The future of aviation - Transport Committee Contents


5  Infrastructure needs

Airports

THE ROLES OF UK AIRPORTS

88. Our witnesses explained the roles of different airports across the UK and how capacity at one airport could not necessarily be substituted for capacity at another, particularly as regards Heathrow.

89. The London airports have different roles and are not necessarily in competition with each other. Heathrow has a unique role. It is a major European hub airport, competing with Paris, Frankfurt and Schiphol airports. Heathrow handles approximately 80 million passengers per annum at its five terminals. It is also the UK's most important freight airport, handling 25% of total UK air freight. However, Heathrow is no longer a significant hub airport for UK domestic flights. As a result of runway capacity constraints, economic factors, including the high value of landing slots and competition from rail, the number of UK cities with flights to Heathrow has reduced to six.[110]

90. It was once planned that Gatwick should be developed as a dual hub and British Airways tried this approach from 1987 onwards. British Airways has subsequently retrenched and, in 2002, concentrated its hub services at Heathrow. Gatwick is now dominated by both long-haul and short-haul point-to-point leisure traffic; its largest carrier is no longer British Airways but easyJet. The low-cost carriers have replaced much of the charter traffic at Gatwick. As a result of the Open Skies agreement, the US carriers which formerly operated from Gatwick have transferred services—despite the high costs incurred in buying slots—to Heathrow where, formerly, they had no access.

91. Long-haul carriers get higher yields at Heathrow while, in turn, low-cost carriers get higher yields at Gatwick than they do at Stansted, a situation which would not change even with additional runways. Stansted is dominated by Ryanair and easyJet (more than 80% of all traffic) and neither appears committed to paying the additional charges necessary to raise capital for a second runway. Both airlines are also threatening to reduce capacity at Luton because of what they regard as unduly high landing charges.[111]

92. Other major UK airports provide point-to-point services, mainly to other UK destinations, to short or medium distance international destinations, and 'spoke' services to hub airports in continental Europe and even in the Middle East and USA.

93. It seems unlikely that Gatwick, Stansted and Luton will ever be anything other than low-cost carrier-dominated leisure airports. They provide predominantly point-to-point services although, especially at Stansted, the density of services has allowed the development of 'self-connecting': the CAA found that 10% of all terminal passengers at Stansted are do-it-yourself 'connectors'.[112] Whereas about 35% of passengers at Heathrow are connecting, Gatwick has only about 12% connecting passengers with fewer still at Manchester. Other smaller commercial UK airports provide more specialist services, such as the TAG Farnborough which is exclusively a business traffic airport.

DEVELOPMENT

94. As noted previously, the 2003 White Paper set out how UK airports should be developed in order to meet the forecast growth in passenger demand to 2030. The key decisions were to support a third runway at Heathrow and a second runway at Stansted.

HEATHROW

95. Heathrow is operating at full runway capacity and has very little resilience to cope with disruptions.[113] Passenger numbers have grown due to BAA's increases in passenger terminal capacity—Terminal 5 opened in 2008—and due to a switch to larger aircraft by some airlines so as to make better use of the limited number of landing slots.[114]

96. At first sight, it might seem logical to take pressure off Heathrow by developing intercontinental services from other UK airports. Moreover, many businesses and individuals would no doubt welcome a greater range of direct international air services from their regional airport. However, attempts to do so, notably at Gatwick and Manchester, have had only limited success as they have been unable to sustain the level of demand for international services that is necessary to operate a hub airport. There has been a further concentration of long-haul services at Heathrow since the Air Transport White Paper, and services at Gatwick and Manchester have been relocated to Heathrow following the implementation of the Open Skies agreement with the USA.

97. Representatives from regions outside the southeast of England, such as regional airport operators, are supportive of Heathrow expansion. Their support is partly based on the hope that this will provide sufficient slots to allow regional services back into Heathrow. However, due to the greater profitability of allocating slots to long-haul flights, the trend of declining regional flights to Heathrow is unlikely to be reversed.[115] BAA expressed hopes that this might happen but could provide no guarantees.[116] Various witnesses suggested that slots should be reserved for UK regional services but the Department for Transport believes this would be prohibited under EU legislation.[117] The Department for Transport also takes the view that it would not be appropriate to use Public Service Obligation arrangements to support regional flights to Heathrow.[118] This is in contrast to what it envisaged in its 2003 White Paper.[119]

98. In contrast to the USA where airports are government-owned, usually by the state or municipality, UK airports are mainly private businesses with little investment from the taxpayer.[120] The issue of new infrastructure is, therefore, not so much one of affordability but of planning permission. The economic benefits must be set against noise, air quality, increased traffic and urbanisation, on which a public interest judgement must be made. We accept that these are significant concerns with regard to a third runway at Heathrow. The Government has made specific conditions in order to moderate the local environmental impacts but it cannot eliminate them entirely. These conditions include a legally-binding process to ensure that additional flights will only be permitted if this can be done without breaching noise and air quality limits. It has also proposed a new "green slot" approach, to incentivise the use at Heathrow of the most modern aircraft.[121] Air quality may improve, but significant noise problems are likely to remain. Ultimately, a judgement has to be made regarding the economic benefits to the UK and the environmental costs.

99. BAA points out that Heathrow is vulnerable to foreign competition. It has only two runways, operating at 99% capacity, in comparison to Paris which has four runways, Amsterdam five, and Frankfurt three, with a fourth approved and due to open in 2011. In 1990, Heathrow was second in Europe in terms of flights to the rest of the world, but by 2010 it will have dropped to seventh—behind Frankfurt, Paris, Amsterdam, Munich, Rome and Madrid.[122]

100. We are not persuaded that refusing a third runway at Heathrow would be helpful in reducing greenhouse gas emissions. Heathrow's competitor airports have expanded their runway capacity and have plans to increase flights and passenger numbers. Constraining Heathrow will only shift flights to other European airports. Climate change and emissions from aviation are international problems that cannot be solved by isolated restrictions on airport development.

101. BAA announced in September 2009 that it would not submit a planning application for the third runway until after the General Election. Lord Adonis told us that he is not unduly concerned at this stage. "We have always made it clear […] that it is a matter for BAA when it brings forward the planning application. They have chosen not to bring it forward so far, but that is a matter for them."[123] This is wholly inconsistent with the Government's assertions of the present need for a third runway. This also introduces an additional uncertainty into the timescale for obtaining planning consent and constructing the runway. The application, if submitted, will be determined by the Infrastructure Planning Commission which will operate from March 2010. The Government intends to publish a National Policy Statement on airports in 2011.

102. In view of the economic benefits to the UK, we endorse the Government's January 2009 decision to support a third runway at Heathrow and an additional terminal. We note the conditions for noise and air quality, imposed by the Government, and arrangements to limit CO2 emissions from aviation generally. It is crucial that these are applied effectively. We are concerned, however, about the lack of clarity on the timescale for completion of this project.

103. Even with a third runway at Heathrow, it is unlikely that the airport will become a hub airport for many UK cities. In order to maximise the economic benefits of an enlarged Heathrow, it is essential that direct access from the national rail network to Heathrow be provided.

STANSTED AND GATWICK

104. The case for an additional runway at Heathrow is based on improving the resilience of an airport that is already operating at full capacity. By contrast, the case for a second new runway in the southeast is based on predicted growth in passenger demand.

105. We have followed the development of the Department for Transport's passenger forecasts with interest. The Department for Transport's 'central case' forecast for 2030 has reduced from 500 million passengers per annum (mppa) in the 2003 forecast, through 485 mppa in the 2006 forecast, to 465 mppa in the 2009 forecast. A Department for Transport 'sensitivity test' shows that, if the calculations are based on rates of economic growth from the November 2008 Pre-Budget Report, demand in 2030 is forecast at 435 mppa.[124] Some witnesses calculated that, using 2009 GDP growth rates, the forecast for 2030 is closer to 400 mppa.[125] The Department for Transport contends that its central case—465 mppa—is the most appropriate figure for long-term planning. However, some of our witnesses argued that the impact of the recession would be substantial and lasting: although growth would return, the level of demand in 2030 would be affected. Whichever recent figure is used, it appears that the shortfall in airport capacity in 2030—the difference between the Department for Transport's estimate of unconstrained demand and the demand that would be accommodated with the two proposed additional southeast runways—has now disappeared.[126]

106. The planning inquiry into a second runway at Stansted is currently on hold. The case is more finely balanced and the recession and the consequent reduction in passenger numbers may impact on its viability and implementation date.[127] Whereas most of our witnesses were clear about the need for expansion of Heathrow, they were less exercised about a second runway at Stansted. Whilst some local authorities, such as Manchester councils, have backed local airport expansion strongly on economic development grounds, this does not appear to be the case with Stansted.[128] Outside London and the southeast of England, runway capacity issues are less critical.

107. We are not convinced that a national case for an additional runway at Stansted has been made.

108. The enforced sale by BAA of Gatwick airport is intended to lead to greater competition between airports in the southeast of England. Gatwick airport submitted evidence to us independently of BAA, stating that it expects its annual passenger traffic to reach 40 million within a decade and that it is keen to explore the option of a second runway at Gatwick.[129]

109. Some witnesses told us that, if a third runway at Heathrow were to be constructed, a second runway at Gatwick would not be viable—at least, not within the 2030 timescale.[130] There is, in any case, a legal restriction that prevents construction of any additional runway at Gatwick prior to 2019. However, other witnesses considered that, in terms of demand, Gatwick would be a better location for a new runway than Stansted and that, in terms of airport planning approval, 2019 was not far off.

110. The delays in arriving at a final decision on a second runway at Stansted, coupled with the recession and declining passenger numbers, mean that a second runway at Stansted is unlikely to be completed prior to 2019 when the restriction on an additional runway at Gatwick expires. The Government should reconsider whether the additional runway, if required, should be located at Gatwick rather than Stansted.

High-speed rail

111. Earlier this year, Lord Adonis set out his Transport manifesto. He noted that "the most far-reaching policy departure […] in its implications for Britain's transport system was the decision to establish the High Speed Two company, and to ask it to recommend to the Government a north-south high-speed rail plan by the end of the year." Part of the initial remit of High Speed Two (or "HS2" as it is now generally called) is to investigate the options for a high-speed rail link between London and the West Midlands, including a link to Heathrow.

112. The Eddington Study was relatively dismissive of high-speed rail but the Government and main Opposition parties are now broadly supportive. We have previously stated our support for new high-speed rail lines in the UK.[131] An inquiry into aviation is not the place to consider this subject in depth the case for high-speed rail.[132] However, it is important to clarify the extent to which rail might provide an alternative to short-haul flights.

113. Both 'sides' in the airport expansion debate were very positive about high-speed rail. BAA would welcome high-speed rail, especially if it served Heathrow. The airlines were also in agreement about investment in high-speed rail and in rail generally.[133] Similarly, the WWF-UK,[134] 2M Group[135] and other organisations opposed to airport expansion also strongly supported the development of high-speed rail.

114. Views diverge, however, on the extent to which improved rail services or new high-speed rail lines would reduce the number of short-haul flights and free up capacity at the busiest airports in the southeast, particularly at Heathrow. Airlines and airports believe that high-speed rail is not an alternative to airport expansion and, while desirable in its own right, it makes little difference to the strategic decisions on airports. The Airport Operators Association said that "Rail-air is a false choice."[136] Mr Harrison explained that easyJet, the largest short-haul airline in the UK, already has a policy of not operating on routes which take less than four hours by rail. "[…] it is a fallacy to think about high-speed rail as some sort of substitution for short-haul flights. They do different things and they are complementary." [137]

115. Mr Ridgway of Virgin Atlantic said that a high-speed rail line might free up some 2-3% of capacity at Heathrow which would be beneficial but would make little difference to the issue of runway capacity. Mr Carrivick (BAR UK) pointed out that a new high-speed rail line would take many years to become operational whereas additional runway capacity was needed now.

116. High-speed rail has proved to be highly effective at growing demand for travel between cities less than four hours apart by rail. It also tends to take up much of the growth in travel that might otherwise be accommodated on short-haul flights. Eurostar, the only UK company that has first hand experience of operating high-speed rail services between UK and continental Europe, provides useful evidence. Since 1994, it has more than doubled the total number of passengers travelling by air or rail between London and Paris. The market share for rail between London and both Paris and Brussels is now in excess of 70%. Eurostar concludes that an 80% share for rail is typical for journeys of approximately two hours, and that high-speed rail attracts more than 50% of the market share for journeys of up to 3.5 hours.[138]

117. Eurostar is more circumspect about the extent to which high-speed rail can eliminate the need for existing short-haul air services. This has happened on the Paris-Brussels route and, according to Dr Hamprecht of Deutsche Bahn, many French domestic services have now been replaced by TGV.[139] A key factor in this is the high quality and direct rail access to Paris airport.[140]

118. The Air Transport White Paper briefly considered the issue of high-speed rail in relation to airport capacity. It noted that passengers on internal flights accounted for some 13% of traffic at UK airports. It also noted the impact of high-speed rail on domestic air services in France and welcomed the prospect of improved rail services in the UK. However, it concluded that for passengers who were interlining (travelling to connecting flights) "rail is unlikely to be the most attractive choice. And for some parts of the UK, travel by air will remain the only realistic solution."[141] Manchester Airports Group told us that, of the 0.9 million passengers who flew between Manchester and Heathrow in 2008, 63% were transferring to onward flights. In its view, rail would not be an attractive alternative for these passengers.[142]

119. Sir David Rowlands, Chairman of HS2, and charged with reporting to the Government by December 2009 on the options for high-speed rail, told us that there was potential for high-speed rail to replace some demand for short-haul flights. He pointed out that the upgrade to the West Coast Main Line, resulting in improved speeds, though not what is conventionally defined as high speed, had already increased rail's share of the rail/air market between Manchester and London from around 50% to 70%. He saw high-speed rail as "potentially complementary" to Heathrow but thought the impact on slots and overall passenger numbers would be relatively minor.[143]

120. Network Rail published its own strategic study of a potential high-speed rail network in August 2009.[144] This concluded that a high speed link to Heathrow would have a positive benefit to cost. This benefit was above the guidance threshold set by the Department for Transport indicating that it could be considered good value for money and hence potentially eligible for funding.[145] When compared to constructing the 'basic' north-south high-speed rail route, adding a link to Heathrow would involve additional cost for the benefit of a relatively small number of additional passengers. As such, Network Rail found that, in benefit to cost terms, "the addition of Heathrow is detrimental to the overall case" for high-speed rail. It should be noted that Network Rail's assessment does not take account of the wider economic benefits associated with Heathrow.

121. We look forward to the creation of a high-speed rail network for the UK. It is imperative that this includes links to some of our major airports. Provided that good quality airport links are provided, high-speed rail will provide an alternative to some domestic flights, a welcome choice for passengers and strengthen the UK's major airports. Enhancing rail access to Heathrow will also maximise the economic benefits of the UK's international gateway airport.

122. High-speed rail is unlikely to replace all UK domestic flights, especially east-west links between regions and flights to Northern Ireland and the Scottish Highlands. In any event, the number of flights from UK airports to Heathrow is relatively small. As such, there is no evidence that high-speed rail offers a viable alternative to expansion of Heathrow.


110   Qq 130-132 (From Aberdeen, Belfast (City and International airports), Glasgow, Edinburgh, Manchester and Newcastle.)  Back

111   The Times, 4 September 2009 Back

112   Civil Aviation Agency, Connecting passengers at UK airports, November 2008 Back

113   Statement by the Secretary of State for Transport, Rt Hon Geoff Hoon MP [HC Deb 15 January 2009, cols 357-358] Back

114   Q 394 Back

115   Ev 305 Back

116   Q 393 Back

117   Ev 118 Back

118   Ev 118 Back

119   Department for Transport, The Future of Air Transport, Cm 6046, December 2003, p 57 Back

120   The main exception is the Manchester Airports Group which is wholly owned by the Greater Manchester local authorities. At some other regional airports, such as Birmingham International, the local authorities have a minority interest. The Scottish Government sponsors the 10 main airports in the Highlands and Islands Region.  Back

121   Department for Transport, Transport Infrastructure. Adding capacity at Heathrow: Decisions Following Consultation, January 2009, pp 24-25  Back

122   Ev 399 Back

123   Transport Questions with the Secretary of State, Transcript of oral evidence, 4 November 2009, Q 88 Back

124   Annex 2 Back

125   Ev 471 Back

126   Annex 2 Back

127   Q 10 [Dr Bush] Back

128   Ev 255 Back

129   Ev 461 Back

130   Q 12 Back

131   Tenth Report of Session 2007-08, Delivering a sustainable railway: a 30-year strategy for the railways, HC 219, para 28 Back

132   The Committee is inquiring into high-speed rail in its current inquiry into the Priorities for investment in the railways. Back

133   Q 335 Back

134   Ev 168 Back

135   2M is a collation of 23 councils in London and the southeast opposed to expansion of Heathrow airport. See Ev 336. Back

136   Ev 271 Back

137   Q 334 Back

138   Ev 110 Back

139   Dr Hamprecht, Uncorrected transcript of oral evidence, Priorities for investment in the railways, 11 November 2009, Q 102 Back

140   Mr Steer, Uncorrected transcript of oral evidence, Priorities for investment in the railways, 11 November 2009, Q 147. Refers to Paris CDG airport.  Back

141   Department for Transport, The Future of Air Transport, Cm 6046, December 2003, p 59 Back

142   Ev 299 Back

143   Qq 402-405 Back

144   Network Rail, Strategic Business Case for New Lines, August 2009  Back

145   The Department for Transport's Guidance on Value for Money states that a benefit:cost ration (BCR) of between 1.5:1 and 2.0:1 represents 'medium' value for money; above 2.0 is 'high' value for money. Network rail's Heathrow option shows a BCR of 1.6.  Back


 
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