1 Introduction |
Aviation and connectivity
1. The benefits of aviation are not only economic;
it also enriches the lives of citizens by providing transport
and trade links with the rest of the world. These benefits do
not come without a price. The local and global environmental impacts
of aviation are widely acknowledged and it is recognised that
these must be tackled effectively.
2. Furthermore, debate continues about precisely
how much aviation contributes to the UK economy. A recent analysis,
often quoted by industry, found that the aviation sector contributed
£49.6 billion (3.6%) to UK GDP.
However, some commentators argue that that overstates the sector's
contribution because, for example, exemptions from paying fuel
duty and the environmental and social costs of the sector are
not adequately taken into account.
Nonetheless, Government figures show that the UK aviation sector
had a turnover in 2011 of around £53 billion, generated around
£18 billion of economic output and employed over 220,000
workers directly and supported many more indirectly.
The aviation industry commissioned research that suggests that
the total number of jobs supported (directly and indirectly) by
aviation could be as high as 921,000.
3. For example, aviation supports the tourism
industry. The economic benefits of inbound tourism are generally
undisputed. However, questions remain over the impact of outbound
tourism on the UK economy due to the so-called "tourism deficit",
which relates to the difference between the amount that UK citizens
spend on their trips abroad and the amount that foreign visitors
spend in the UK. ABTA, the travel association, has published research
on the contribution of outbound travel towards UK GDP, which it
suggests shows that "the longstanding myth that outbound
travel results in a 'tourism deficit' is proven to be without
a footing". However,
Greenpeace and WWF-UK remain concerned about the potential impact
of a "tourism deficit".
4. The economic benefits of aviation are further
augmented by its catalytic impacts on businesses across all sectors,
which are facilitated by greater connectivity.
The concept of connectivity, which encompasses the number of destinations
served, their importance to business, and the frequency of flights,
is essentially about the ease with which consumers can find the
route they want at the time that suits their needs. Good connectivity
can help to promote both trade and inward investment.
Connectivity is also important for leisure travellers as it creates
a variety of route and destination opportunities.
5. The UK is already very well connected, with
direct air links to over 360 international destinations.
However, concerns have been raised that the UK's position is slipping
in comparison to other countries and that this may be having a
detrimental effect on trade and investment. There are particular
concerns about poor connectivity between the UK and some of the
world's emerging markets, such as, the so-called BRIC and CIVETS
1 shows that London lies behind Dubai in terms of connections
to the BRIC economies. This is largely a consequence of Dubai's
high level of connections to the Indian subcontinent. It also
shows that while London is currently better connected than its
European rivals to the BRIC economies overall, it falls behind
Paris and Frankfurt in terms of connections to Brazil, Russia
and China (excluding Hong Kong). London's position, in terms of
its links to China, is better if Hong Kong is included, indicating
that it is well connected to the financial centre in Hong Kong
but less well connected to the manufacturing heartland of China.Figure
1: London's Air Connectivity to the BRIC Countries
Source: OAG data, April 2013.
6. The consequences of poor connectivity in the
UK may be that businesses consider it preferable to move their
European headquarters away from London. For example, Boris Johnson,
the Mayor of London, suggested that KPMG moved its European headquarters
from London to Frankfurt because the latter is so much better
connected with emerging markets.
While there are few hard examples such as this, business groups
remain concerned about the prospect of the UK economy losing out
in the future if connectivity is not improved through the provision
of new services.
The Confederation of British Industry (CBI) has recently estimated
that a new daily service to one of the key growth markets could
generate up to £128 million of additional trade.
7. The viability of additional services to new
destinations, or indeed more frequent services to existing destinations,
depends upon the level of demand for such services. At most airports,
the level of demand is determined by the number of potential customers
based in the airport's catchment area. These customers travel
"point-to-point" on flights either to their end destination
or to a "hub airport" for a connecting flight to their
end destination. It follows that a hub airport makes use of both
its own local catchment area and also incoming customers from
other airports to feed demand for services so enabling additional
destinations to be served and higher frequencies of service to
be offered. Hub airports operate in a way that facilitates the
transfer of passengers or goods, originating from a number of
different cities and countries, onto services that would otherwise
not be viable if they relied solely on the catchment area around
the airport itself. Nonetheless, hub airports need strong local
catchment areas in order to ensure that there is always a base
level of demand as there is strong international competition for
transfer passengers, with airlines often competing on price to
encourage passengers to use their hubs. International scheduled
carriers rely on transfer passengers to provide competitive services
to the world's emerging markets.
Hub airports therefore have a particular role in delivering air
connectivity. Consequently, much of the recent debate about aviation
strategy has focussed on hub airports and in the UK a concern
about insufficient capacity at Heathrow, the UK's current hub
strategy and the airport capacity debate
8. The lack of capacity at UK airports, particularly
in the south east, has been the subject of much discussion over
the past five decades. For many the obvious solution has been
to construct new runways to accommodate more flights. In 1971
the final report of the Roskill Commission recommended Cublington,
Buckinghamshire, as the preferred site for a new four-runway airport,
with a minority report favouring Maplin Sands, off the Thames
estuary. Maplin was
chosen by the Government as the preferred site although neither
airport was built. It was this failure to develop a new hub airport
in the late 1960s and early 1970s that the Royal Aeronautical
Society blames for the "current impasse in resolving the
airport capacity crisis in the [south east] of England [and] the
failure to overcome Heathrow's evident frailties as a national
9. Following the cancellation of the Maplin project
in 1974, the first Airports Policy White Paper was produced in
1978, following an extensive period of consultation.
This envisaged the development of both Heathrow and Gatwick as
the two major international airports to meet demand over the medium
term through the addition of a fourth and second terminal respectively,
with subsidiary roles for Stansted and Luton. Study groups were
established to consider longer term requirements which culminated
in a recommendation that Stansted be developed as the third main
London airport. Planning approval was granted for major development
at Stansted as a single runway airport in conjunction with the
publication of the second Airports Policy White Paper in 1985.
By 1990, the Civil Aviation Authority was recommending that at
least one additional runway would be required at a London airport
by 2005. The Government set up a new working party, known as RUCATSE
(runway capacity to serve the south east), which reported in 1993.
This working group recommended that an additional runway at Heathrow
would generate the highest benefits, with a second runway at Gatwick
being the next best alternative. Options at the other airports
were deemed to be less beneficial. This working group also recognised
that "Thames estuary sites could offer important long term
advantages, although they pose major problems of their own".
10. The most recent in-depth review of UK airports
was carried out in preparation for the former Government's 2003
White Paper on the future of air transport, which concluded that
a second runway should be built at Stansted, followed by a third
runway at Heathrow subject to certain environmental standards
being met, and that land should be safeguarded for a second runway
at Gatwick after 2019.
None of these runways has been built. Prior to the General Election
in 2010, the then Labour Government supported a third runway at
Heathrow. The Labour Party's manifesto in the run up to the election
indicated that it no longer supported expansion at any airports
other than Heathrow.
11. In May 2010, the Coalition Agreement set
out the current Government's position, which was to cancel the
third runway at Heathrow and refuse permission for additional
runways at Gatwick and Stansted.
In order to make better use of these existing airports, without
building new runways, the Government announced the establishment
of the South East Airports Taskforce. In July 2011, the Taskforce
recommended a package of proposals to address punctuality, delay
and resilience issues at Heathrow, Gatwick and Stansted. The package
included a set of operational freedoms to allow certain tactical
measures to be applied to mitigate disruption and to facilitate
recovery, a performance charter for each airport to setting out
the level of service that airline customers and their passengers
should expect to receive, and a set of policy guidelines to optimise
the utilisation of runway resource at each airport.
12. In July 2012, a year after the Taskforce
report, the Government published its draft Aviation Policy Framework
(APF), setting out its broader strategy on aviation, for consultation.
Notably, the draft APF did not itself express a view on the hub
capacity issue. It did, however, note that "the main issue
of contention remains airport, and particularly runway capacity".
The draft APF indicated that the Government would explore the
options for maintaining both the UK's aviation hub status and
its international air connectivity through a call for evidence
later in 2012.
13. On 7 September 2012, the Government announced
that it had asked Sir Howard Davies to chair an independent commission,
tasked with identifying and recommending options for maintaining
the UK's status as an international hub for aviation.
The Airports Commission has undertaken to produce an interim report
by the end of 2013, and a final report by the summer of 2015.
14. In March 2013, the Government published its
final APF, which comments on a number of issues, including:
- the benefits of aviation, particularly
in relation to the UK economy;
- climate change and the global environmental impacts
- local environmental impacts such as noise, air
pollution and surface access traffic congestion;
- the role of the Airports Commission in relation
to the capacity debate;
- protection of passenger rights;
- competition and the regulatory regime for airports;
- airspace issues;
- aviation safety; and
- the security regime.
15. We launched our aviation inquiry on 13 September
2012, shortly after the publication of the draft APF and the Government
announcement on its intention to set up the Airports Commission.
We chose to look at UK aviation strategy as a whole including
the role played by both hub and non-hub airports. Our terms of
reference sought views on the following questions:
i. What should be the objectives of Government
policy on aviation?
a) How important is international aviation connectivity
to the UK aviation industry?
b) What are the benefits of aviation to the UK
c) What is the impact of Air Passenger Duty on
the aviation industry?
d) How should improving the passenger experience
be reflected in the Government's aviation strategy?
e) Where does aviation fit in the overall transport
ii. How should we make the best use of existing
a) How do we make the best use of existing London
airport capacity? Are the Government's current measures sufficient?
What more could be done to improve passenger experience and airport
b) Does the Government's current strategy make
the best use of existing capacity at airports outside the south
east? How could this be improved?
c) How can surface access to airports be improved?
iii. What constraints are there on increasing
UK aviation capacity?
a) Are the Government's proposals to manage the
impact of aviation on the local environment sufficient, particularly
in terms of reducing the impact of noise on local residents?
b) Will the Government's proposals help reduce
carbon emissions and manage the impact of aviation on climate
change? How can aviation be made more sustainable?
c) What is the relationship between the Government's
strategy and EU aviation policies?
iv. Do we need a step-change in UK aviation capacity?
a) What should this step-change be? Should there
be a new hub airport? Where?
b) What are the costs and benefits of these different
ways to increase UK aviation capacity?
16. We received 124 written submissions and took
oral evidence on seven occasions between November 2012 and February
2013. In December 2012, we visited Frankfurt Airport in Germany,
to find out more about how it functions as a major European hub
and to discuss with Fraport, the airport operator, and Lufthansa,
Germany's flag-carrying airline, the role of hub airports and
the international challenges faced by Europe's aviation industry.
The programme for this visit is published in Annex A. We are grateful
for all the written and oral evidence we received and for the
assistance we received in organising our visit, particularly from
Fraport and the Embassy in Berlin. During the course of our inquiry,
we also commissioned research from Oxera Consulting Ltd on the
commercial viability of a new hub airport. This research is published
in Annex B. We are grateful to Oxera for their work. Finally,
we are grateful for the assistance we received in our inquiry
from our specialist adviser, Louise Congdon.
17. This inquiry builds on our related work in
this Parliament, including our reports:
- Keeping the UK moving: The
impact on transport of the winter weather in December 2010, which
noted capacity as a constraint on Heathrow's ability to recover
from periods of closure.
- Draft Civil Aviation Bill: Pre-Legislative Scrutiny,
which looked at changes to the system of economic regulation of
airports by the Civil Aviation Authority (CAA), changes to the
CAA's remit, governance structure and powers, and the transfer
of security operation regulatory functions from the DfT to the
- High Speed Rail, which concluded that the Government
needed to make clear how the High Speed 2 rail network fits into
its wider aviation strategy.
1 Oxford Economics, Economic Benefits from Air Transport
in the UK, 2011; and AS 040 [International Air Transport Association] Back
Q 201 [Tim Johnson]; AS 010, paras 2.3-2.4 [HACAN]; and AS 109,
paras 17-18 [Greenpeace] Back
HM Government, Aviation Policy Framework, March 2013, Cm
8584, p 9 Back
Oxford Economics, Economic Benefits from Air Transport in the
UK, 2011, p 4; AS 089, para 6 [Virgin Atlantic Airways]; and AS
110, para 1.3 [British Airways] Back
AS 048, para 15 [ABTA] Back
AS 069, para 2 [WWF-UK]; and AS 109, paras 21-24 [Greenpeace] Back
AS 039, para 7 [Foster+Partners] Back
AS 011, para 7 [Royal Aeronautical Society] Back
Q 108 [Andrew Cooper] Back
AS 087, para 6 [Department for Transport] Back
BRIC refers to Brazil, Russia, India and China; and CIVETS refers
to Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa.
Q 764 [Boris Johnson] Back
Qq 425-429 [John Dickie; Stuart Fraser; Rhian Kelly; Mike Spicer;
and Corin Taylor] Back
Confederation of British Industry, Trading Places, February
Q 19 [Sian Foster] Back
House of Commons Library, Aviation: proposals for an airport
in the Thames estuary, 1945-2012, SN/BT/4920, last updated
on 20 July 2012 Back
AS 011, para 3 [Royal Aeronautical Society] Back
Secretary of State for Trade, Airports Policy, February
1978, Cm 7084 Back
Secretary of State for Transport, Airports Policy, June
1985, Cm 9542 Back
Runway Capacity to Serve the South East: A Report by the Working
Group, July 1993 Back
Runway Capacity to Serve the South East: A Report by the Working
Group, July 1993, Executive Summary, para 13 Back
Department for Transport, The Future of Air Transport,
December 2003, Cm 6046 Back
The Labour Party Manifesto 2010, p 1:8 Back
HM Government, Coalition Agreement: our programme for government,
May 2010, p 16 Back
Department for Transport, South East Airports Taskforce: Report,
July 2011, p 7 Back
Department for Transport, Draft Aviation Policy Framework,
July 2012 Back
Department for Transport, Draft Aviation Policy Framework,
July 2012, p 4 Back
Written Ministerial Statement, Independent Airports Commission
- increasing international competitiveness of UK airlines and
airports, 7 September 2012 Back
Airports Commission, Guidance Document 01: Submitting evidence
and proposals to the Airports Commission, February 2013 Back
Department for Transport, Aviation Policy Framework, March
2013, Cm 8584 Back