Public Accounts and Public Administration Committee

Croeso. Welcome to the participants and witnesses who have now joined the meeting. I'd be grateful if we could start this session by inviting them to state their names and roles for the record, perhaps starting with Welsh Government representatives and moving across to the airport representatives.

Thanks, Chair. Good morning to you and committee. I'm Andrew Slade, director general for economy, energy and transport in the Welsh Government.

Good morning, everybody. I'm Stephen Rowan. I'm the deputy director for national and international connectivity in the Welsh Government, with responsibility for the relationship between the Government and Cardiff Airport.

Morning, everyone. I'm Spencer Birns, the CEO of Cardiff International Airport Limited.

Good morning, Chair. Good morning, members of the committee. I'm Wayne Harvey. I'm the chairman of the operating company at Cardiff international airport.

Diolch. Thanks for attending committee today. As you'll expect, we have a number of questions. I therefore ask both members of the committee and you as witnesses to be as succinct as possible to enable us to cover the wide range of issues generated by this topic. I propose that there will be a short break approximately an hour into the evidence session, before we move on to our conclusions, which are anticipated around 11:35.

As convention has it, as Chair, I will start the questions, regarding, if I may, the WGC Holdco Limited and airport boards. This is a question to the Welsh Government representatives. In the update you recently shared with us, you note that despite not being regulated by the Commissioner for Public Appointments, the new appointments for the Holdco board followed the principles under the code of governance for public appointments as closely as possible. I’d be grateful, therefore, if you could expand on this in terms of the appointments of the new chair and non-executive directors.

Thank you, Chair. Shall I kick off? It’s a good opportunity for us to update the committee on a number of things, and then, I have no doubt, later in the session, we can talk a little bit more about the application that the Welsh Government has put in to the Competition and Markets Authority for guidance on future subsidy for the growth of the airport and the economic potential of the airport, where we can say certain things, but other things are a bit more tricky to say because we’re in the middle of the process.

But on Holdco, we feel that we have very much responded to points that the committee has made in the past about how Holdco is established, set up and operates. We’ve got a new chair, my colleague Reg Kilpatrick, who has a lot of experience, including, right at the outset of his career, in aviation and aerospace, and two non-execs with real expertise in the sector, in commercial skills, in finance, and you’ve got the details of those in the letter that I sent through to you. We felt very strongly that we should be using an appointments process that was going to give us best value in the greater sense of that term, in terms of the people appointed, and that’s what we adopted as an approach. We’re very pleased with the new Holdco, and we think it will make an important difference, particularly, and not least, as we move into a new phase of the airport’s operation and growth.

I don’t know whether Stephen wants to add anything in terms of the process, but we’re very grateful to Rhian, and to Geraint, and to Reg, for taking on these roles, and we’re very pleased with how Holdco is doing.

Thanks, Andrew. I would just add that we followed the public appointments process. We had a very healthy field of very good candidates, and we were very pleased to get Rhian and Geraint on board with Holdco through that process. The process worked very well, and we’ve got some very strong people on our board now, very well set up for the future.

Thank you. Given that you have adopted the code of governance for public appointments, to what extent do you consider that the chair and non-executive directors are, effectively, public appointments?

They’re not strictly public appointments, which is why we weren’t formally obliged to go down that route. What we chose was a route that was going to give us the best candidates, both internally from the sense of having a member of the senior civil service keeping that line of sight straight through to Ministers—since the Welsh Government is the shareholder—but, also, just to make sure that we use the best techniques from the public appointments to, as Stephen was saying a few minutes ago, give us the best possible field of candidates with the right sets of skills, and we feel that that’s what the process gave us.

Thank you. Is the Holdco board now complete?

Yes.

Thank you. One of the new executive directors appointed to the Holdco board in January of this year served as a non-executive director on the airport board for 10 years until May 2023. In making the appointment, how has the Welsh Government balanced perceived concerns over independence, objectivity and impartiality with appointing someone with background knowledge and experience over such a protracted period?

The roles are different is the first thing to say. Then I think, in a sense, Chair, the answer is what you’ve just said in the question—the points you’ve made—which is that we were looking to get an appropriate balance. In this case, we have, in the individual concerned, lots of relevant experience of the airport, which is hugely helpful to the Welsh Government in terms of Holdco’s role, but not in any way being prejudiced in terms of the conduct of that position. So, I think we feel we've got that balance right. Again, I'll just ask Stephen, but in adopting a public appointments-type process, all of these things will be worked through and were worked through.

Thanks, Andrew. I would add that as the new Holdco has been operating, certainly we've been entirely comfortable that everything has been done in the proper manner and that our new members of the Holdco board are doing the job very professionally. Where Geraint has very long previous experience of working with Cardiff Airport, he is bringing that experience to bear, to provide constructive challenge to the current airport board and to advise us within Welsh Government. But he is also very clear about the parameters of his new role and he's delivering that role very effectively indeed.

Chair—

Thank you, yes.

Could I take the liberty of just commenting from an operating company perspective, to reassure the committee that we do get suitably high levels of challenge and scrutiny from Holdco? It's a very strong but robust relationship, and so we would, as it were, on the other side of that relationship, say that we are being looked at very comprehensively and in great detail, and it's a good relationship with Holdco. Thank you.

Okay, thank you. Well, again, a question to the Welsh Government, following on from that. How will the Welsh Government assess the performance of the new Holdco board, including ensuring that there are no apparent conflicts of interest manifesting themselves in the circumstances we've just described? And what measures will the Welsh Government use to do so, and what information will it make publicly available about this?

That's an interesting question, Chair, in the sense that I think that's something where we could continue to work with the committee on these points. But, for our part, we will periodically revisit the operation of Holdco. That's a sensible thing to be doing as a matter of routine, never mind in relation to the specifics associated with the airport. And we will always ask ourselves whether there are skills gaps or, as the role changes and as the airport grows, are there new things that we want Holdco to be able to do, and what does that mean for our membership, or membership of the company. But I think, for the time being, we feel that the process that we have gone through has delivered us a really strong new Holdco to take things forward with the airport in the way that Wayne has just described, and as I say, we will periodically revisit the operation of Holdco. And we're very happy to talk to you further, as we move into the next phase of the airport's operation and growth, about some of those measures, if that's helpful to the committee and of interest to the committee. I don't know whether, Stephen, you wanted to add anything.

Yes. I'll just add, on the specific point around conflicts of interest, that our board members are very professional and I'm entirely confident that if a conflict of interest were to arise in future that they would make that known to my team, which provides a secretariat to Holdco, and then we would escalate and deal with that as necessary. I have full confidence that anything like that would be made known to us. Thanks.

Chair, can I also give some feedback from our interaction with the Holdco so far, particularly on how we're measured and some of the key performance indicators, if that's okay?

Thank you, yes.

We have a bi-weekly update with the chair of Holdco and the Welsh Government deputy director, which is Stephen. In that session, we talk about key topics and key matters that are coming up on a regular basis. Wayne and myself meet with them. We also then have the accountability meetings that take place, which is the joint Holdco and Cardiff Airport meeting. That is attended by myself and Wayne along with the Holdco board. When there is a consent matter that does come up, we go through due process. Obviously, our board goes through consent first before we're allowed to approach Holdco, and in those decision papers there is proper ratification and scrutiny. And I think, from a personal perspective, it's been very welcome having Rhian and Geraint and Reg, coming with those questions from different angles and from their experience. Rhian in particular, with some of her experience in the aerospace sector, is asking very challenging questions of us to make sure that we've thoroughly thought through the points before they provide consent. And Geraint does exactly the same. So, we as an operating side are seeing a very, very professional approach.

Thank you for sharing that. This particular question was very much focused on what measures the Welsh Government will implement and on what timescales, to monitor the performance of the board itself. I understand from the initial responses that there's an aspiration to do so, but no formal process thus far established. Will a process be established, and when will you be able to share with this committee what the measures will be and over what timescales, so that we can follow through in our future monitoring within our brief accordingly?

Chair, can I just clarify, are you talking about Holdco, or are you talking about the airport's board, which is obviously something different?

The Holdco board.

Okay. I think, subject to anything that Stephen's about to say, I think we will come back to you on that and set out some of the points that Spen was just referring to in terms of how Holdco is operating at the moment and what we're expecting of Holdco right now, and the sorts of areas that it might get into in future in the next phase of the airport's development and growth. And I think that will be an opportunity then to test some ideas with committee. But I might just ask Stephen if he's got a view about timing on all of that. I think we would like to let the new Holdco carry on with its work in the first instance and not immediately dive in with further thoughts about revisiting the current arrangements. But I don't know whether Stephen wants to add to that.

I think I'd just amplify the point you made, Andrew, that as we get increasing clarity about how we're going to be moving forward together with the airport over the next few months, then that will be the most opportune moment to reflect on how Holdco has performed so far and what the most appropriate more formal arrangements will be for monitoring how Holdco is performing in making sure that the Government's plans for the airport are being delivered and the economic objectives are being achieved.

Okay. Thank you. I'll move on, if I may, with a question to Mr Birns and Mr Harvey. Companies House records show that, in May of this year, Jonathan Stott, the finance director and board company secretary, resigned from the airport board. The records show also that the airport's chief executive, Mr Birns, has been the company secretary since 1 May of this year. What happened and who is undertaking the role now of the airport's finance director?

Thank you, Chair. If I may, I'll tackle those points and Spen will no doubt add to it. Firstly, Jonathan Stott did resign from the board. He's taken a different direction with his career and he left, as you said, in accordance with what's recorded at Companies House. However, he was retained on a consultancy basis over the summer months. We then put in place, obviously, a recruitment programme, and I'm pleased to say that that has been successful and we do have a chosen candidate who has agreed to join us as financial director. And I believe, Spencer, that his start date is at the end of November.

Yes.

And we are happy, if it's appropriate, in the private session, to share a little more detail on that, if that would help the committee. In the meantime, we have had, as I said, good support from Jonathan over the summer months, and we've also got an excellent finance team here. And also on our board, alongside myself, a chartered accountant, we've also got another chartered accountant, Andy Jones, who is a non-executive director, and so we have been able to monitor and maintain the usual financial controls that one would have expected over recent weeks. Anything to add, Spencer?

Yes. It's been a process that we've had to go through in terms of recruitment. It is a very tight market for recruiting finance directors. There has been a lot of pressure in industry since COVID, where finance directors have been a hot commodity—that's probably one way of describing it. And we've gone through a process to secure a new candidate who we are looking forward to joining the team. We've also got to be mindful that, when we do appoint new directors to the company, we go through a consent process, which again, has gone through the Government and Holdco as well.

And I would add that he's obviously on a notice period.

Yes, he's on a substantial—

Substantial notice period.

Okay, thank you for your response. Can I now bring in another Member to take up the questions, Rhianon Passmore?

Thank you very much, Chair. We are three years into the five-year rescue and restructuring plan. So, how do you, and I suppose we, assess the effectiveness of the plan against those objectives?

So, maybe I'll kick off and then other colleagues will come in. I suppose, at the most summarised level, the airport is still with us, doing well, has had a good summer, and I would argue therefore that the rescue and restructuring package has been successful and, in essence, has done what we wanted it to do.

There are a set of targets and measures associated with the package, which I updated committee on in my letter back in August, and most things are on track in the way that we expected, including in relation to draw-down and associated money, and, fundamentally, we think that it has done the job that we needed it to do.

There is more to do to lock in the recovery and build on it, as we move into the next phase, and the airport and the hinterland around the airport has huge potential to offer economic value to Wales and to south Wales as a region. And I think it’s important that we build on that platform that we’ve created effectively through the rescue and restructuring package. But that would be my headline assessment, Ms Passmore. I might just ask if Stephen wants to add anything in terms of more detail, and then it might be worth us just asking the airport how they feel about it all as well.

So, yes, I agree with Andrew that the package has fulfilled its primary function, which was to support the airport through what's been quite a long-tail impact from the pandemic—perhaps longer than people anticipated—and it's worth remembering the huge degree of uncertainty that there was around how the industry might deal with the pandemic, back in the early days, and we made our very best estimates about how things might unfold. It’s easy to say in hindsight how things have gone. So, we are very comfortable that it has protected the airport through those long-tail issues.

But, as Andrew said, there are still residual impacts from the pandemic. It’s certainly been more of a challenge for some regional airports to recover fully from those impacts of the pandemic. We think the airport team have done a fantastic job in those circumstances, to get Cardiff Airport to where it is today, and provide that really solid and stable platform for a future that we hope will be very positive indeed.

Andrew, are you okay if I come in next?

Yes, briefly.

So, Rhianon, thank you for the question—it's a great question. I think it's also good to reflect on what our purpose is as the airport. So, we’re the national airport for Wales, providing economic benefits, jobs and ensuring global connectivity. One of the key points of the rescue and restructuring agreement was to ensure that the airport stayed open and functioning during the COVID process and the recovery process.

There was a recent economic assessment done for the Welsh Government from Grant Thornton UK LLP that has been used as part of our preparations for future investment plans, which we’ll come on to later, but that was indicating that there’s over £200 million-worth of economic value being generated from the operation of the airport as a company, as GVA to the Welsh economy annually.

We’re fundamentally running Cardiff International Airport Ltd as a business; we operate Cardiff Airport and we also offer St Athan Airport for the Government, and in the region, in the Vale of Glamorgan area, between the two airports, there are over 4,000 employed off the back of that. Keeping all of those jobs gainfully operating and employed is critically important for Wales. There are over 50 companies operating over the two sites. The largest employer is British Airways—over 750 jobs there. They’ve been here for over 30 years; there’s a long-term partnership here with Wales.

The other really big customer here in Wales, which a lot of people lose sight of, is TUI. They’ve got over 550 staff in Wales, 28 stores and a major call centre right across Wales serving the operation that goes out of Cardiff Airport, with over 100 staff operating here, who are pilots, cabin crew, engineers, and all of that is ultimately giving economic value to Wales, plus also offering choice to people living in Wales to be able to take their journeys. There are 15 airlines regularly making use of the airport. There are over 30 routes. The airport itself is a gainful employer with over 310 direct staff, and, from this perspective, this is where the rescue and restructuring agreement was critical to make sure we were able to maintain that momentum and rebuild from there.

Okay. Thank you. That's a good overview. I'm going to move to my next question. Obviously, you've mentioned that you've had a good summer. You've also mentioned the hinterland opportunities around the airport. But, if we look at some data, there was a decrease in passenger numbers compared to other major UK airports in 2022-23. There seems to be a revision now within the Welsh Government's most recent update consequently, and the airport is now, I believe, two years later, in its anticipated 1.3 million passenger level now by 2028. So, what are the implications of that two-year delay for the airport, and why is that the case in terms of that lower figure than anticipated in 2023? And that's to the airport.

Thank you. So, in terms of the reasons for the delay, I don't know if you recall, we had an airline here called Wizz Air that was operating and actually pulled out. That was part of our growth plan to grow back with that airline. That was replacing some of the capacity we'd lost from 2020. That fundamentally set us back while we'd been trying to replace that capacity. The growth this year, January to August, has been 7 per cent growth at the airport in 2024 so far. Yes, we are short of the targets that were set out, but that's fundamentally because we've not been able to replace quickly enough alternative carriers. Now, the reasons for not being able to replace alternative carriers is there is a lot of choice in the marketplace for airlines to fly their aircraft, there is a shortage of aircraft and crews, and airlines are focusing on fast return on their investments, opportunity costs and development for their assets, and are fundamentally serving the bigger markets first. So, they're seeing bigger market opportunities at bigger airports and they're putting their capacity into those bigger airports first and foremost, so all regional airports across the country have significantly been challenged where they're smaller airports in terms of recovery. We're not on our own in this in Cardiff. Some of the peers across the UK have had similar challenges and, unfortunately, one of the airports has been closed because their shareholders were no longer able to keep that particular airport viable and operational. But, from our perspective, we've been on a good growth trajectory now that we've gone through the full 12-month effect of Wizz pulling out, and we're now growing again. There's been good growth this year in particular with TUI at 7 per cent growth for us and Ryanair's 19 per cent growth for us. Ryanair are now doing five routes, TUI are doing 25 routes. As I mentioned before, TUI's a rather large employer in the area. We've also got further growth expansion plans into next year as we grow with our airline customers and future customers.

Can I just interrupt? I mean, but how does that delay, and obviously you've given us a reason for that, in terms of the ability to acquire those carriers, how does that impact on your ability to meet your cash requirements?

Ultimately, in terms of our ability to meet our cash requirements, we've been very, very focused on tight cash management, operational management. We've got some significant regulatory cost control activities that need to be dealt with, in particular where we've got to do capital investments that are related to safety and security. It is very challenging, and we have a regular dialogue with our shareholders to talk about what we can do to make sure we have suitable cash flow to be a going concern as a business.

Okay. Thank you. The next questions are also to the airport. The airport, in March of 2023, held around £15 million in cash. It had yet to meet the related grant conditions for around £13 million of Government grants, and so that amount was included as a liability in the accounts for 2022-23. So, does this omply, or not, that you actually have drawn down the rescue and restructuring plan grant in advance?

I can answer that.

Yes.

So, the way we've drawn down the rescue and restructuring agreement has been in line with the actual agreement terms. Where we've had a cash balance that's remained high, we've been preserving cash to maintain operational compliance, but we've also got a load of capital expenditure programmes that we're currently in the process of dealing with. There are over 40 major projects we're working on, and the most significant one that we're currently dealing with is a next generation security project, which we can't go into too much detail on in a public forum, because the Department for Transport have asked us not to. But, ultimately, it's making sure that we've got the right cash in place to be able to sign the contracts and actually ensure that we're a going concern at the time of signing accounts, as well—

But you have actually drawn down in advance. Is that correct?

Yes. We've drawn down in line with the actual agreement.

Yes.

Okay. So, in need, in terms of that qualification. Thank you. I'm going to move on.

So, what's your current cash position, please? And how much of the rescue and restructuring grant have you drawn down but not yet recognised as income since it's not met the related grant conditions?

In terms of the balance that remains to be drawn, which is probably the easiest way to answer that question, we have drawn down £42 million of the £42.6 million. So, as I understand it, at the moment, we have £600,000 left to draw down, and I believe, Steve, you can confirm that that's the case from a Welsh Government perspective.

Yes, I can. Yes.

And that's not recognised as income. Is that correct?

Correct.

Yes, that's correct.

Thank you so much. I'm going to move quickly on.

In May 2023, the Welsh Government told the committee that it understood that the airport would be updating and publishing a new version of its environmental flightpath document in due course, which would map out the pathway to net zero. Have you done that and, if so, is it publicly available? Or, when can that be expected? That shouldn't be a lengthy answer.

Are you happy for me to answer that, Andrew?

Yes.

Yes. Thank you, Rhianon. I appreciate the question. We've mapped it out. We've been working with Government officials. We were in discussions with the Deputy Minister for transport at the time in terms of what we do with next steps. We're still going through that process in terms of where we're at—we're finalising and publishing it. But, to give you some detail in terms of what we've achieved so far, the carbon emissions are down by over 60 per cent in the last four years from 1,700 tonnes to just under 600 tonnes of carbon dioxide annually—that's in scope 1 and scope 2, where we're obligated to focus our attention on. The aim is to reduce that by a further 50 per cent over the next five years. We're doing things like taking on board electric vehicles, building into our operational fleet. We're powered entirely by renewable energy sources. We're heavily focused on recycling and zero waste to landfill. We've reduced our natural gas consumption by 30 per cent. We're replacing assets at their end of life with modern, more efficient technology. The affordability is part of the challenge, but that's where we're using the finances. We're restricting operational activities in terms of ground running of engines during anti-social hours. We're using continuous descent operations. We're encouraging the use of single-engine taxiing. We're introducing replacement programmes on lighting, as we need to reduce that, as we go through that. And we're also working very closely with our partners on the reduction of plastic consumption. There is a whole raft of other activities we're doing. So, we—

And I'm sure—. That sounds very interesting. With regard to when that's going to be published, have you got a timeline on that? I've got another question that I need to move on to.

Sure. So, in terms of a timeline, we're working through bits and pieces there with Welsh Government officials. We're also, at the same time, going through a CMA process for future investment in the airport. And, bearing in mind that we've also got carbon net-zero targets of 2050 to achieve carbon net zero. This is part of the investment plan, so, we're not going to be going into that in a public dimension at this stage.

Thank you. It would be useful for us to know when that will be published.

Finally, in regard to the Civil Aviation Authority's accessibility report 2023-24, in regard to the treatment and accommodation of passengers with reduced mobility and disabilities, I believe Cardiff was one of five airports that was rated 'needing improvement'. So, can you outline those actions, please, in light of that finding to improve those experiences? There have been some very high-profile media reports of issues around accessibility, not necessarily with Cardiff Airport, but with other modes of transport, and it's very important to us that this is as good as it can be.

Absolutely. Thank you for the question. It's a great question, because we were pulled up by the CAA on this particular topic, and it was actually to do with data reporting and the way the data was reported to the CAA as to how we process the passengers that require the assistance. Our special assistance programme is very, very good and a lot of the feedback we get from the customers is it's exceptional and they really appreciate it. We actually had a back-of-house system that changed over last year, and the reporting of the information to the CAA didn't meet the same standards as we were using on the previous systems. So, there was an error in the way we were reporting information. That's where the recommendation for improvement was, and we've taken action straight away and improved that immediately. So, the rest of our programme—. I'm very happy with the programme, and all the customer feedback we're getting is they're very happy with the programme. And our staff work their socks off to provide an amazing product here, and we really appreciate everyone's efforts in that.

Thank you very much. Thank you, Chair.

Thank you very much. Could I just ask a question very briefly on that final point, in terms of disability and people with hidden impairments, perhaps neurodevelopmental conditions, neurodiversity or sensory loss, in addition to those who have physical disability, like wheelchair use and so on? So, in terms of hidden disability, what training and performance management do you have to enable your staff to respond appropriately to the needs of such passengers?

Thank you, Chair. It's a really good question. It's a really good topic in terms of where we are with awareness. It is a programme we have been running since about 2017. We have what's called the 'sunflower lanyard system' here. A lot of airports actually sign up to this programme. When a customer advises us through the special assistance system, we issue the sunflower lanyards. All of our security staff and our passengers-with-reduced-mobility teams and other special assistance staff are trained on how to recognise that there may be a hidden disability here. There may be something that we need to treat that customer with—an extra level of care—to give them a better experience through the airport. It's a programme we've been running for at least seven years now, I believe, and it is a programme we continue to invest in and we make sure our staff are properly trained in that.

Okay. Thank you. If I can bring in Adam Price, who will take up the questions now.

Iawn. Diolch yn fawr, Cadeirydd, a bore da i bawb. Dwi eisiau canolbwyntio ar sganwyr diogelwch cenhedlaeth newydd, rŷch chi eisoes wedi cyfeirio atyn nhw'r bore yma. Y cwestiwn cyntaf yw a oedd yn wreiddiol yr amcangyfrif ar gyfer cost cyflwyno'r sganwyr newydd yma wedi ei gynnwys yn y cynllun achub ac ailstrwythuro?

Yes. Morning, Mr Price. There was an element of the rescue and restructuring plan that included funding for the scanners. I think a combination of factors, such as the cost of the kit on the one hand, and there are clearly restrictions where you can go for supply—we can only say a certain amount about that today for the reasons that Spen outlined a few minutes ago—. But, partly for that and also because of operational factors at the airport—and Wayne and Spencer might want to say a bit more about that at the moment—it meant that the costs ultimately proved to be higher than the original estimate. So, there was a component, yes, in the rescue and restructuring plan, but, through an equity arrangement, we've made more money available to the airport to get that work complete.

O ran y ffigwr yma o gost ychwanegol o £6.6 miliwn, hynny yw, sut ddaethoch chi i'r ffigwr hynny?

We probably need to bring colleagues in from the airport, but effectively, these scanners are going into a hall that, I think, was designed and built in the 1970s. Work was done initially, I think, Spen, to have a look for asbestos and other issues. I think that, upon closer inspection, when we got going with the work, we found more issues to address. So, the costs are a reflection of costs in the supply chain, but also the work associated with getting the environment ready for the scanners.

Yes, Andrew. Thank you for that, and good morning, Adam. It's a great question. It is a significant challenge to put new equipment into an operational environment and make sure that we maintain the current operational environment to the regulatory standards that we need to maintain. To do so, we've had to take a building from 1972, and vacant space in it, and reallocate that space to make sure that it is fit for purpose to put the new equipment in, while maintaining full operations on the current equipment.

That was where the asbestos challenge came in. There was a major strip-out of kitchens and other vacant space that was effectively mothballed for a number of years during COVID. All of that area has effectively been remodelled, and unfortunately, because of the significant increase in labour costs and other equipment costs post COVID, we were caught out on the significant cost increase. But it was absolutely budgeted in the rescue and restructuring agreement, at just over £3.4 million.

If I could add as well, Mr Price, that the technology cost more than doubled. The original estimates were made in 2018 and 2019, and it's been well documented—and I'm sure that everyone is aware—that technology costs, in particular software, escalated during that period. Also, there is a limited number of suppliers. We can't go into the details, but as Andrew mentioned, the number of suppliers for this kit is very limited. There is demand across the globe for this type of technology and equipment. Across Europe, as I'm sure everyone is aware, the requirement was made—a regulatory and legal one—and the suppliers were in a strong position. That's probably the best way that I could summarise that.

Iawn. Cwestiwn i Andrew Slade: pam oeddech chi wedi penderfynu darparu'r cyllid ychwanegol yma ar ffurf ecwiti yn hytrach na grant neu fenthyciad?

We took advice on what was the best route, and the advice was very clear that this was the best way to go. It keeps value in the business. It doesn't form then just another loan to add into the mix. And it means that it is compliant with the rules that are set out, not least in relation to subsidy control, but also what Governments can and can't do in respect of costs associated with security. So, we were very clear. We took advice on it, and this was the best route to go down.

Pam oeddech chi wedi gwahaniaethu yn y ffordd yr oedd yr ecwiti yma wedi cael ei ddynodi? Hynny yw, mi oedd y cyfranddaliadau yma yn wahanol i'r cyfranddaliadau eraill. Mi oedd gyda nhw hawliau ffafriol mwy na'r cyfranddaliadau blaenorol. Beth oedd y rheswm dros hynny?

Again, it was part of the advice that we took, but I think that I will bring—if that's okay—Stephen in on this, because I know that he was closely involved in this at the time.

Yes. Thanks, Andrew. As you alluded to, we had to make sure that the process for providing the funding to the airport was compliant with the new Subsidy Control Act 2022. To do that, we had to make sure that any funding of this nature that was provided through equity was done on the correct market terms. The advice that we had suggested to us that it would be better to have two classes of shares, with the second class of shares for the money for the scanners, with different preferential rights over them, to make it compliant with market operator principles.

Y cwestiwn olaf i'r maes awyr: pryd ŷch chi’n disgwyl i'r sganwyr newydd yma fod yn weithredol, a pam mae wedi cymryd mwy o amser i chi nag yw e mewn meysydd awyr cyhoeddus eraill, fel Maes Awyr Rhyngwladol Teesside?

Thank you. There are a couple of points there. First of all, we purchased the equipment and it was due for delivery—to make sure we were updated and operational—earlier this year. We were due to hit the deadlines. However, the supplier we were with was a different supplier to what Teesside chose. They hit delivery supply chain issues, and they had problems being able to deliver to the airports that had contracts with them. In the UK, the airports that are contracted with this particular supplier are Leeds, Liverpool, Manchester Airports Group—so, that covers East Midlands, Stansted and Manchester. It's also gone in—. I'm just trying to think of the other one. There's Cardiff, and then there are quite a lot of airports across Europe, and then a lot of airports in the US. It is a US manufacturer. They had supply chain issue challenges. They told us there'd be delayed deliveries, and then we sought alleviation from the Department for Transport. We're not allowed to go into too much detail on that in a public forum. We've been specifically asked by the Secretary of State for Transport earlier in the year, and the Department for Transport, not to discuss it in a public forum. Our obligations are to get this equipment ready and operational while we've got the alleviation in process. We have got the equipment on site now. We're going through final preparations, and we should have it operational later this year.

Ocê. Diolch yn fawr i chi.

Diolch. Thank you. Can I bring in Mike Hedges to take up the questions, please?

Diolch, Cadeirydd. The first question to the Welsh Government: what has triggered the discussions with the airport and the longer term strategy, given the rescue and restructuring plan was for five years, to March 2026, with targets set for the airport beyond the period covered by it?

Sorry, we can't hear you, Andrew.

I beg your pardon. Can you hear me now?

Yes.

Sorry, Mr Hedges. The first mission was to get the airport back on its feet and on the right trajectory after the pandemic. We're now moving into the next phase, which is about long-term investment, based on economic growth, the potential of the airport and the surrounding area, through to St Athan and Bro Tathan, in relation to aviation, aerospace, advanced manufacturing and a range of other sectors. That's the focus of this next stage in the airport's journey, and that's why we have got on and made our subsidy application to the Competition and Markets Authority.

Thank you for that answer. You talked earlier—or somebody did—about the importance of TUI. I absolutely accept that; it's one of the two major mass holiday transporters. But you haven't got Jet2. And this is not giving any secrets away: Jet2 is the other large transporter of people on holidays. It exists in lots of other airports. You haven't got Jet2. Have you a strategy to bring Jet2 to the airport?

I'll bring Wayne and Spen in, in a moment. We can't get into too many specifics about future plans or, indeed, in relation to future companies. You are quite right that having certain routes available, and having certain types of offer, are an important part of the mix, and that's in the thinking in the subsidy application that we have made to the CMA and the subsidy advice unit within the CMA. But it's also true to say—and you touched on it a bit already, Mr Hedges—that patterns of aviation have shifted post pandemic, along with a number of other modes of transport. I don't know whether Spen wants to talk a bit about what's happening out there in the industry.

Sure. Thank you. Yes, there is very strong demand for package holiday travel. It's been very significant since COVID, because of the protection it brings. To an extent, we've been very fortunate to still have TUI. Thomas Cook, you may recall, went out of business just before COVID, and they were the other major significant player in the UK marketplace for package holidays, and, again, they were a large employer in the area because of their retail stores. It's been very challenging to replace what we lost with Thomas Cook. Discussions with Jet2 do take place, as they do with all other airlines. We talk to a lot of airlines about flying to Wales and investing in Wales as a marketplace. Similarly, we have talks with EasyJet, with Ryanair, and all of those operators are telling us that, at the moment, they do not see Wales as a significant marketplace they want to do their investments in, yet. And that's part of our rationale as to how we then convince people in the future that they do want to invest in Wales—as employers as well as partners for future offerings. But most importantly, our incumbent airlines are growing with us. While Ryanair, as I mentioned before, are not setting up a base yet, we're actively in discussions with them about how we can do that as soon as possible. With TUI, we're very fortunate to have the base with us, and are growing with that. And the likes of Emerald Airlines are operating the service on behalf of Aer Lingus to Belfast. They're growing with us. We've got Loganair operating a service with connectivity to Edinburgh. We've got KLM operating to Amsterdam and the world via the hub. We've got Vueling operating to Spain. So, there are a number of airline partners we're working with on growth programs, too.

Thank you for that. I was in Morriston working men's club last night, and they said, ‘Why haven't we got Jet2?’ I flew from Birmingham in the summer to Verona airport. That was a very full plane going from Birmingham. In fact, it was a completely full plane going from Birmingham. And what I don't understand is whether there's something that you are not doing in order to attract Jet2, who fly from an awful lot of other smaller regional airports.

Andrew, are you okay with me directly answering?

I think so, because we are straying into understandings of the sector, and you are better placed to answer on that. But I think just to reinforce the point I was making, we've got to be a bit careful about getting into too many specifics around companies and plans, for the reasons I outlined at the top of the session in relation to the subsidy application. But anyway, over to you, Spen.

Thank you. Mike, again, great question, and I'd probably welcome all of the committee members to come to the airport to have a session with us. We would welcome opportunities to have a private briefing with you all. Our dialogue with airlines, whether it's Jet2 or any other airline, is, 'If you're going to do regular services from our airport and grow your business with us, we don't actually charge you landing fees and parking fees. We offer you significant incentives. We charge you per passenger that gets on the aircraft, and we work our socks off to help promote those carriers flying from the airport.' That is very similar to the kind of incentives offered by airports all around the country, with the exception of one major airport at Heathrow that doesn't need to do that. But from our perspective, in our dialogue with the likes of Jet2, the likes of EasyJet, they're fundamentally telling us that they're very happy serving the Welsh market by flying from another airport. And you've given us an example there—that you're quite happy to go to another airport to get on their aircraft. That is part of our challenge when we're dealing with these airlines. We're trying to convince them to invest in our marketplace, and we're trying to convince them that they need to work with us to actually service the market that is demanding their product from our marketplace, and that is an ongoing dialogue that we are actively engaged in.

I won't press Jet2 any further. One of the great strengths of the airport when it was owned by the three local authorities—when it was making a profit and doing incredibly well, I may add—was that KLM offered a jump-off point. You could go from Cardiff to Schiphol, from Schiphol to almost anywhere in the world. I flew from Cardiff to Aarhus via Schiphol. I've flown to other places in Europe via Schiphol. Why isn't KLM used as the first stage of a journey? And what about using Dublin as the first stage of a journey from Ireland to the United States?

Thank you. KLM is being used very heavily from here. Their flights have been operating for over 30 years at the airport. I think it's 35 years, actually. Their planes are full. They are critical for Wales, actually, because they are the major partner that brings visitors to Wales, as well as giving people living in Wales the opportunity to link to the world very easily via Amsterdam. Their flights are rammed, and we're asking them to put more capacity on. We're heavily promoting their services. Routes like Dubai and New York are up. Dubai was up 220 per cent this year via Amsterdam. The demand is very strong there. Where people have used the service, they realise how good it is and actually how easy it is, and that customer loyalty is very strong.

In terms of Dublin, we've been actively engaged with airlines about putting on connectivity via Dublin. At the moment, there are limitations in terms of the airlines' desire to want to do that quickly; they're doing that elsewhere in the bigger markets. You may recall that I mentioned earlier on that airlines are actively choosing bigger markets to do their investment. There is actually limited resource in terms of aircraft supply and capacity, and they're using opportunity costs as the primary function to develop their return on investment.

If I may, Mr Hedges, I'd add that the key issue there is that there is a worldwide shortage of long-haul-suitable planes, both because of supply chain issues, which are well documented, and also I won't name individual manufacturers, but people who are on the committee will be aware of problems. Also there is a shortage of pilots and trained cabin crew, and, as a consequence, those in positions of power in the airlines are making sure that their long-haul assets are fully utilised in main markets.

But Dublin wouldn't be long haul, would it?

It's a similar discussion—connecting to the long-haul programme.

It's connecting to the long-haul programme.

Is it right to say that, through Cardiff, you can get to I think it's nearly 150 global routes, best part of, not least through Schiphol?

Yes, you can pretty much get anywhere in the world via one stop at Amsterdam; it's very, very easy.

And that works very well, speaking as somebody who's used it in the past.

I'll move on to another point. This is to the Welsh Government. In March 2021, the Welsh Government explained the process it had conducted for the rescue and restructuring plan, including a detailed restructuring report by an independent consultant, which was corroborated by an external party, which was scrutinised by its lawyers, and backed up with advice from a Queen's Counsel. What process have you undertaken for the latest strategy and proposed package of support?

So, again—. It's a very good point, Mr Hedges. We've gone for external advice to help us formulate the plan and, indeed, the application through to the Competition and Markets Authority. We had a range of external advice across a whole number of different disciplines to make sure that we are testing thoroughly what's proposed. We've used the airport board with all of its experience and the airport's team, with all of their experience, and the management team, to put this work together. Holdco have looked at it in depth. So, we have used a range of different mechanisms to challenge, test, probe, kick the tyres of what we're proposing, to make sure what we're proposing makes sense and stacks up. I don't know, Stephen, if there's anything else you can say about the process we've used, but I would want to reassure the committee that we have taken lots of expert advice, and we have used lots of different mechanisms to test what's in the plan.

Yes, thanks, Andrew. There's not too much more to add; your answer was very comprehensive. Just to say as well that we've drawn upon expertise from across the Welsh Government as well, so a whole range of different teams within the Welsh Government and various specialisms and disciplines have been brought to bear to help us to develop the strategy.

That makes the question even simpler. Have you or have you not used a King's Counsel?

We can't hear you, Andrew.

Sorry. We have sought appropriate legal advice. There we are—that's probably the best way I can—.

It would not be telling us anything that is commercially confidential to say you have or have not used a KC. If you are unwilling to answer that question, I will take the assumption that you have not used a KC.

I don't know; Stephen, what do you think?

It might not be appropriate to name the specific lawyers that advised us, but we could talk in generalities.

I haven't asked for the name of the lawyer; I haven't asked for the name of the KC. I've just asked: have you used a KC or haven't you?

So, I think we'll say, 'Yes, we have', without giving any names.

Thank you. That was a very painful way of getting there.

And my final question is that if the airport is to be successful, it'll be competing against lots of regional airports until some of them disappear. Britain has too many small regional airports for its population, and we don't have much internal flying—London, Edinburgh, Manchester perhaps, but people don't get on a plane from Cardiff to Bristol. They don't get on a plane from Cardiff to Birmingham, do they? So, we're in competition with these other airports. Airports that cover relatively small population areas—Bournemouth is one, Exeter is another—why are they able to get some of these routes?

Well, the growth plan will, to some extent, entail development of particular routes and carriers, and air service development on the one hand, but, fundamentally, this is about more than passengers and about more than airlines operating out of the airport. It's about aviation and aerospace businesses in the area; it's about aircraft maintenance, repair and overhaul. Mr Hedges, I know you know quite a lot about this area, but as Wayne was saying, in an era when getting new aircraft on stream, and also when we are looking to update and make more fuel-efficient aircraft, the MRO business—maintenance, repair and overhaul business—is hugely important, and we've got great strengths in the area.

General aviation and the private use of planes is growing as well—that's a factor. Air cargo is a factor. And then we're trying to do more around sustainable aviation technologies. So, you are quite right, there are all sorts of things happening in the regional airport market in terms of carriers and who goes where, but we don't see this growth plan as being about that. It's a component, but this is not about trying to outdo other airports on that front; it's about growing the area around the airport and the wider range of businesses, which, we believe, based on advice and our own work, and in dialogue with the airport, bring lots of economic potential to south Wales and to Wales as a whole.

Well, I'm sure Mark Isherwood would tell you it doesn't bring much to north Wales, to the area he represents, where Manchester Airport and Liverpool airport are the two airports that are his local airports. But, leaving that aside, the question is: don't you think—and I think the answer's 'no'—that the key to a successful airport is having more carriers and more passengers?

You need more carriers and you need more passengers, but that isn't the only thing that we're talking about here, and I think I might, if I may, bring Spen in to talk a bit about that. As I say, we are not looking to knock out other airports in this regard; that's not what this is about. This is about the economic opportunities afforded by the airport, which includes supply chains and it includes suppliers in north Wales, just as it does in south Wales. But I might just ask Spen or Wayne if they want to come in.

Absolutely, and thank you. Just to go back to our purpose: it's being the national airport for Wales, providing that economic value, the benefits and the jobs and ensuring the global connectivity—that's the overarching aim of what we're doing. And again, just to bring you back to the fact that British Airways have been here for over 35 years, operating in a centre with over 750 highly skilled jobs, maintaining their Boeing fleet. The engines on those fleets may be linked to Rolls-Royce, may be linked to General Electric. If it's General Electric, it could be up in Caerphilly; if it's Rolls-Royce, it could be up in Nottingham, Derby. So, the supply chain stretches right across Europe, stretches across the globe, anyway. In Wales itself, we've been developing an aerospace cluster. North Wales is part of a cluster, as is south Wales; the whole of Wales is part of this cluster. The objective for us, when we look at our dream and what we are trying to achieve here with this diversification plan, is we want to be the first choice in Wales for airline passengers to choose to take their journeys, but also to be the centre for aviation-related activities so that people can choose to invest in the area, and they can see that there's growth and development going on here.

We're in the very fortunate position of having a 24-hour runway that is suitably capable of taking very large aircraft, and we've got very large aircraft arriving pretty much every day for maintenance. We've got cargo capacity and capability. We're in good discussions with people about developing that. We've got assets that we need to grow and use, as part of the diversification plans, which, actually, in fairness, a lot of you committee members have actually been recommending we consider too. This is part of the strategy, part of the plan, of how we develop, using the assets. How do we grow the income for the business, not only relying on passenger activities? Because, as COVID demonstrated to us, when passenger activity is completely restrained and people can't travel, that part of the business falls off a cliff. We've got to diversify our programme so that we can build resilience in the business, make it a more sustainable and viable business, and avoid the vulnerability of key issues, like a decline in a certain thing that may happen. So, that's a key factor in what we're building on.

So, as I mentioned before, growing our market share, but actually focusing on the estate, growing the incumbent shareholdings to deliver on that, whether that's in terms of investment programmes, developing with our people and our systems, but also at the same time being very cognisant of the targets for net zero by 2050 within scope 1 and scope 2 emissions, and working with the supply chains to develop future technologies and incubate that.

One of the programmes we're working on—I'm not sure if you're aware of this—is we have a joint degree programme with Cardiff Metropolitan University, Cardiff Airport, and Embry-Riddle Aeronautical University from the USA, which is the leading aeronautical university in the world for developing talent. We're trying to grow talent pools in the area, make Wales a destination for people to come to learn, to educate, to develop their MRO skills, to develop their aviation management skills, and then feed into the businesses that we're bringing into these areas.

If I could add to what Spencer has just said, Mr Hedges, as well, it's important, I think, for everyone on the committee to appreciate that we have looked outside of the UK at the regional airport market, and in particular we've looked both in America and in Europe—

Can I intervene? We're running horribly short on time. We will, I think, have to move on, if Mike's content with that.

I'm not going to get any further, Chair.

Thank you. I would corroborate Mike's point that, for reasons of proximity and convenience, in north Wales, John Lennon in Liverpool and Manchester will remain the airports of choice unless people happen to be travelling to Cardiff as part of their itinerary.

One final question in this section, if I may, though: will the terms of and targets in the rescue and restructuring plan remain once a longer term strategy is in place, and why? It's a question for Welsh Government, and I'd be grateful if you could be very succinct in your response.

It's a blend of things. We need to build on the existing plan and make sure that the key components of that are followed through, but the focus increasingly will move on to the growth plan and the discussions that we're having with the Competition and Markets Authority. I think that's the neatest way to say that. Stephen, is there anything you want to add?

No, not at this stage. Thanks, Andrew.

Okay, thank you. Natasha Asghar, over to you.

Thank you so much, Chair. Good morning, gentlemen. I do have an array of questions that I want to go through with you, but there are a few bits and pieces where I may just want to do some housekeeping for myself, following previous questions that have been asked by Members.

The Welsh Government has received and approved 15 capital expenditure requests of between £50,000 and £1 million to date from the airport, totalling £4.6 million, and three that were requested above £1 million, totalling £13.6 million from a total pre-approved budget of approximately £29 million, ring-fenced until March 2026. These were investments that were called

'essential operational safety and/or security costs'—

I can appreciate scanners, et cetera—but I'd like to know, is there any way you could potentially share with the committee, either today or in written form, what exactly a lot of these expenditures have covered? Because, quite frankly, that's a lot of money going to certain things that we are absolutely in the dark about.

I think, subject to colleagues' views, we can write, in general terms, about what the money has gone towards. We can't get into specifics, partly for commercial confidentiality, and then also, as you've said, in relation to some security matters. Stephen, is that fair?

Yes, I think we could write to the committee with a summary of what those payments were for.

Great, appreciated. So, I appreciate what Spencer mentioned earlier, and I acknowledge the bi-weekly meetings that take place between the Welsh Government, Holdco and also the airport. So, I just wanted to know, when exactly was the £206 million that's been granted actually discussed?

Well, £206 million hasn't been granted. What we have done is we have gone to the Competition and Markets Authority with a 10-year plan, which in total amounts to £206 million, or just under, and we're waiting to hear back from the CMA and get their views on what we're proposing to do. There isn't any additional money that's gone into the system; this is a plan that we're talking about.

So, my question, then, going back to it: when was this plan initiated?

It's grown off the back of the rescue and restructuring process, and it's about taking the airport on to the next level. The airport is growing, its activities are growing, and we see lots of additional potential alongside all of the benefits that Spencer has set out already.

Okay. So, Mr Slade, you're still not answering the question: when was it discussed? I'm looking at months, dates, times, years.

I might bring Stephen in at this point about when the process began, but it's been in formulation for a number of months.

Yes, Andrew. I wouldn't say there was a definitive start point to it; it's been an evolution of discussions over many, many months, so there wasn't a specific point where we started this work. It’s been coming out of thinking about what we would do towards the end of the rescue and restructuring package, what’s next for the future of the airport, and discussions have evolved from those initial considerations into the plan that we’ve got today.

Still no date in place. I’ve asked both of you, and neither of you have given an actual specific time or date frame when this was actually discussed, because—

Chair—. Maybe I can provide a little clarity, Natasha. It has been something, strategically, that’s been on the operating board’s agenda every month, certainly for the last 16 or 18 months. It’s also on every agenda for the joint meeting with Holdco that we have, okay, throughout that period.

Right. The next sub-question is that Bristol Airport is investing £400 million to improve facilities within the airport itself over five years, and this is going to cost not a single dime, or not a single penny, to the taxpayer. Did you as an entity—Holdco, Welsh Government, Cardiff Airport—look into creating a similar option for Cardiff Airport?

You mean inviting Bristol Airport to give us £400 million?

No, no, not at all. Looking at private entities to potentially look into investing in Cardiff Airport, as opposed to relying on the taxpayer, which we're currently doing now.

Well, I think I’ve made this point before—over 80 per cent of the world’s airports are publicly owned. There are lots of different ownership models, as the Cabinet Secretary’s statement earlier in the summer set out. It’s not that Welsh Government is wedded to a particular ownership model; it’s about the strategic importance of the airport and the value to the people of Wales and the economy of Wales.

So, to your point, Bristol has got investment from its shareholders. We are the owners of the airport; it’s therefore incumbent on us until such time as things change, in light of what Ministers want to do, to make sure that we are putting in place similar packages of investment for our national airport. I think that’s probably the easiest way to address that.

I think, to go to a different kind of airport model, operating model, immediately off the back of the rescue and restructuring plan, would never have been a possibility, even if that was what Ministers wanted to do, and it isn’t what they want to do.

Right, okay. So, to the Welsh Government now: how has the Welsh Government determined the value of the investment, and the 10 years over which it will indeed be provided now?

I think, probably, I would refer back to the answer I gave Mr Hedges a few minutes ago. We’ve had lots of expert advice, many intensive discussions with the airport team, with Holdco, and we’ve drawn on a range of expert advice in formulating the plan.

Right. Once again to the Welsh Government: in the announcement, the Welsh Government says it will not be providing a breakdown of the funding allocation, and you say in your recent update that there’s a restriction on the additional commercial information that can be shared whilst the regulator considers the intended investment package. Will this continue to be the case now, after the publication of the Competition and Markets Authority report, and, if so, how does this facilitate actual legitimate scrutiny taking place by this committee in the Senedd?

I think that’s an entirely fair point. So, the answer is that, when we’re through the process, we will definitely be able to share more information, but we won’t be able to share information that is commercially confidential.

Okay. And, again, what conditions is the Welsh Government planning to impose for the £206 million it plans to provide over 10 years, and what will determine how the airport draws down its funding now?

That is for further discussion. At the moment, we’re getting through the first step, which is making sure that we are clear on the compliance with the subsidy control legislation that now applies at the UK level. But that is very definitely something that we’ll want to talk further with the committee about. So, there’ll be things that we’ll be looking for the restructuring—sorry, the growth plan—to deliver, and we will set those out in a broadly similar way to how we’ve done things with the rescue and restructuring plan. But that’s further work to be done as we move through this process.

Now, the Welsh Government says, for transparency, it will report regularly on the flow of funding to the airport and ensure close monitoring of the economic outcomes of investment. Can you expand on this? I appreciate what you’ve just said, but how, exactly, are you proposing to do this, and what information are you going to be sharing in the public domain? Because we've had many of these sessions, Mr Slade, we’ve had many of these tête-à-têtes with Members here on the committee, and often we’re told, obviously due to certain regulations, certain security issues—which I take on board, and I’m not condemning or criticising—. But how frequently are you actually, genuinely, going to be updating us?

Well, I think, again, that’s subject for discussion. I would suggest we will need to come back to you as a team to talk to you once we’ve gone through the process, and we’ve gone through this calendar year. It may be that we come back and talk to you in the new year, and we can discuss these points further. At that point, we'll have a decision from Ministers on the way forward and we'll be able to say a bit more. But I might just invite Stephen to come in on some of the specifics.

Yes, thanks, Andrew. I think it's fair to say that, once Ministers have made their decision on how to take things forward, we'll certainly be looking at metrics that are more focused on the economic growth of the airport and how it's delivering benefits to Wales. So, as was alluded to earlier, as part of our work in developing the strategy, we have sought a reassessment of the potential economic benefits of the airport, and I envisage that we would be looking to repeat that kind of analysis—the exact details are still to be refined, but repeating that kind of analysis on a periodic basis—so that we can monitor how well the airport is doing in terms of delivering on GVA uplifts, increasing the number of jobs, the types of jobs and so on, and they're the kind of figures that I'm sure we would be very happy to discuss with the committee in future sessions, and report to the committee on a formal basis, but there's still a bit of work to do to formulate exactly what those metrics are, and a lot of that will depend on what Ministers decide to do when the CMA process is completed. Thank you.

I just have one final question, gentlemen. I appreciate Cardiff Airport, I do. I know the general consensus is that I don't have time for the airport; I actually have a lot of personal love as well as professional love for it, and I do want it to succeed, and I think every Member, regardless of our party or our background, does want the airport to excel and do well for the people of Wales. Many times in this committee I've heard today how it's doing well, the economic growth, et cetera—that's lovely. I don't want to see the loss of jobs. I don't think anyone here does. But you cannot deny passenger footflows are still down. The EBITDA hasn't hit the mark. It's quite evident; it's clear to everyone to see. Financially, I can take COVID into account to a point. When other airports I'm seeing down the road—. You have Bristol Airport with footflow of 9.8 million; we barely cover 20 per cent of that. Do you not feel—? So, my question actually is: what happens—? I appreciate you setting targets. I appreciate that you've got plans. What happens if you don't keep hitting these targets? Are we going to keep throwing money at this? Are we just going to keep throwing taxpayers' money at this, going forward? What is your plan? Tell me, what is the back-up plan for not hitting any of these targets, because, so far, I'm not seeing much happening?

Well, first of all, I think it's very clear that the airport is on a growth trajectory. We just talked about that. Prior to the pandemic—I think; Spen will confirm—passenger numbers were actually up about 50 per cent on when the Welsh Government bought the airport back in the early 2010s. Great progress was happening at that point. COVID has had a huge impact, not just for Cardiff. A number of other regional airports, including in the UK, have been pretty badly affected and arguably worse affected than Cardiff, and we've also just heard from Spen about what happened in Doncaster, very sadly; the airport has ended up having to close. Bristol is interesting. I mean, it is a regional airport, as in it operates at a regional level, but it has a different kind of base of operation and is very well established, and I think that that has had a bearing. So, I'm not sure the comparison is a completely clear one there. Longer term—

Mr Slade, let me give you a better example. I've spoken with Ben Houchen from Teesside. I know Mike Hedges often likes to use Teesside as a comparative example, so let's go down that road. They've recovered. They are on track. They aren't relying—. If they do rely on Government funds, they pay it back. They have a plan in place. If the airport is not ever going to be a success, they have decided, they have a plan that all the entire community is agreed on. What's our back-up plan if this doesn't work?

Well, we have a number of options available to us, which would ultimately be a matter for Ministers to form a view on, but that is not where we're starting from. We are starting from a position of lots of economic benefit added by the airport every year, in the way that Spen has just described, and massive potential to do more, not just in respect of passenger numbers, which is where, for understandable reasons, people gravitate and focus—. That's a huge part of this, but there's a much bigger play, longer term, in the areas that Spen has outlined and I was touching on a few minutes ago. This is not just about passenger numbers, and, indeed, the plan is all about that kind of diversification and that wider hinterland that Spen has described. But I might just—. I don't know if Spen wants to, or Wayne wants to, come in on comparators.

Yes, thanks. Morning, Natasha. Thank you for the questions, and also thank you for the support, by the way. It is appreciated. The points here are, you know, there is a lot of regional connectivity that has come back in certain areas and hasn't come back in others. There are a lot of airports still down in the regions, not only in the UK but all around the world. There are other places that have massively bounced back quicker. It goes back to the point that airlines are putting their capacity into where they perceive to be the bigger and stronger markets, first and foremost. So, that's one of the challenges we're up against there on passenger footfall. And that's why it's critical that we've been focusing on the diversification of our income to make sure that we can actually have a balanced portfolio for the viability of the business.

First and foremost, what we're focusing on is offering choice for people in Wales, the long-term benefits to Wales, delivering economic value. Reducing the ask on the public purse is a major factor that we're focused on. We had been asked by the First Minister in 2020 to, 'Keep the airport alive, keep people gainfully employed but continue to reduce the ask on the public purse where you can.' And that is front and foremost in our decisions every time we do things. And developing the business in a viable, sustainable manner through diversification is a massive part of what we're trying to do here, but also fitting with Wales's global connectivity ambitions—so, trying to make sure we can bring airline partners in here that do fit those ambitions. You heard Mike talk about KLM before; we are talking actively to a number of airlines about global hub connectivity. We're always talking to people about who they can bring in here to put investment into the place to create more jobs.

British Airways is a significant employer here, and, if this airport was closed, there would be a long-term partnership between Wales and British Airways that would be lost. So, there would be obligations on relocating that to England somewhere; we don't really want to go down that line at this stage. For us, our focus is on how do we make sure this business is viable, sustainable, to keep all of those jobs in Wales. And the 4,000 jobs employed off us so far is a testament to that, and that's where the rescue and restructuring agreement has been focused. And now our energies are really, really focused—. And thanks, as well, to some of the comments you've made, where you've said and you've encouraged that we should be focusing on the diversification of our income, those are the paths we're going down, and we've been having those discussions for a long time about how do we secure that business, how do we grow. But a lot of people don't just want to grow in Wales without partnership and investment, and that's part of what we need to do here as well.

Thank you, Spencer. I'm all for diversification, but I'm equally thinking about profitability as well, which is something that I—. I know we've talked about passenger numbers and I know Mr Slade said the focus is on passenger numbers; I'm looking at how much money we're actually bringing into the public that's investing so much into it. And, right now, I'll be honest with you, after hearing what I've heard, I don't see the public making a profit from the airport as of yet. I live in hope, but I hope you're going to be able to fill me with some confidence, because, as it stands, I don't have much of it. Thank you very much, Chair.

Okay. Thank you very much indeed. Clearly, a plan is only a draft plan until it incorporates the who, what, why, when, where and how, and, clearly, the CMA conclusions are going to be key to that, as you've indicated. Mr Slade, you've committed to provide further information after the CMA report is published. Can you tell us what information that would include? Clearly, you can't be specific, but the areas to which that information would apply.

Well, as I mentioned earlier, Chair, if you wanted to have a few minutes in a private session, I'd be very happy to give you a little bit more detail about what's gone into the plan that has gone into the CMA. You've touched on this already; we need to be careful to preserve the integrity of that process and not get in the way of the CMA's work, which is one of the reasons why I'm being a bit reticent today about what we can and can't say. The plan is, I think, subject to any points that Stephen wants to add, that the CMA will report by the beginning of October. There's then a standstill period. There's then a period where people can lodge review applications, or challenges, if you like. Through that period, we'll be talking to Ministers, and Ministers will then form a view on the way forward, in light of what the CMA says. Because the CMA may make observations, they may say, 'We'd like these points to be tested a bit further'' There are a number of things that we may need to respond to in terms of the plan, and then Ministers will form a view on the way forward. And whatever we can reasonably provide to the committee at all of those points we will do.

As I say, I'm very happy to come back with colleagues to talk further with the committee, probably in the new year, because that allows the process to go forward. And I would also just encourage the committee, if there's an opportunity for you to do that, to take up Spen and Wayne's invitation to go and visit the airport—I would suggest once the scanners are in. You can see the operation but also have a look at the potential of the airport, not just in relation to building on passenger numbers, but also that hinterland that Spen and Wayne and Stephen and I have referred to, about that wider programme of economic development, which we think is going to be so important.

Well, committee will consider that in its own private session and the clerking team will follow up on the committee's decision then. So, are you, therefore, not able to tell us what areas of information, without being specific about information itself, would be then brought forward?

I don't know whether Stephen can assist in terms of areas. We can provide a bit more detail about the nature of the plan. There will be certain things that the CMA publish anyway, which will be available, and Spen has already referred to some of the expert inputs that we've had, and I'm sure we will be able to share at least a summary of those if not the full detail. We've just got to be very careful not to get in the way of a very important, formal process that we're engaged in at the moment, but also not to get in the way of commercial confidentiality and the need to protect the airport in terms of how it conducts its operations. But I don't know if Stephen can add anything further on information provision.

Yes. Thanks, Andrew. Just going back to the broader timeline that you outlined, we will need to see what is in the CMA report before we can consider which aspects of the plan we can talk about in—[Inaudible.]—because if, as Andew alluded to, there are areas where we do need to contemplate refinements of the plan or have further discussions, then clearly there’ll be areas where we wouldn’t be at liberty to discuss more details. Certainly, I think when Ministers have made their decisions on the way forward, we’ll be able to be a lot clearer on the path forward and the nature of the final plan that Ministers have approved.

Okay—

And on reporting requirements, Chair, as you were pointing out earlier and colleagues as well, talking to you about those and how we update the committee on a regular basis.

Okay. You made a few references to offering to provide some information in private session. Our clerking team will follow up with you over proposed dates and times on that.

We understand that the CMA report will be non-binding. Is that your understanding also, and, if that is the case, is it your understanding that the CMA will nonetheless keep a watching brief in the context of performance against their report with a view to possible further engagement down the line?

I don't want to put words in the mouth of the CMA, but I would expect them, as in other areas of their activity, to keep an eye on everything that's going on, especially where we particularly flag points to them. Ultimately, it is for the public authority—in this case us, as the Welsh Government—to decide how to proceed, but we do it on the basis of the advice provided by the CMA. I think that is the correct way to describe it, Stephen, isn't it?

Yes, that's correct. Yes.

So, technically, it is non-binding. Is that correct?

Yes, but it would be—what's the word—a bit heroic for us to be heading off with a particular plan if the CMA was telling us something very different, if I can put it like that. So, we would be very guided by the CMA's advice.

Okay. The last few questions from me: in an opinion piece, published in WalesOnline in August, a former airport non-executive director said,

'Reading between the lines, I judge that Cardiff Airport is in serious trouble now.'

How do you respond, and what are the implications for the airport if the Welsh Government was not to provide the additional funding?

Well, that's not my view, and I don't think it's Welsh Ministers' view, and I don't think we would be putting an application into the CMA unless we saw the growth potential of the airport in all the ways that we've already described. And I don't think there's much more that I can add. I don't know whether Stephen or Wayne or Spen want to add anything.

Nothing to add. I would agree entirely with your observation, Andrew.

Okay, a not-unexpected response. It's clear the key point is that he is no longer a non-executive director and perhaps feels freer to talk.

This question is for the Welsh Government: the former airport non-executive director also noted the Welsh Government’s acquisition of the airport has 'come at a heavy cost'. How is the Welsh Government, therefore, balancing the cost of its continued support of the airport with the competing demands for public resources in the current financial climate?

I think it forms part of the discussions we have on a regular basis, on an annual basis, on a multi-annual basis across the Government about where we put our energy and our effort and our money, and then Ministers take a view on all of that. Our commitment to Cardiff Airport is clear. We see real opportunities for growth in the way that we've set out, hence the subsidy application to the CMA, and that's what is one of the key factors that obtains here. Ms Asghar mentioned earlier how you measure value to the Welsh citizen, and we just go back, at least in part, to the points that Spen was making earlier on: £200 million-worth of annual GVA contribution from the airport and its operations, probably in excess of 5,000 jobs supported either directly or indirectly, or induced jobs. These are hugely significant economic contributions to Wales, and we see great potential for more.

Okay. Again, a question for Welsh Government: the former non-executive director suggested the Welsh Government has directly incentivised airlines. What incentives, therefore, has the Welsh Government provided? How does it balance doing this with the airport running on a commercial basis and operated at an arm’s length from the Welsh Government?

That is a good point. We own the airport, but we don't run it. That's the first thing to say, and we've got an expert team to run the airport and we've got a highly skilled Holdco acting on the Welsh Ministers' behalf, looking at the airport's performance and how it goes about things. I don't know whether Stephen wants to come in on the specifics about money. Again, we have to be a little bit careful because of commercial confidentiality requirements.

Yes. Commercial negotiations with airlines are the purview of the airport leadership team, so it's not something that Ministers get directly involved with, it's not something officials get directly involved with. It's Spencer and his team that are in the lead for all commercial negotiations with airlines.

Has the Welsh Government directly incentivised airlines, yes or no?

[Inaudible.] Can you hear me?

Yes, thank you.

So, as far as we're aware, since 2013, since the Welsh Government has owned the airport, there have been no direct arrangements between the Welsh Government and any airlines. All activities take place between the airport as commercial activities with airlines. That's part of our commercial business at arm's length focus. The particular non-executive director you're talking about left the business in 2015. There were some reasons why he left the business, so we're not going to go into other details on that particular topic, but the point here is we have to give incentives to airlines to grow business as we talk about investment programmes. The Welsh Government does not, as far as I'm aware, get involved in any direct dialogue with an airline. In the whole time they've owned the airport, they've never once done that. They've always asked us to do it—not asked us to do it directly, but they've said to us, 'You're responsible for running the airport. You deliver what you think is the most appropriate for running that business in a viable, sustainable way that does deliver economic value to Wales.'

Okay. Does Mr Slade wish to add anything to that?

The reason I was reflecting, Chair, was because I think there have been opportunities for Ministers and others in the past, senior officials, to lend support to the airport when they are pursuing particular markets. But that's different from the direct dialogue and engagement that Spen has just described. So, I was trying to work out in my head whether we'd been involved in anything directly. But my recollection is exactly the same as Spen's—I don't think we have been, unless Stephen can't think of anything else.

No, I think you've characterised that very well, Andrew.

Okay, so you're effectively saying that this former airport non-executive director was incorrect in his statement.

Well, I haven't seen the points in question. I heard what you just read out, but I think the point there is that the Welsh Government hasn't been running out and talking to people, giving them money to come and run operations out of Cardiff Airport. That's the point I'm making.

Okay, thank you. My final question, again to the Welsh Government: in announcing the longer term strategy, the Welsh Government said it's open to exploring different ownership models in the long term and is open-minded about how the airport is owned in the future. I'd be grateful, therefore, if you could expand on what conditions would need to be met for a change in ownership. Would this be influenced by the need for continued funding of the airport beyond the proposed investment, and does the Welsh Government have an exit plan?

We don't have an exit plan in the way that you frame that point. We are committed to the airport, and Ministers are very clear that Wales needs to have an international airport, and the strategic value of the airport, not just for that reason. International travel, bringing people to Wales, giving Welsh citizens the chance to go further afield through their own national airport, but also the very significant economic contribution made by the airport and the potential around it mean that the most important thing for Ministers is that we have that capacity through the airport. As the statement set out in the summer, in the longer run, different ownership models might be appropriate, and Ministers aren't slavishly stuck to one model or another, but those would not be things we'd be we be forming a view on right now. Obviously, we need to hear from the CMA on what we're proposing to do in the subsidy application and provide advice to Ministers off the back of that, but these are questions for down the track, and certainly no particular conditions are set for one model or another.

Spen has already referred to, and a number of you on the committee have referred to, the need for the Welsh Government to be prudent with the use of public money. That's uppermost in my mind as an accounting officer, and it is for the airport in the running of its operations. But, on the other hand, the strategic importance of the airport means that we need to continue to support it for now, and that's why we're coming up with this long-term plan for growth, to allow it to achieve its potential.

Does the Welsh Government remain open-minded about how this regional airport, not national airport, is owned in the future?

But it is our national airport, as in it is the airport of Wales—

Not if you live in the north it isn't.

—and even if different people in different parts of Wales are using different airports—[Inaudible.]—categorise it. But, yes, we're not fixated on a particular model. What Ministers are keen on ensuring is the strategic importance of the value of the airport to the people of Wales, both in terms of having a national airport and international entry point and exit point for Wales, but also that economic contribution that we've kept coming back to repeatedly through this session. So, it's more about the strategic value of the airport; it's less about ownership models. But these are questions for the future and in the longer run, not in the immediate or medium terms.

I'm only saying what the Welsh Government itself has said in the context of its long-term strategy. So, in complete conclusion, therefore, can you confirm that the statements that the Welsh Government have made, which I quoted, are still applicable?

Yes. Everything that was in the statement earlier in the summer is applicable.

Okay. Thank you very much indeed. That brings, I think, our collective questions to a conclusion, and, as I say, we will follow up on your offer of a private session and we will discuss, in private session, the invitation to attend the airport also and follow up on that accordingly.

So, I now propose, in accordance with Standing Order 17.42(ix), that the committee resolves to meet in private for the remainder of the meeting. Are all Members content? I see that all Members are content, so, therefore, I'd be grateful if we could go into private session.