Transport CommitteeWritten evidence from ABTA (AS 48)

Introduction

1. This response is submitted on behalf of the membership of ABTA—The Travel Association. ABTA was founded in 1950 and is the largest travel trade association in the UK, with around 1,300 members and over 5,100 retail outlets and offices. Our Members range from small, specialist tour operators and independent travel agencies specialising in business and leisure travel, through to publicly listed companies and household names.

2. The success of ABTA Members’ businesses is directly reliant on the UK’s aviation infrastructure; many of ABTA’s larger Members are themselves part of groups that own airlines. ABTA Members provide 90% of the package holidays sold in the UK, with Members also selling millions of independent travel arrangements. The provision of quality, efficient and competitively priced passenger air travel is vital to the business interests of Members.

3. ABTA has responded to the Department for Transport’s Draft Aviation Policy Framework. Although there are some welcome commitments within the consultation document, particularly involving improved surface access to airports, the Government fails to address the most fundamental challenge facing the aviation industry, namely the pressing need for increased airport capacity. Capacity constraints are not only hurting the UK’s aviation industry, but are also damaging the many industries reliant upon it, and the whole of the UK economy.

4. ABTA shares the concerns we expect that other sectors of the aviation and tourism industries are likely to have put forward, particularly the significant delay to the adoption of a proper UK aviation policy and the need for a clear cross-party plan on developing additional capacity. This submission also focuses on the importance of leisure aviation within the aviation mix, necessary improvements to airport surface access and the passenger experience, and the impact of Air Passenger Duty.

1. What should be the objectives of Government policy on aviation?

5. Government’s role should be to facilitate the conditions to allow airports and airlines to meet aviation demand in a sustainable way. Within such a framework, UK airports and airlines will then be able to make decisions that best meet demand and provide the greatest benefit for passengers.

6. If the Government is serious about driving growth, it must not delay the publication of a proper aviation policy any further. Our continental competitors have continued to invest in their future aviation infrastructure, and the UK is falling further behind in the absence of an effective policy framework. We are concerned that the Government’s timetable will lead to a policy vacuum which will make business investment decisions challenging, and risk delaying much needed investment.

7. ABTA believes it is essential that any aviation policy framework agreed is robust and has cross party support so that it continues beyond a single Parliament. Aviation policy cuts across Government and any future policy must sit alongside a raft of measures that address other policy concerns such as planning, connectivity and taxation. Further, that UK Government processes, such as planning and regulation, do not create excessive costs for business and, moreover, have cross-Government departmental cooperation. We do not want to see a repeat of the Heathrow Terminal 5 planning process, which took 15 years before finally becoming operational. The UK planning process stands in remarkable contrast to processes in other countries, where it has been demonstrated that new airport infrastructure can be planned, constructed and made operational within a few years, enabling countries to reap the economic benefits of enhanced capacity and infrastructure.

8. As a result we would like to see Government create a method for ensuring cross-party support for a new sustainable aviation strategy with a clear view on future capacity growth.

(a) How important is international aviation connectivity to the UK aviation industry?

9. It would be wrong to believe that connectivity is a concern for aviation alone. A vibrant and effective aviation industry is a vital pre-condition for broader economic growth within the UK economy and it plays a key part in maximising business, leisure and social opportunities for UK citizens across the country.

(b) What are the benefits of aviation to the UK economy?

10. ABTA is pleased that the Government acknowledges aviation’s contribution to the economy and that one of the main objectives in developing a policy is to ensure that the UK’s air links continue to make it one of the best connected countries in the world. The aviation sector offers a wide range of benefits to the UK: it facilitates business and leisure travel of British citizens across the world; it brings business and visitors into the UK; and it enables the import and export of goods; all of which contribute to a successful and growing UK economy. ABTA believes that aviation is a key plank of the UK’s growth strategy and that we need an aviation policy from Government that recognises its pivotal role in the UK’s recovery. Aviation contributes £49.6 billion to the UK economy.1

11. If additional capacity is not provided where it is needed, we strongly believe that passengers cannot and should not be cajoled into using airports outside the South East; rather, they will begin to use competitor airports in Europe to hub through to reach their preferred destination. Anecdotal evidence exists showing that this phenomenon is already occurring.

12. The inability to start and grow existing connections to the new and burgeoning economies where demand exists is a direct consequence of the lack of capacity at Heathrow and Gatwick. At a time when direct market access to these economies is essential, having our main airports virtually full and only being able to offer second choice airports is unsustainable.

13. Being an island nation on the periphery of Europe, a strong and comprehensive network of air services is an absolutely vital component of a competitive UK economy. UK plc benefits from the excellent air connections with cities worldwide, which has until now made the UK an easily accessible country in which to set up business. Investors particularly view London as one of the most attractive cities in which to do business in Europe and the quality of its international connections and domestic networks is viewed as key. This historic connectivity advantage cannot be taken for granted. To maintain our leading status in aviation connectivity, the Government must recognise that the necessary growth in capacity, improvements in surface connectivity, and the quality of the passenger experience are vital conditions for a successful economy.

14. One clear economic benefit which aviation underpins is UK tourism. ABTA strongly believes that the aviation and tourism markets (domestic, outbound and inbound) could together help rebalance, strengthen, and stabilise the UK economy in this economically difficult time. There is a vast potential for tourism to generate many jobs within the sector, particularly amongst young people.

15. Outbound travel alone has great potential to generate growth and jobs, however it is being held back by capacity constraints and disproportionately high taxation. Research recently published by ABTA paints a picture of outbound travel’s growth potential. The research finds that outbound travel directly accounts for 1.6% of UK GDP (£22 billion), with a total economic impact through the supply chain of 3.8% of GDP (£55 billion).2 The research also found that the sector underpins more than 1.2 million jobs across the UK economy and brings in over £6 billion in tax revenue to HM Treasury. Crucially, the report underlines the critical mass of other industries across the UK economy that outbound travel touches, and supports, such as retail, financial services and construction. The longstanding myth that outbound travel results in a “tourism deficit’ is proven to be without a footing.

(c) What is the impact of Air Passenger Duty on the aviation industry?

16. Not only is the UK’s competitiveness constrained by lack of runway capacity, it is also constrained by high aviation taxes in the form of Air Passenger Duty (APD), on top of which there is now the added cost of aviation participating in the EU Emissions Trading Scheme (ETS). ABTA believes that aviation should pay its proper environmental cost but feels that this cost is more than reflected in the current APD levels. UK businesses and travellers cannot continue to pay the relentless annual increases in APD rates which are putting us at a competitive disadvantage compared to our European neighbours and damaging the position of the UK as a hub for global air travel. APD is particularly hard on passengers from UK regional airports travelling through London to long-haul destinations who will have to pay twice if they are not flying on a through ticket.

17. ABTA has long supported the inclusion of aviation in the ETS which we feel should be a first step towards a global solution. We feel that ETS revenues should be offset against APD revenue; and submit that Per Plane Duty (PPD) would act as an incentive to airlines to invest in quieter more fuel efficient aircraft.

18. ABTA is a founding member of A Fair Tax on Flying that has called on the Government to undertake a review of APD to assess the damage it does to the UK economy. We believe such a review should inform future aviation policy as taxation levels do directly contribute to the success or failure of routes and aviation’s economic position in general. Nearly 200,000 people have called on their MP via the www.afairtaxonflying.org website for an economic review into the impact of APD. We believe that the Government should not increase APD any further before it has commissioned a review. It seems perverse that the Government is striving for policies to achieve growth and yet is ignoring the reasoned and popular calls to consider whether this tax is having a negative effect on employment and growth. We believe that such a review would show that APD makes UK goods and services more expensive, puts off foreign visitors from flying to the UK, damages the affordability of UK aviation and puts the annual holiday abroad out of reach for an increasing number of hard working families across the UK. A simple economic review by Government would show whether this is correct or not.

19. ABTA strongly believes that there should be a single APD regime across the UK, with the exception of Northern Ireland as a special case given the shared land border with the Republic of Ireland and where legislation to eliminate APD on direct long haul flights from NI is already progressing through the NI Assembly. There should not be different rates charged at airports outside London and the South East; we believe this would generate distortion and competitive disadvantage within the UK economy and air transport industry.

(d) How should improving the passenger experience be reflected in the Government’s aviation strategy?

20. Improving the passenger experience is of vital importance to ABTA and its Members. This starts with the passenger’s journey from their home/place of business to the airport necessitating a good choice of surface access by public transport. It continues with their journey through the airport. Although the airports and airlines have invested time and money in substantially improving their facilities in recent years and reducing the time spent in queues particularly at check-in and security, there is always room for further improvement. Equally the inbound journey is important with the two pinch-points being the UK Border and baggage reclaim. ABTA supports moves to further improve these and will continue to work directly with the airports and airlines and through the Airport Consultative Committees for the good of the passenger.

21. Greater focus by the Government in improving the delivery of the public sector side of the passenger experience, such as queues at the UK borders, would be very welcome. Whilst we all want a safe and secure border, long queues to enter the UK undermine our position as a global trading hub and create a poor welcome to Britain for visitors and returning citizens. Much more needs to be done to smooth the process at the UK Border and ABTA welcomes a renewed focus on this part of the passenger journey. Improvements made for the Olympic and Paralympic Games must not be allowed to fall as political and media attention moves on. A permanent fix in the service quality and resourcing of the Border Force to ensure that passengers are dealt with quickly and efficiently is urgently needed to this problem.

22. ABTA supports moving to risk based immigration controls and using the e-Borders programme, which the airlines have already spent millions of pounds on, to its fullest extent.

(e) Where does aviation fit in the overall transport strategy?

23. Aviation is an important part of the UK’s transport strategy. Many parts of the UK are dependent upon aviation as a lifeline, not just for communication purposes but economically eg the Scottish Highlands and Islands, Northern Ireland. It is important to recognise the value of all parts of aviation on the UK economy. Just as ABTA suggests the Government’s tourism policy should value all parts of the sector: domestic, inbound and outbound, so too must aviation recognise the mix of aviation models that contribute to the UK’s economy: scheduled, charter, no-frills, leisure, business and cargo. A strategy that promotes one type of flying over another or seeks to downgrade the relative importance of leisure aviation, for instance, would not carry our confidence and would, indeed, be a bad move for the UK.

24. We believe that High Speed Rail should complement and not be a substitute for additional airport capacity. Our greatest concern with plans for HS2 is the Government’s stated aim to link Heathrow, the UK’s international hub via a spur and not as an integral point on the London to Birmingham route. We urge the Government to think again.

25. As well as HS2, any scoping exercise must assess how best to improve the integration of the UK’s existing road, rail and light rail infrastructure with airports.

2. How should we make the best use of existing aviation capacity?

(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 resilience?

26. ABTA supports passengers being able to fly from the airport of their choice, which will likely be that closest to their home or business. The 2012 ABTA Consumer Survey3 showed that 62% of passengers strongly favoured flying from their local airport, showing the importance of local airports and that the Government should not seek to manipulate demand to suit their ends. Equally, passengers flying into the UK will wish to use the airport closest to their destination. This, in turn, helps prevent unnecessary road journeys at a cost to the environment.

27. In addition to calling for more capacity, we believe that better use should be made of existing runways. We support the Operational Freedoms trials at Heathrow with runways being used simultaneously for either arrivals or departures in a bid to cut delays and cancellations and get punctuality back on track. We also support moving as soon as possible to full mixed mode utilisation of runways at Heathrow on a permanent basis allowing for more slots to be made available. Mixed mode is implicit in single runway operations at every other airport in the UK.

28. We are deeply concerned that there appears to be inherent thinking within Government that business traffic is more valuable than leisure traffic and that any expansion should be for the benefit of business traffic. It has been suggested that leisure traffic might be moved to Stansted to accommodate more business traffic at Heathrow and Gatwick. But it must be noted that many air routes that clearly cater to business traffic are also dependent on leisure travellers for their financial viability. Most flights departing UK airports are “composite” ie aircraft flying with leisure and business passengers.

29. Further, ABTA does not believe that the “Heathwick” proposal, involving the construction of a high-speed rail line between Heathrow and Gatwick in order to create a new “virtual hub” allowing passengers to connect between the two, is a viable solution. Whatever Heathwick’s superficial appeal, we do not believe it will provide the seamless transfers between airports/terminals that are necessary for a successful international hub nor will it create any additional capacity at the UK’s two largest airports. However, additional rail access to Heathrow should be introduced including the proposed western access.

30. UK airports do experience problems with resilience and will continue to suffer unless and until capacity issues are addressed. The UK’s two largest airports are capacity constrained and without increased resilience, what should be a minor disruption as a result of adverse weather or other incidents can result in a severe delay. Spare capacity is not only essential for jobs and growth but also for efficient management of incidents and delays, however they are caused.

(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?

31. In its consultation the Government suggested that fifth freedom policies and bilateral agreements might be extended to other airports. However, it is necessary for there to be sufficient demand in order for a financially viable service to be operated. Lack of demand has led to many services being started up from regional airports then discontinued. Equally, airlines would prefer to operate from a few airports rather than spread their aircraft fleets and crew. We would not support any financial penalties or incentives on aviation in an attempt to create artificial demand.

(c) How can surface access to airports be improved?

32. ABTA has long supported airports in their aim to increase the number of passengers using public transport and are pleased to see this included in the Government’s consultation. Businesses looking to locate to London closely examine the surface access from London airports before deciding whether to locate in London or a competitor European city. Improving these links is essential to remaining competitive.

33. Coordinated action and investment by the Government is needed so as to encourage a greater number of passengers and airport workers to access airports by public transport. Local residents benefit from these services which also help to manage airports’ overall environmental impact.

3. 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?

34. We acknowledge aviation’s impact and accept it is vitally important that aviation plays its part in making every effort to reduce noise and other environmental impacts. However, it is necessary to strike a balance between the economic benefits of meeting demand and the needs of the industry, with the impact this has on local communities and the environment. It is essential that airports work in harmony with the local communities around them.

35. Aviation’s climate change impact, although growing, is relatively small at about 6% of the UK’s total CO₂ emissions.4 The aviation sector accounts for 1.6% of global greenhouse gas emissions and this will rise by just 0.5% by 2050.

36. We support the work of Sustainable Aviation5 which is entirely focused on finding collaborative ways of improving the aviation industry’s environmental performance and ensuring sustainable growth. Sustainable Aviation’s recent CO₂ roadmap shows that UK aviation can accommodate significant growth to 2050 without a substantial increase in absolute CO₂ emissions, through a combination of operational efficiencies, new technology and sustainable biofuels.

37. Aviation has a demonstrable and well-documented track record in improving its environmental performance and in delivering quieter planes and continues to invest heavily in the future. Aircraft today are 70% more fuel efficient than 40 years ago and the industry will work hard to ensure that this trend continues. Although the perception is that noise around airports has increased substantially with a growing number of aircraft movements, aircraft have in fact become significantly quieter over the past few decades due to increasingly stringent certification and improvements in technology and the noise footprints have shrunk. For example, the number of people within the 57dBA contour around Heathrow has shrunk from two million in 1980 to 268,000 in 2008 despite an increase in movements. Other airports have reported similar reductions in the number of people affected with a continually shrinking noise footprint.

(c) What is the relationship between the Government’s strategy and EU aviation policies?

38. ABTA supports the Government accelerating the coordination of environmental policy in the UK, the EU and globally. The inclusion of aviation in the European Union’s Emissions Trading Scheme (ETS) is a first step towards a global deal reducing environmental impact. We feel that the Government should continue to push ICAO to rapidly progress a global cap and trade system for emissions. Whilst we recognise the UK and EU’s desire to show leadership there are economic consequences in doing so. We urge that an early solution is found to the problems besetting ETS with other countries’ airlines refusing to participate.

39. Generally, greater coordination is needed of European Air Traffic Control with central management and active participation of other governments in Europe. We support the work being done through the Single European Sky II package (SESII) and SESAR (the technological project for modernising air traffic management in Europe).

4. Do we need a step-change in UK aviation capacity? Why?

(a) What should this step-change be? Should there be a new hub airport? Where?

40. It must be self-evident that constraining capacity in the South-East will increasingly fail to meet the needs of customers. The question of airport capacity in the South East must be addressed urgently and planned for in the medium to long term.

41. ABTA supports a third short runway at Heathrow and a second runway at Gatwick. We also support a runway extension at Birmingham and an additional new runway at either Edinburgh or Glasgow. We support other regional airports seeking to expand but not as a substitute for additional capacity in the South East. We believe that aviation can grow within the agreed carbon limits and support the move towards sustainable aviation.

42. We believe there can be only one international hub airport in the UK with a comprehensive route network serving destinations that other airports cannot, supplementing local demand with domestic and international transfer traffic and cargo, and that hub is currently Heathrow. In the long-term, we believe that the UK’s hub airport needs to be able to grow to reflect market demand and ensure continued international importance. If that additional capacity cannot be realised at Heathrow then it needs to be found elsewhere.

(b) What are the costs and benefits of these different ways to increase UK aviation capacity?

43. See our response to question 1b.

44. Thank you for taking our comments into consideration. We would welcome the opportunity to discuss any points raised in our response further with the Committee and would urge the Committee to specifically look at the importance of leisure aviation within the aviation mix in order that this is not overlooked or deprioritised without adequate scrutiny of any proposals. We would request the Committee’s support for an economic review into the impact of APD.

19 October 2012