Memorandum submitted by Emirates
INTRODUCTION TO
EMIRATES
— Emirates Airline (Emirates) operates
a total of 14 daily flights to the UK: five daily flights to London
Heathrow, three daily flights to London Gatwick, two daily flights
to Manchester, two daily flights to Birmingham, one daily flight
to Glasgow and one daily flight to Newcastle. — Having ordered
58, Emirates is the largest purchaser of the part UK built A380
aircraft—one of which now operates daily between Dubai and
London Heathrow.
— Emirates injects over £260 million
each year into UK local airport economies and has a total fleet
related UK gross capital spend of £15.4 billion.
— Emirates has no expertise in motorsport
and hence this submission applies only to the aerospace industry.
How effective has government policy been in supporting
the sector
1. UK government support for liberalised
markets and open skies policies has aided the UK aviation industry.
The benefits of an open, vibrant and competitive market have had
a positive knock-on impact on the aerospace industry.
2. Such government policies have enabled
Emirates to continue to contribute to the UK economy and invest
in new aircraft. Emirates' contribution to the UK economy is large,
especially in terms of spend on airframe and engine products.
The total fleet related UK gross capital spend of Emirates at
list prices is £15.4 billion, based on historic deliveries
and future confirmed aircraft orders through to 2025. For a major
British employer and technology leader like Rolls-Royce, this
equates to almost a £1.6 billion spend to date on their engines
and almost £3.5 billion worth of firm orders to 2025.
3. However, we have concerns that recent
government policy proposals regarding Air Passenger Duty may impair
the industry's future performance. Emirates agrees that the aviation
industry should contribute to the cost of its environmental impact.
Yet government policy from November 2009 for Air Passenger Duty
fails to incentivise or reward investment in more efficient aircraft.
This investment is vital both to the aerospace industry and in
the reduction of carbon emissions going forward.
4. Emirates is pleased that the Government
has to date decided not to pursue a per-plane tax based on maximum
take-off weight. Such a tax would have disproportionally penalised
medium and long-haul carriers, for which no viable travel alternatives
exist, without incentivising more efficient aircraft.
5. The UK aerospace industry is important
for several reasons. Firstly, it is a large contributor to UK
plc providing employment to thousands and helping to promote skilled
jobs. Airbus estimates that 22,000 UK high skill and value jobs,
as well as over 400 British companies throughout the UK are directly
linked to the Airbus A380 programme. This is part of over 45,000
people employed on Airbus UK work overall, whose activity indirectly
supports a further 90,000 British jobs. In total, over £7.5
billion worth of work has already been placed in the UK on the
A380 programme, with this figure set to more than double to over
£15 billion over the life of the programme.
6. Secondly, the UK aerospace industry has
been at the heart of the development of a new range of cleaner,
more efficient aircraft. A good example is the Airbus A380. The
UK content for this aircraft is extensive, which includes the
design and production of the wing, fuel system and landing gear
at Filton near Bristol and at Broughton in North Wales. Such investments
in advanced technology, manufacturing and design processes have
supported the UK as a leading world player in the aerospace industry
and are key to the UK's efforts to reduce carbon emissions and
meet its targets, without hampering economic growth.
7. When Emirates selects aircraft components
our first priority is always to find the product which fits our
specifications and that offers the best value. The fact that the
UK offers a wide range of high tech workforce skills as well as
a wide local supplier base, influenced our selection of the Rolls-Royce
engine for our Airbus A380 fleet.
8. While we conduct all major checks on
our aircraft in Dubai, our engine overhauls are conducted by GE
in Nantgarw, Wales, at one of the largest aircraft engine maintenance
facilities in the world with one million sq ft of servicing floor
space and which employs a workforce of approximately 950 people.
The impact of the recession on Motor Sport and
Aerospace industries
9. While Emirates remains committed to the
aircraft and engine orders it has made, the recession is clearly
having an impact on the aviation industry, and as a result on
the aerospace industry. However, we do not believe that it represents
a significant deviation from the long term trend of strong growth
in the sector.
10. Our main concern is that the impact
of the recession may mean that issues connected to competition
in the airline industry risk being ignored. The lower the level
of competition in the industry, the less vibrant and healthy it
will be. Emirates therefore urges UK Parliamentarians and regulators,
such as the Competition Commission and Office of Fair Trading,
to rigorously analyse the real outcomes of recent airline consolidation
and the impact of alliances on the competitive environment.
11. The airline map of the UK and Europe
is being remade by consolidation—often with airline alliances
being the vehicle or stimulus for this change. However, it is
debatable whether the consequences have been fully thought through.
Barriers to entry for new airlines are now much higher, with many
countries and regions facing the prospect of consolidated carriers
dominating their markets and reducing consumer choice—irrespective
of the so-called "remedies" agreed to as part of regulatory
approvals.
12. Demand for new technology and aircraft
is driven by growth in the industry and the incentives for airlines
to offer new services. Without competition, there is a real risk
that this demand will slacken—which will have negative consequences
for the UK aerospace industry.
7 September 2009
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