Examination of Witnesses (Questions 440-459)
WEDNESDAY 19 MARCH 2003
MR GEOFF
MUIRHEAD, MS
ROWENA BURNS,
AND DR
JONATHAN BAILEY
440. So you do not see it coming back to what
it was five years ago, when it reached a peak of about 7%? You
do not see that returning? (Mr Muirhead) At Manchester
our forecasts are based on somewhere between 5% and 6% growth—that
sort of area. At our other airports it is higher than that; at
East Midlands, in particular, it is much higher than that.
441. What is it at East Midlands? (Ms
Burns) Fifteen to sixteen per cent.
442. And Bournemouth? (Mr Muirhead)
Compound and average growth over the next five years is 11%.
443. Why is it so high? Was it at Humberside
you said it was 16%? (Mr Muirhead) East Midlands. Low-cost
carriers, fundamentally.
444. How important are the no-frills carriers
to Manchester Airport Group? What proportion of your traffic is
now made up of low-cost carriers? (Dr Bailey) For the
East Midlands it is approximately half the traffic; about 1.5
million passengers a year. For Bournemouth it is about half. Manchester
airport itself is probably below 10%, I would say. Just going
back to the forecasts, as Geoff just said, we agree in the round
with all the Government's forecasts. The only one where we have
some concern is to do with East Midlands, and we mentioned that
in our submission. For example, if we look even as near as 2005
the Government's forecast put the passenger numbers at 3.8 million
and we are already at 3.6 million in 2002 because of this growth
in no-frills that you have alluded to. So the situation is changing
and there will be a 45% gap because we think there will be 5.4
million by 2005, not the 3.8 million the Government has forecast.
445. Finally, in terms of public airports, I
think it is sometime ago you tried to make it a hub, as far as
Manchester itself is concerned. Do you see them still being around
in the future within air transport in, say, 30 years' time? (Mr
Muirhead) I think it depends on how you define a hub. If you
were to look at hubs like Atlanta where there is a lot of on-line
with single carriers, then I think those sorts of operations will
decline. If you talk of a hub as being a very busy airport which
has lots of interlining and opportunities to connect just through
the volume of traffic that comes in and goes out, ala Heathrow,
then I think as airports get busier, that type of thing will grow.
446. I always thought the idea of a hub airport
was quite simple, in that you fed in from near-to-hand airport
business and then you loaded that on to a 747 and off you went
to the other side of the world. You tried to do something along
those lines and it did not really come off. (Mr Muirhead)
The growth of a hub with a dedicated carrier is an aspiration
that we still have, and the building of the second runway gives
us a certain opportunity in that. It is difficult and limited.
It would not be a worldwide hub as Dallas or Chicago are, but
we can provide hubbing capabilities for BA between domestic destinations
and Europe, for example, so we have done a lot of analysis work
to do that.
Chairman
447. Ms Burns, do you want to comment on that? (Ms
Burns) Yes, just picking up the point, for us the short-term
requirement, which is a precursor to proper hub development, is
to grow the strength and depth of our point-to-point network,
particularly in Europe. That, together with sufficient front-end
traffic, is an absolute precursor to hub development. In that
context, we have capacity do that now. We have, particularly in
British Airways, but in Star Alliance as well, base carriers who
are committed to grow at Manchester, so some of the conditions
are in place. The point I made earlier about surface access is
important to hub development as well. We need to improve our penetration
of our catchment area if we are to capture sufficient market share.
448. In that case, did anybody ask you before
they cut the train service from Crewe? (Ms Burns) No,
Chairman.
449. When you discovered that it had been cut,
what did you do, Ms Burns? (Ms Burns) We made representations
both to the SRA and to the Secretary of State.
450. And what responses did you receive, Ms
Burns? (Ms Burns) I am tempted to say, the usual ones,
madam Chairman.
451. By which you mean not very helpful and
negative? (Ms Burns) Yes, I think so.
Chairman: And from Stoke? It is from Stoke and
from Crewe.
Mr Donohoe: Lots of self-interest here.
Chairman: Excuse me, remember who is the Chairman
here.
Mr Donohoe
452. I have, do not worry. Can I go back and
re-ask the question, then. Do you think hub airports will be a
feature of airport business in 30 years' time? (Mr Muirhead)
You are talking about progression, and that is one of the difficulties,
because as you are trying to develop a network, one of the things
that enables you to develop a network faster is to have transferring
traffic which makes the routes more viable. Once you become congested—and
I think you will start to see that at Heathrow—transfer
traffic actually becomes a problem, because actually managing
baggage and other issues to do with getting people from one aircraft
to another, which does not really add a lot of value to the business
and does not really add a lot of value to the country either,
is more problematic. So as you move through into congestion, then
the demands to be a hub I think become less so. You can create
hubs like Charlotte which really have no origin and destination
traffic, it is just built upon connecting traffic being reassembled
into different aircraft. That is, I think, starting to suffer
now. So I think it depends where you are on your phase of evolution
that would decide whether or not you want to be a hub and use
transfer traffic as a means of increasing route networks.
Mr Stringer
453. That evidence is in direct contradiction
to what BAA told us about the economic value of interlining. They
said that they believed that ten years ago the interlining at
Heathrow added £1.2 billion to the UK economy. Were they
wrong, or is it different at Manchester? (Mr Muirhead)
No, it may well have done ten years ago, but as you get busier
an airline will get much more efficient use of its slots if it
fills all of the aircraft with other-airline traffic. So will
the country, because those people then come out of the airport
and spend money in the area, but traffic that flies over a country
does not add a lot of value to the country itself.
454. I think they were talking about benefits.
They did not expand on that, but they seemed to indicate that
it was the benefits to the airlines, the extra aeroplanes and
people employed on air servicing to maintain those aeroplanes. (Dr
Bailey) If I could add to that, yes, we accept that. I think
that the issue of what we are trying to say here is that the importance
of transfer traffic diminishes over time. When a market is developing,
the origin and destination market is increasing, because the yields
are better on just a straight O and D city-paired service than
they are on transfers, because in general on transfer traffic
you get a much lower yield. You are competing. To give you an
example, if British Airways wants to compete for Amsterdam/New
York traffic, because it is a worse service in terms of having
to change flights, it has to offer a price below what KLM does.
So the contribution made by transfer traffic is small but important
in terms of ensuring the viability of a network. As you get more
congested and as you have a bigger market at each end of the route,
which is what is happening as routes develop, then you want to
focus more on the O and D traffic, and indeed British Airways
are doing that. To add one thing on the development of Manchester
as a hub, I think that like all airports we are at the mercy of
not just the market but the airlines, so airlines need to take
a decision to start the hubs. So Atlanta, which we have been talking
about on a couple of occasions already, has a home carrier that
dominates that airport and the hubs and spokes. At Manchester
we do not have such a hub carrier.
Chairman: Thank you, that is very helpful.
Mrs Ellman
455. Did the Strategic Rail Authority consult
you on the recent cuts in services to the airport? (Mr
Muirhead) I do not believe so. I think we were just told about
that.
456. Are you a statutory consultee? (Mr
Muirhead) I do not think we are a statutory consultee. It
may be better, as I talked about at the start in terms of integrating
the way in which we want to develop transportation, with aviation
being part of it, that we were more involved in these decisions
which are actually quite fundamental to our business development.
457. You are saying that that is not happening
at the moment. Is it because the structure to do it is not there? (Mr
Muirhead) Yes, I think it is because the structure is not
there, and I think the SRA are dealing with lots of other problems
as well.
458. But they do not see you as being important? (Mr
Muirhead) I think that when you are trying to develop, the
economic viability is less than it otherwise would be, so you
tend to go down the pecking order. (Ms Burns) I do
want to be fair to the SRA in this.
Chairman
459. Why not? We all are, of course, all the
time. (Ms Burns) Indeed. We are in dialogue with them
and in collaboration with them in looking at the key priorities
for real development across the North West region, including access
to the two airports at the present time. In particular, they have
consulted us extensively, I would say, about the content of the
North Trans-Pennine franchise. They are alive to our aspirations
in relation to utilising the ground transport interchange which
will be completed this summer and will provide the capacity at
the airport for greatly improved rail access. As to their ability
to deliver and to support the development of the network serving
the airport through public funds, I have to say, I have grave
concerns that that is going to change.
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