Memorandum submitted by A J Lucking
This note argues that there is an urgent need
to reform the UK airport regulatory regime, which is administered
by the CAA. The present Single Till" regime flouts a basic
principle of privatised businessFrom each and every asset,
15%, or you're fired"....Is your priority to the British
taxpayer to provide a high quality airports authority or are you
looking at yourself solely as as a commercial company needing
to give a very high return to your shareholders?"
Our number one priority has to be our shareholders"
(Then BAA Director Michael Maine, questioned
by Mrs Dunwoody MP).
Professor de Neufville, an American aviation
economist, addressing the Royal Aeronautical Society, said that
Britain had made a mess of airport policy. Airports are too important
to be privatised: they should be bond financed public utilities.
Whilst agreeing with his first point, the writer believes that
the problem can be solved by reforming the regulatory regime to
achieve a commercial return on the operational assets.
In his 2004 Brancker lecture, Mike Clasper,
Chief Executive of BAA, said that ...we will not see a return
on Heathrow's Terminal 5 for the next 50 years!" (ILT
journal, June 2004, p 47). Perhaps when T5 was planned, BAA was
confident that the CAA plan to switch from the single till to
the dual till would be implemented, and the Competition Commission's
rejection of the proposal came as a nasty shock. The worry now
is that having been caught out once, BAA will not be prepared
to invest in the desperately needed third runway. In an address
to the Heathrow branch of the ILT on 13 September 2005, Mr Clasper
said that the shortage of capacity at Heathrow meant that 737
size aircraft must be displaced by A380s etc to maximise the number
of passengers served, ie the performance of Heathrow as our national
global gateway will deteriorate further. In answering a question
from the writer, he agreed that there has been a lack of urgency
in dealing with the need for more business airport capacity.
(Leisure passengers will travel long distances to an airport,
eg Bournemouth or Manston. Gatwick, Stansted, and Luton still
have spare capacity, and high profit Luton plans a major expansion).
The White Paper on airport policy did not attempt
to evaluate the wider economic value of air transport, quantifying
only passenger benefits, such as lower fares, and access costs
(50%): APD for the Chancellor (37.5%) and minor savings for the
airport (12.5%). The percentages are for Stansted (Passenger
Forecasts: Additional Analysis p 47. DfT December 2003). In
the case of Heathrow, these benefits totalled £5.5 billion,
discounted over 50 years. The 1993 RUCATSE figure was £48.6
billion, and Oxford Economic Forecasting's (1999), £37 billionafter
deducting £7 billion for optimism bias", and global
warming costs. Chicago values its O'Hare airport at $38 billion
per annum, and the forthcoming eighth runway and re-alignments
at a further $18 billion pa.
A further illustration of an American assessment
was that the owners of property displaced by Atlanta's fifth runway
were paid five times the valuation (Mrs Dunwoody MP, Civil Engineers'
airport conference). BAA's current Stansted offer is pre-blight
valuation plus 10%, and removal expenses.
In a 2004 presentation to the Royal Aeronautical
Society, Liverpool claimed that re-connection to Heathrow would
generate 40,000 jobs (in an objective one area)though some
claim they would merely move there from elsewhere in the UK. Since
the Plymouth service was moved to Gatwick, two of the four Japanese
companies have moved out, and the others have ceased investing.
Some complained that they had been assured that the air service
would be maintained. Inverness has lost its high value Japanese
tourists, though some have moved to Edinburgh. A company whose
main business was in India and South Africa has closed its factory
there, and the Chamber of Commerce has expressed concern about
a major overseas employer (it is to be hoped that the restoration
of a daily service by Bmi may help). To the writer, interviewing
US and Japanese investors during the 1994 BCC survey, made it
clear that for them If you can't fly there, you can't get there",
and that In Texas, only cattle travel on trains... No air service?
That's third world stuff!". The US system of Essential Service
Orders applies to any community that is more than 60 miles from
a major air hub.
We need a comprehensive study of the economic
value of the Heathrow feeder services. The CAA has suggested that
Amsterdam could fill the gap (sixth report of the Committee, July
2003, para 156), but inward investment agencies have pointed to
the dangers of routing foreign investors and licensors via competing
countries. During the BCC survey, Rolls Royce Industrial and others
underlined that Amsterdam's low frequency services to the Middle
East and the Old Empire" wasted time.
HeathrowThe world's greatest money making
machine!"Robert Milton, when CEO Air Canada. Financial
The failure to expand Heathrow in a timely way
has led to large scarcity value" profits for the airlines,
and the writer has wondered if these are higher than those resulting
from extra runway capacity, which would enable fresh competitors
to enter the market. For most of the airlines too, shareholders
have to be the number one priority. Could it be that whatever
their public stance, these airlines would be best served by preventing
expansion of the airport? Reportedly, slots are worth £10
million eachBA has invested £118 million in them (2005
accounts, note 13).
Examples of the annual profits achieved:
£38 million for BA's HeathrowMumbai
slot pair before Virgin and Bmi were allowed on the route. (Cross-examination
of the then Mr Rod Eddington, Indian route case.) This could have
been up to £200 per passenger.
£21.7 million Heathrow to New York,
per slot pair.
£7.56 million Heathrow to Dubai,
per slot pair.
£3.3 million Heathrow to Nairobi,
per slot pair.
CAA Nov 2001 report Estimating Demand Valuation.
Table 4.4 of CAP 754, the Feb 2005 CAA
report on regional services, illustrates the relative valuations
of the five SE airports:
Average business air fares (return) from London
| Edinburgh % business
|Rail (averagejourneys over 350 miles)
These figures illustrate both the scarcity value of Heathrow,
and also that it commands higher fares than three of the other
airports. The airlines' opposition to the Dual Till" centred
on the addition of circe £3 to BAA's then operational charge
of about £6 per passenger. Currently, BA's US fuel surcharge
is £40. Hence, the increased charge appears to be pocket
money to Heathrow users.
Another important aspect of this demonstration of the willingness
of Heathrow users to pay up is that they can be expected to fund
the works needed to solve the NOx problem, and to acquire properties.
A Stansted type" property purchase scheme could result in
acquisition of about half the properties as routine moves take
place over the next ten years, thereby reducing the pain (half
of us move house over this period).
The writer believes that modern planes produce similar amounts
of CO2 to trains (detailed reasons attd. at A), though he accepts
that discharge at height is more damaging. However, domestic flights
do not fly as high as intercontinental services: recent German
research has established that 30% of surface transport emissions
are found at aviation heights: and contrails can be halved by
flying 6,000 ft loweralbeit at a cost of 6% greater fuel
consumption (recovered by five years technical advance). And as
the table on p 3 shows, air carries far more of the business passengers
London to Scotland (total traffic, 2003-04, air 8.2 million, rail
1.16m. CAA and SRA reports). The 2003 CAA survey showed that 63%
of the point-to-point Heathrow domestic passengers were on business
(all traffic, including connecting passengers, 47%).
The writer is uneasy that the CAA has proposed to delegate
initial agreement of airport charges to BAA and the airlines.
For both, shareholders have to be the number one priority, rather
than the national economy, and the passengers. There is a need
to assess the economic value of regional access to the national
global gateway at Heathrow. All our major Continental competitors
will soon have four or five runway national hubs. Most have informal"
safeguarding arrangements for regional services (evidence to the
Committee from Mr Andrew Clarke).
Under the single till regulatory regime, BAA may not press
ahead with the third runway that is needed, and the change to
a dual till should be re-examined. The airlines may have opposed
the introduction of the dual till because it would result in more
effective price competition. But Heathrow business passengers
are not price sensitive, and this has the additional advantage
that they will pay a few pounds extra to deal with the environmental
22 October 2005
ARE PLANES TEN TIMES AS EVIL AS TRAINS?
For rail travel, carbon dioxide emissions and fuel use per
passenger-kilometre are typically at least an order of magnitude
lower". Royal Commission on Environmental Pollution, 2002
report, para 4.39. The Commission for Integrated Transport reached
a similar conclusion, but its report does not detail the load
factors etc on which it is based.
The airlines claim to have achieved parity in fuel consumption.
And a high level conference on railways and the environment in
Berlin (19 November 2004) was told that the Airbus A321 consumes
less energy than a Eurostar trainset (Railway Gazette,
January 2005). Can this difference be explained?
The 10:1 ratio applies to the total Radiative forcing",
not the carbon dioxide production and fuel use alone, and it measures
the total climate change impact of aircraft flying at altitudes
of 9-13 Km. It is calculated by multiplying the fuel use ratio
of c 3.5 set out in table 12.2 of the Commission's 1994 report
by a factor of around 3", (The Commission's news release,
29 November 2002, para 3.1. It notes also that this figure contrasts
with others generally in the range 1-1.5 for most human activities).
Much of the difference in fuel consumption is due to the
1. In its 2002 report (para 4.40), the Commission accepted
that because of rail tortuosity", trains have to travel greater
costing distances than planes. This factor was not addressed in
the 1994 report, and its effect on rail's fuel usage London to
Glasgow is proportional to costing distances of 401.5 miles from
Euston, vs 345 from Heathrow, and less from Luton.
2. In table 12.2 of the 1994 report, the load factor
for long distance trains at typical occupancy" was given
as 50%. British Rail 1993 data for Intercity trains showed 161
passengersan average load of 33% for the 225 trains. When
this difference was queried with the Commission, it stated that
it had used a forecast of future occupancy. 2003 SRA data showed
average loads of 201 for GNER, and 168 for Virgin Rail.
3. Since 1994, the advent of low cost airlines has increased
the industry load factor from 65% to over 80%, (para 2.23 of the
Commission's 2002 report shows that this improvement had not been
included). BA stated that it too has achieved this figure for
short haul flights (26 October 2004 R Aero Soc conference). Furthermore,
Easyjet's 737-300s have 149 seats vs BA's 122. Ryanair's 737-800s
4. The R Aeronautical Society 2002 report Greener by
Design" showed that between 1976 and 1994, aircraft fuel
consumption per passenger-km halved. The improvement is continuing
on budget towards the ACARE 2020 targets. The Rolls Royce Trent
1,000 will burn 12% less in 2008 than the 800 does nowand
produce less NOx and noise (RR presentation to the HACC, 29 November
2004) At the same seminar, Boeing claimed that the 787 will burn
75% less fuel per seat-km than the 707.
5. The 1994 R Commission report (table 12.2) showed a
French TGV burning 10% more fuel than a BR 225. The new Virgin
Pendolinos have 439 seats vs 480 in the 225s, increasing fuel
burn per seat by 9%. They need 6,800 HP vs 4,850 for the 225s,
and have air conditioning: 200 on board computers: electrically
operated doors: and tilting mechanisms.
Greener by Design" stated also that high speed trains
achieved 80 passenger miles per gallon vs 70 for short haul aircraft.
However, this was 1997 data for aircraft achieving only 70% load
factors. Adjusting this to 80% indicates parity in fuel consumption.
A US paper by David S Lawyer reaches the same conclusion, and
notes also a 25% deterioration in fuel usage per seat following
the introduction of the new Amtrak Acela trains. He found also
that in the USA, no allowance had been made for fuel used to carry
cargo in passenger aircraft.
The Radiative forcing" factor of c3 is believed to be
due largely to contrail/cirrus formation by aircraft flying at
heights of 9-13 Km. This is less of a problem at the lower altitudes
used by short haul aircraft. ProfessorDavid Lee found that a 6,000
ft drop reduces contrail formation by 47%albeit with some
6% increase in fuel consumption. And a Lufthansa report states
that 30% of surface transport emissions are found at aircraft
altitudes ie surface transport should not be rated at 1, and is
perhaps one of the 1.5" activities (2002 report para 3.32).
So there is persuasive evidence that planes use no more fuel
per passenger than high speed trains: that the three times multiplier
is too high for short haul flights: and that surface transport
has a higher multiplier than one. At worst, planes are only slightly
more evil than trains.
Moreover, domestic air services carry far more business users
than rail's 11% on routes of over 350 miles. The 2003 CAA survey
showed that 47% of Heathrow domestic passengers were on business
(63% of those flying point to point), and a further 15% were currency
importing foreign tourists. The longer routes tend to carry more
31 March 2005