Memorandum submitted by Belfast International
Airport
1. INTRODUCTION
1.1 Belfast International Airport Ltd (BIAL),
as the largest and most important civil and military airport in
Northern Ireland, welcomes the Committee's invitation for BIAL
to make a submission regarding their Inquiry into Air Transport
Services in Northern Ireland and commends the Committee's initiative
on this vital subject for the region.
1.2 We believe that such an inquiry is long
over-due. The current situation which allows for unstructured
and separate development at airports fails to recognise the strategic
economic needs of the region and serves to undermine the region's
competitiveness when it comes to the development of new routes
and services. Two major Inquiries by the House of Commons Transport
Select Committee on Regional Air Services in 1998 and Aviation
in 2001 have pointed to the need for greater cohesion, but little
has happened that would give practical effect to any of their
findings. The Department for Transport's "The Future of Air
Transport" (December 2003) fell short of expectation and,
in our view, gave no firm direction for the future. BIAL believes
that there is an onus on the Government to come out categorically
with a policy that places Belfast International at the centre
of a structured drive for the development of Air Transport Services
in Northern Ireland that fully exploits this major strategic asset
for the benefit of the entire region.
2. THE DEVELOPMENT
OF CAPACITY
AT EXISTING
AIRPORTS
2.1 We contend that Belfast International
Airport should be the airport of choice when it comes to meeting
the strategic economic needs of Northern Ireland. It is the largest,
most important civil airport and the only 24-hour air transport
facility in Northern Ireland, catering for both passenger and
air cargo requirements (See annex 2 regarding air cargo), including
intercontinental flights. The site is also shared with RAF Aldergrove,
which plays such a strategically important role in the nation's
security.
2.2 Given its location, size and scope to
expand in line with published traffic forecasts, BIAL believes
that other existing airports could close with minimal short term
adverse economic impact, but the loss of BIAL would be tantamount
to a crippling body-blow which would restrict or retard Northern
Ireland's wider economic growth.
2.3 It should be borne in mind that the
indigenous population of NI and the surrounding catchment is less
than two million people. There is limited current in-bound demand
to Northern Ireland, partly due to the lack of a cohesive network
of air services as compared with Dublin. Competition for airline
assets across Europe is becoming increasingly intense and it is
recognised that, unless a critical mass of passenger activity
is attained at an airport, major airline investment will go elsewhere.
Maintenance of a major commercial airport remains a capital-intensive
challenge as much of the prospective growth emanates from low
cost operations offering increased passenger throughput at lower
margin to the airport operator. It is, therefore, critical for
the future prosperity of the region that business at the key air
transport facility is not rendered unsustainable through an inadvertent
policy of diluting the available traffic base across too many
airports.
2.4 In terms of Northern Ireland, BIAL is
unique. It operates on a 24-hour, unconstrained basis with two
cross runways, capable of coping with all weather/wind conditions.
The main runway can accommodate the largest aircraft in service.
Existing runway capacity means that growth can easily be met in
line with anticipated demand for the entire region. Planning permission
has been granted for a Terminal extension enabling BIAL to cope
with up to 10 million passengers per annum (ppa)—more than
double its current annual passenger throughput. Further development
can easily take place on the 1,000-acre site which has no significant
environmental or pollution issues.
2.5 No other airport in Northern Ireland
offers the same combination of strengths. Other facilities are
physically constrained by insurmountable obstacles such as location,
proximity to built-up urban areas and nature reserves, environmental
and noise restrictions, available land and serious infrastructure
deficiencies such as surface links, runway limitations and night-time
curfews. There is already considerable public concern about the
number of aircraft breaking the night-time curfew at BCA and about
further growth at the airport.
2.6 On this basis, the optimum strategy
for air transport services is that BIAL would be the only logical
facility for future development. BIAL acknowledges the fact that
quirks of history have delivered the current spread of airport
facilities within the region. However there are clear attractive
employment and investment implications inherent in concentrating
additional future growth and development in one centrally located,
showcase site, in order to benefit the overall competitiveness
and economic performance of the Province. At BIAL passenger traffic
has now increased to 4.028 million ppa with that number expected
to rise to 4.5 million in the current year. BIAL already accounts
for approximately 4,000 on-site jobs. For every additional 1 million
passengers, 1,000 immediate jobs are created, notwithstanding
the secondary, tertiary and catalytic downstream employment implications
brought about by large-scale aviation development. The overall
benefit can be as high as 3,500 jobs per million passengers.
2.7 In reality the concentration of air
services leads to greater sustainability. Bmi's transfer of Heathrow
services from BIAL to Belfast City Airport three years ago has
been detrimental for "NI plc", due to the implicit restrictions
present at that airport. Had bmi been exclusively in situ at Belfast
International Airport when British Airways announced termination
of their six daily services from Belfast to Heathrow in Autumn
2001, bmi would have had the unconstrained option to increase
capacity on their existing schedule between Belfast International
and Heathrow.
2.8 Sustainability of routes out of NI is
a major issue. Diluting critical mass by trying to operate to
the same destination from three airports does not make economic
sense either for the airlines or Northern Ireland. Over the last
decade, several routes have disappeared and airlines have come
and gone. Three airports are not commercially sustainable given
the size of the catchment area. In our opinion, there is too much
capacity to several of the UK airports and there will be "casualties"
within the next year. If we are to pursue a two-airports for NI
philosophy, then complementarity rather than competition is a
sensible way forward. This can only be achieved if the Planning
Agreement at Belfast City Airport remains intact. Moves to develop
piecemeal operations around various airport locations in the Province
at inherently reduced frequencies weakens the general sustainability
of all routes and, in terms of long-term contribution to the region's
economic development, amounts to moving "deckchairs on the
Titanic". The possibility of Government infrastructural aid
to extend the runway and enhance facilities at City of Derry Airport
on the basis of an underlying plan to develop business by "poaching"
from other airports in the region would appear to only serve to
compound the problem.
For the sake of comparison an analysis of other
world cities which have two or more airports, and an assessment
of the population they serve is included as Annex 5.
For the sake of completeness we have enclosed
Annex 6 in respect of issues at City of Derry Airport and BIAL's
ongoing challenge to maintain a level playing field in terms of
airport investment and funding transparency.
3. SPECIFIC CHALLENGES
FACING NORTHERN
IRELAND AS
A PERIPHERAL
REGION OF
THE UK
3.1 We consider that there has been a historic
absence of a co-ordinated strategy for the development of airport
capacity for Northern Ireland as a region. A fragmented approach
to the development of air transport services will only continue
to undermine Northern Ireland's wider competitiveness and economic
prospects. It is imperative for Northern Ireland to be treated
as a single unit with decision-makers adopting a focused and unwavering
attitude in order to achieve the necessary strategic objectives
for the Province.
3.2 The template already exists. It is perhaps
worth taking some time to consider a cameo of another community
in Western Europe which has been beset by strife and division
and now faces similar challenges of economic regeneration and
social integration to those faced currently within Northern Ireland.
3.3 For many years the city of Berlin has
been served by three separate airports—Tegel, Tempelhof
and Schoenefeld—albeit under common ownership. The city
centre airport of Tempelhof was a member of the erstwhile "Conference
of City Airports" in the early 90s, along with Belfast City,
London City, Stockholm Bromma and Toronto Island. All of these
city centre airports operate under very strict environmental conditions
and notwithstanding the future of Tempelhof there are major questions
over the future development and operation of Stockholm Bromma
and Toronto Island.
3.4 In recognition of the need to make a
huge infrastructure statement about the new Berlin, the German
authorities made a consensus decision in 1996 clearing the way
to combine all of Berlin's aviation activity and create Germany's
third largest airport (Berlin Brandenburg International) on the
least environmentally constrained site of Schoenefeld in the former
Eastern Bloc. The final construction permit for BBI has recently
been secured following the biggest such approval process ever
conducted in Germany and this includes strict environmental requirements.
Tempelhof is now planned to close imminently, while Tegel is expected
to close shortly after the completion of development at BBI, in
approximately five years time. 20 million annual passengers are
expected to use BBI by 2010, around 50% more than the three Berlin
airports combined in 2003.
3.5 This is a prime example of a co-ordinated
strategic approach for the broader benefit of a region. In contrast,
any semblance of over-arching aviation strategy in Northern Ireland
and the prospect of complementarity in respect of air service
provision appears to have been effectively eradicated since Short
Brothers made their announcement on 5 January 1983 stating that
they planned to "develop Belfast Harbour Airport for use
by commuter and regional airlines operating passenger services
to and from Belfast" not being "at all interested in
competing with Aldergrove which is clearly the Province's major
gateway airport"!
3.6 Due to our location as an island to
the west of an island there is also significant cost in being
remote. It is vital for the region to remain competitive and maintain
efficient transport links in order to move people and goods to
market. However, remote location by definition adds to an airline's
operating costs and makes the balance between incurred cost and
revenue potential more marginal. Cohesive, imaginative thinking
can make the difference between operators developing or bypassing
services into Northern Ireland.
3.7 The current make-up of the Northern
Ireland economy also presents a major challenge. A large proportion
of the workforce are employed within the public sector, there
is a low manufacturing base, limited extent of private enterprise
and comparably few SMEs. The make-up of the economic landscape
is best illustrated through the fact that small firms, employing
fewer than 50 people, make up more than 95% of all businesses
and provide 56% of all jobs in the private sector (Northern Ireland
Yearbook—2002), a circumstance which impacts upon levels
of inbound business travel.
3.8 The challenge, however, for Northern
Ireland is most vividly illustrated in relation to our neighbours
and competitors within the island market. Due to the geographic
location of Northern Ireland within the UK (having a land border
with another EC State) the onus is on the region to match and
exceed competitiveness levels.
3.9 In sharp contrast to Northern Ireland,
the Republic of Ireland has forged ahead through a combination
of effective Government-driven and co-ordinated, business-friendly
capital-intensive measures. A common sense of purpose and a cohesive,
buoyant and "can-do" approach have led to the aviation,
travel and tourism sectors receiving fillips such as the abolition
of Government Air Passenger Duty and significant tax breaks in
order to create an access bedrock upon which the wider economy
can flourish. The VAT rate in the Republic of Ireland stands at
13.5%, while Northern Ireland imposes a rate of 17.5%, in line
with the rest of the UK. BIAL wholeheartedly shares the view expressed
by NITIC in its Manifesto, namely "VAT should be reduced
for accommodation or the difference in VAT rates between the Republic
of Ireland and Northern Ireland (4 percentage points) should be
ringfenced and these funds used to support tourism product and
promotion.". These legislative breaks have combined to assist
wide-scale development of private enterprise (including high-tech
industry, e-commerce and financial services) in the Republic of
Ireland, which continues to sustain annual economic growth rates
significantly ahead of the rest of Europe.
3.10 Another key challenge for Northern
Ireland is to develop and sustain links to key airport hubs so
that travel to and from the region becomes "one stop from
anywhere". Although Boeing's decision to commit to development
of the B7E7, in expectation of greater future demand for point-to-point
air services, bodes well for increased direct access from Northern
Ireland and similar geographic regions in the longer term, dependence
upon interline access to one major hub (London Heathrow) operated
by one legacy (full service) carrier is not a healthy position
for the economy of any region.
3.11 BIAL recognises that world links or
connections to major hub airports, remain critical to Northern
Ireland's competitive status. New services to long-haul hubs,
(eg, North America, Middle East) will help offset the requirement
for services to London hubs. Current traffic analysis of the Belfast
City to London Heathrow service (CAA Survey) indicates that 25%
of the 800,000 annual market transfers to international destinations.
Upwards of 50% of these passengers transfer to destinations in
North America. A direct New York service would save time, and
link directly into one of the biggest hubs in the world. For example,
Continental Airlines, and its partners, connect to over 170 destinations
in the USA out of the same Newark Terminal. Direct services into
Europe will again reduce the demand for interlining over Heathrow.
Likewise, direct flights to Frankfurt/Dubai would service the
Middle East and Asian markets.
3.12 Currently, PSO's can only be issued
on a city-to-city basis, not city-to-airport. Therefore, it is
unlikely that Government would consider PSO's to Heathrow and/or
Gatwick as the city of London is well served with flights to Luton
and Stansted. In the short term, access to Heathrow is important
to NI. However, its importance should decrease as direct services
are developed from Northern Ireland. It is in this area that we
should be seeking support from ARD and the various other Government
bodies.
3.13 In summary, Northern Ireland critically
needs to lose any hang-ups and impediments to expansive thinking.
The joined-up progressive approach inherent within bodies such
as Tourism Ireland must take precedence if the region is to develop
wide-scale, cheaper access and help practically overcome the obvious
image problems which have dogged the last few decades of our history.
3.14 While not strictly a peripherality
issue, we at Belfast International Airport carry substantial costs
due to the need to maintain a police force. We will always put
safety and security first; however, this additional cost is over
and above those which are normally incurred by airports throughout
the UK. There is an ongoing need to ensure that the activities
that we carry out actually make sense in view of the terrorist
threat.
4. THE EFFECTIVENESS
OF THE
ROUTE DEVELOPMENT
FUND
4.1 In the opinion of BIAL, the Northern
Ireland Air Route Development Fund has been a good initiative.
However, to keep the impact of the Fund in context, it has not
changed basic airline rationale in terms of route development,
rather altered the timing of certain developments. For instance,
it has proven valuable in pump priming discussions with Continental
Airlines regarding scheduled transatlantic access from Northern
Ireland, where the basic quantum of necessary support would have
been preclusive for a private airport operator/PLC to speculate
upon.
4.2 It is critical to bear in mind that
the core issue in respect of route funding is sustainability.
Recent experience in Scotland has illustrated that a "scatter-gun"
approach towards certain developments can be detrimental to the
image of such a Fund, not to mention wasteful of taxpayers' money.
It is critical that the use of such funds needs to be applied
consistently and carefully.
4.3 It is also our contention that use of
funding to simply shift passengers within the general round of
the region (cf support for new Derry—Manchester/Birmingham
services) is a misuse of resource and counter-productive to the
overall aims of the initiative.
4.4 We suggest that alternative/supporting
approaches should be considered in order to level the general
playing field within the island, for example:
(a) Abolition (or ringfencing of monies for
route development) of UK Government APD (£5 within EU/£20
to Rest of World) on routes from Northern Ireland, as already
accepted in the Highlands and Islands of Scotland (which would
have a much wider and more meaningful impact upon airline economic
performance and route development), and
(b) Designation of Public Service Obligation
(PSO) status for marginal routes which are of economic importance
for the region. It seems highly invidious that the only current
PSO route from Northern Ireland links Derry with Dublin, effectively
taking traffic out of the Northern Ireland system, and by association,
money out of the economy.
4.5 Ultimately all of these initiatives
would contribute to overall job creation and economic competitiveness
for Northern Ireland. It cannot be overstated how fundamental
it is for international air access developments to take place
into the region.
4.6 It is perhaps pertinent to place the
competitive conundrum in full context. A £12 million annual
budget is presently ascribed by various tourism bodies for international
marketing and promotion of the island of Ireland. However Northern
Ireland currently gains minimal value from 75% of this expenditure
due to the blanket absence of direct access from core markets
such as USA, Germany, Italy and Belgium, and value can only now
be extracted from a further 16% of this expenditure due to the
recent introduction of services from France (Paris, Nice), Spain
(Barcelona, Malaga, Alicante) and Eastern Europe (Prague). Meanwhile
83% of all European visitors coming to Ireland arrive through
Dublin Airport. For Northern Ireland to benefit more from the
£12 million investment, direct access into the region is
critical.
5. THE POTENTIAL
IMPACT FOR
NORTHERN IRELAND
OF WIDER
AIR TRANSPORT
ISSUES ON
THE ISLAND
OF IRELAND
5.1 Dublin Airport (DUB), backed by effective
and concerted Government action, regards the entire island of
Ireland as its marketplace. In the aggressive search for business
opportunities, it ignores the border and, with the range of routes
served from the airport, has considerable success "poaching"
passengers from Northern Ireland.
5.2 Investment in roads (M1) has dramatically
cut travel times, thus creating further pressure on Northern Ireland
airport operators and the National Roads Authority in the Republic
of Ireland has committed investment to make further major improvements
on the Belfast-Dublin road corridor. In contrast a proposed single
carriageway link estimated to cost £13.8 million (the 6.5km
M2/A57 project) which would link Belfast International Airport
to the M2 to/from Belfast, has been relegated by DRD(NI) to the
Reserve List rather than being included in the schedule of works
for the 10-year period up to and including 2011/2012. BIAL contends
that this project would be a more substantial application of Government
money than investment in City of Derry Airport infrastructure.
Further evidence of surface displacement comes in the form of
a recently launched coach service from Belfast city centre to
Dublin Airport which operates 15 return trips per day with the
potential to carry 480,000 passengers per year. With two home-based
airlines to assist, Dublin Airport's goal is to bring passenger
numbers up to 44 million ppa by 2030 and with no alternative or
competition to DUB on the eastern seaboard of the Rol, this growth
level is viewed as achievable.
5.3 Dublin Airport is a serious competitor
to the fragmented airport and air services structure in Northern
Ireland, made all the more so because of the planned and structured
manner in which growth has been concentrated at the facility.
5.4 A proposal by Ryanair to develop commercial
operations from the Irish Air Corps airfield at Baldonnel on the
western outskirts of Dublin was rejected by Government in recent
times, a decision that avoided damaging fragmentation and dilution
of the business base at DUB. A similar single-minded commitment
is required from the UK Government.
5.5 Dublin Airport has been nurtured by
Government policy to the point where it now offers 90 scheduled
destinations, two-thirds of which are outside the British Isles,
not to mention an extensive range of charter and air cargo services.
5.6 Clearly, the experience in the Republic
of Ireland has been to husband resources in such a way as to ensure
that internal competition does not undermine or threaten their
principal "gateway" and that gives tangible expression
to the importance that aviation plays to the Irish economy.
5.7 The break-up of Aer Rianta, the state-owned
airport operator in charge of Dublin, Shannon and Cork, presents
both a threat and an opportunity.
5.8 On the one hand, Dublin, as the only
serious revenue generator, could end up having to shoulder the
burden of the significant, ongoing debt accumulated at both Shannon
and Cork. In order to offset part of the financial handicap and
service the debt of the smaller airports, Dublin may well have
to increase charges. This would have an adverse effect on their
competitiveness and could have consequential benefits for Northern
Ireland.
5.9 The break-up might also provide Dublin
with greater autonomy to develop new air-links without the retarding
arrangements currently in place to maintain Shannon services.
The advent of Dublin/Shannon de-coupling would most likely result
in operators gaining added impetus to gravitate towards Dublin.
However, the prospect of offering direct unconditional access
for international airlines to Ireland through Belfast is an opportunity
which could be exploited for the benefit of Northern Ireland plc
under the prevailing conditions.
5.10 At present, the Rol is considerably
ahead of Northern Ireland when it comes to trips per capita (approximately
5.2 trips per capita in Rol against 3.7 trips per capita in NI).
A number of factors contribute to this situation including available
disposable income, the absence of Government Air Passenger Duty
and, most importantly, greater choice of destination and frequency.
The difference of 1.5 trips per capita already leaves Northern
Ireland with 2.5 million less annual passengers than would be
the case if it matched Dublin performance. That would in turn
create a further 2,500 direct on airport jobs and more than 8,000
additional jobs for the Northern Ireland economy.
5.11 Greater choice, cost and access will
enhance DUB's ability to further erode the Northern Ireland customer
base. A suggested spur from the main Belfast-Dublin line at Balbriggan,
to connect rail passengers directly into Dublin Airport, could
exacerbate the situation.
5.12 While the Republic of Ireland has been
single-minded in the development of modern surface infrastructure
on the approaches to DUB, Northern Ireland has seemed content
to put major investment on the long finger or to content itself
with less capital intensive schemes and leave the development
of air transport services without any structure or cohesive direction.
BIAL believes this is short-termism of the worst kind, as it does
little or nothing to address our regional infrastructural shortcomings
which are certain to place barriers in the path of future inward
investment and tourism growth.
6. CONCLUSIONS
6.1 Northern Ireland needs a coherent air
service strategy that embraces all key commercial, economic, tourism
and social policies for the region. The Government "Future
of Air Transport" White Paper has failed to provide a strategic
direction for air services in Northern Ireland.
6.2 Northern Ireland needs a single focus
for future airport and air service development to enable it to
compete effectively with Dublin and other airports across Europe.
That focus should be BIAL. This will maximise service provision,
increase the economic contribution from air services and potentially
generate thousands of new jobs. The current policy has fragmented
traffic and services, reducing Northern Ireland's competitiveness.
6.3 Northern Ireland Air Service Policy
priorities should include:
— BIAL should be allowed to grow to
fulfil demand as outlined within the Aviation White Paper.
— Belfast City Airport should continue
to operate within existing planning constraints.
— No further Government infrastructural
aid should be given to any airport in Northern Ireland.
— Improved roads should be constructed
from BIAL, both to Belfast via the M2 motorway and to the north
west of the Province.
— UK Government APD should be removed
on services from Northern Ireland, and VAT levels should be harmonised
with those of the Republic of Ireland.
29 September 2004
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