the feeling goes away.

Isas shine amid the uncertainty

There is a continuing debate about whether tax incentives encourage new saving or simply attract funds that would otherwise have been deposited elsewhere.

What is currently beyond dispute in the investment industry is the dramatic effect on fund flows that has resulted from the decision by Alistair Darling in the last Budget to increase to £10,200 the maximum amount that could be invested in an individual savings account by an over-50-year-old in any one year.

Fund managers at Fidelity, one of the biggest investment organisations in the country, say that Isa business is running at up to four times normal levels, and has done so since the increased allowance became available at the beginning of last month. Other fund managers — though not all — report a similar upsurge of interest over a parallel period.

Given that the UK badly needs to rebuild its savings ratio, which in spite of the economic downturn still lags a long way behind the norm for western Europe, there may be something to build on here.

The Conservatives are touting around a plan for a lifetime savings account. While the last thing the industry needs is yet another gimmick and the scrapping of existing products simply because they were introduced by the other side, if the Tories win power, or Labour if it gets another term, they should absorb the lesson that simple-to-understand, unambiguous tax incentives do seem to have a place.

It might also help, of course, if it didn't take 30 seconds of form-filling to apply for a credit card to get into debt, whereas trying to become a client of an investment adviser who would help you save can easily take half a day.

The other thing that is different in the Isa market at the moment is that in normal time investors have a favourite destination for their funds — be it UK equity or property or bonds — which depends to a great extent on what is the fashion of the moment.

However, no one thing is capturing the imagination right now. This time the business is spread almost evenly between emerging markets, low-risk growth funds and higher-risk specific funds.

Clearly there is still a lot of uncertainty out there — but at the same time savers are getting increasingly fed up with the fact that there is almost no return to be had from keeping their savings in cash.
The brave new world mapped out by Bush should in time transform the travel experience as customers benefit from differences in price, different levels of service and a choice of facilities. Who knows, we might one day achieve the ultimate — the ability to check in and fly without first having to spend three hours in the shops.