Transport CommitteeWritten evidence from TUI Travel PLC (AS 116)

Introduction

TUI Travel PLC, the parent of TUI UK & Ireland, Thomson Holidays, First Choice Holidays and Thomson Airways welcomes the opportunity to submit a response to the Transport Committee inquiry into the Government’s aviation strategy. Thomson Airways, the UK’s third largest air carrier, operates a fleet of 65 aircraft to European, North American, Caribbean and Indian Ocean destinations a total of 85 destinations being served carrying approximately 10 million passengers per year.

Thomson Airways operates flights from 20 UK Airports and has aircraft and crews based at 15 airports, with the largest being Gatwick where we have a fleet of 15 aircraft. Such fleet disposition enables our tour operator consumers to fly from their “local” international airport to short haul and medium haul destinations. For its long-haul operations Thomson Airways flies from around eight UK airports serving the catchment areas local to that and other nearby airports that would not, themselves, support direct long-haul flights. For example Bristol would support the Exeter, Cardiff and Bournemouth airport catchment areas for its long-hall operations. Newcastle likewise supports Edinburgh, Doncaster, Durham-Teesside airport catchment areas.

Summary

TUI Travel is concerned that the current aviation debate is principally focussed upon the contribution to the economy made by business travel and inbound tourism. The significant value to the UK economy of outbound tourism also needs to be understood and considered. A recent study for ABTA shows 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 (£55billion).1

The TUI UK & Ireland business model is constructed such that we provide flights from the customer’s local airport to a wide range of destinations that is driven by the demand from within that catchment area; it follows from this that our largest bases are Gatwick, Manchester and Glasgow.

Thomson Airways does not operate from London’s Heathrow airport, although our tour operators do offer holidays on flights departing from Heathrow. It follows that, for us, the debate on the UK’s hub capacity is not our central concern, save to the extent that a decision on such hub capacity may indirectly impact our operations at other UK airports.

Responses to the Committee’s Questions

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

We are concerned that Government, including the Department for Transport, appears too often to signal that it considers business travel to be in some way superior, or more worthy of support, than leisure travel. We reject any such notion. For example DfT officials has recently stated that the most efficient use of an airport slot is based upon the economic benefit of that slot through the revenue it generates from First and Business class passengers. Conversely we would argue that for the same aircraft type, our high density seating aligned with high load factors that also deliver a more environmentally friendly use of the slot through reducing the CO₂ per passenger kilometre is the most efficient use of that scarce resource. Given what we say above about the importance of the outbound tourism industry to the UK economy, our view is that the government policy on aviation should consider all modes as equal players and policy should not favour one particular sector over another.

Further, the policy should be fully cognisant of the need for sustainable growth of the industry. TUI Travel is committed to reducing its carbon footprint and we believe that Government Aviation policy should incentivise such behaviours, as we will explain in greater detail later in this response.

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

We will let others make the point for connectivity for business travel and visiting friends and relatives, however for TUI Travel our businesses are providing connectivity that enables the consumer to take well-earned holiday. Thomson Airways operates from 20 UK airports to 85 overseas destinations a network that is unique to charter operations.

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

TUI UK and Ireland is providing its 6 million customers with the experience of travel, in the majority of cases from their local airport, that broadens horizons, provides rest and recuperation for many of the UK’s citizens where “taking the children on holiday” was one of the areas highlighted by David Cameron in his November 2010 speech as a contributor to wellbeing. Through our diverse range of holiday products that are sold through our 700 stores, to be found on most high streets, or via the internet we provide a wide range and mix of jobs and skills across the United Kingdom; These range from the highly specialised pilots, engineers and IT professionals to the specialist high street holiday advisors and our administration teams in our head offices and call centres where we have a UK workforce in the region of 17,000 colleagues. Thus demonstrating the economic value of connectivity across the UK airports.

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

In our view the levels of APD has the effect of dampening and displacing demand. We have seen this effect in our sales in Ireland where holiday sales for Dublin departures were increasing for residents of Northern Ireland as a result of the different rates of APD in place.

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

In order to manage customer retention it is incumbent upon us as a business to put the customer at the centre of our holidays and flight offerings. Since the late 1980’s Tour operators have historically led the way in providing good customer service and in particular appropriate welfare and assistance during flight disruption. We are therefore well placed to work with the government to share best practice and improve the customer experience. Most UK Airports work voluntarily with their stakeholder partners to agree service level agreements, where additionally Heathrow and Gatwick airports fall within the regulated airport sphere. The industry over recent years has worked together to improve customer service to the extent that, for example security queues, when departing an airport, are generally a thing of the past. However the same cannot be said of arrival queues at the UK Border primary line. Despite a very good record during the Olympics and Paralympics where money and resources were made available to the UK Border Force to ensure a smooth passage, we remain particularly concerned at the service quality levels at the border going forwards; in particular the current methodology of measuring queues as the average queue length as opposed to the actual. The SLA targets are not demanding enough with a 25 minute for UK/EU nationals and a 40 minute for non UK-EU nationals. We firmly believe that this should be significantly reduced. On a similar note whilst we fully recognise and accept that the need for a strong UK Border, this is not incompatible with good customer service. We refer to the Home Affairs Committee report2 where they call for a return to risk based controls based upon the evidence provided by TUI Travel into the costs and benefits of e-Borders.

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

We believe that aviation should fit into a national transport strategy and that strategy should include better surface access to airports. We refer in particular to our evidence provided to the transport committee3 in relation to the problems associated with severe snow in 2010 and 2011.

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

TUI Travel supports the announcement by the Secretary of State for Transport of the implementation of the Aviation Commission headed by Sir Howard Davies, we are concerned however at the delay to the government decision of airport capacity and would welcome any moves to bring forwards the Commission’s reporting dates.

(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?

We believe that the recommendations of the Aviation Commission, when published, should be adopted by both the current government plus also by cross party support thus creating a clear aviation strategy that can continue even with any change of government. It is difficult for us to make the right investment decisions when government strategy is unclear, or at worst non-existent as at present.

(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?

We do not believe that there is a capacity issue outside of the South East and that any growth can be accommodated within the existing framework.

3. What constraints are there on increasing UK aviation capacity?

TUI Travel believes that restrictions designed to limit climate change are the biggest constraint upon increasing aviation capacity since any increase in capacity within the UK must be made within a clear sustainable framework. We support the Commission on Climate Change that growth can be achieved up to 2050 within the current climate framework

(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?

The recent UK Department for Transport consultation on its Aviation Policy Framework stated at paragraph 3.31 “In the last 10 years, although air traffic has increased by 45%, the demand for jet fuel has increased by only three%” This reflects the measures that airlines such as Thomson Airways have taken to reduce fuel burn and therefore emissions. Our current emissions are 73.1g CO₂ per Revenue Passenger km [FY11/12] one of the lowest in the UK. Our fleet replacement programme will see Thomson Airways operating one of the youngest fleets in the UK by 2020.

We do not subscribe to the view that yet more regulation or legislation is required. Airlines could be incentivised to operate more sustainably through, for example, gearing landing fees & charges to reflect airline fuel and carbon efficiency per passenger per 100kms. Government should publish an agreed method for calculating and reporting grams of CO₂ per RPK

As a founding signatory of “Sustainable Aviation’, TUI Travel believes that the aviation industry will reduce its actual carbon emissions through a combination of:

Technology—airframe and engine.

Sustainable alternative fuels.

Operational improvements.

In its recent CO₂ Road Map, SA concludes that UK aviation is able to accommodate significant growth to 2050 without a substantial increase in absolute CO₂ emission. SA supports the reduction of net Co₂ emission to 50% of 2005 levels through internationally agreed carbon trading.

In October 2011 Thomson Airways was the first UK Airline to carry out flight biofuel trials on a commercial passenger route, The Government should play a key role in supporting research and development in aerospace technology, encouraging the introduction of sustainable biofuels, delivering on infrastructure projects such as the Single European Sky initiative and working with other countries to establish a global sectorial approach. TUI Travel does not support unilateral UK targets and measures, as they would be unnecessary and counter-productive.

Recent and future developments in aircraft and engine technology will play a major role in reducing the UK’s carbon intensity. We anticipate absolute CO₂ emissions will continue to fall post-2050 due to the on-going penetration into the fleet of new wide-body aircraft types entering service from around 2035 onwards. The same technologies will also be deployed on a world-wide basis, with a correspondingly greater CO₂ mitigation impact.

TUI Travel therefore supports the SA position and believes that the Government Aviation Policy should:

Support the development of more efficient aircraft and engine technologies which will be deployed on a worldwide basis.

Support the development and large-scale deployment of sustainable aviation fuels offering very significant life-cycle CO₂ savings relative to conventional fossil-based fuels.

Work with international partners to enable more efficient air traffic on non-domestic routes, within the context of increased capacity requirements.

Press for agreement on and support implementation of a global carbon-trading solution, encompassing all of aviation and ensuring a level playing field for all participants.

In late August 2012, TUI Travel launched its three-year Sustainable Holidays Plan [2012–2014] as well as our 2011 Sustainable Development Report. The Plan has 20 commitments including those that cover carbon management and specifically aviation. In addition, TUI UK [Thomson Airways] has a set of 20 SD Commitments, referred to as its Holidays Forever commitments, again a number of which are carbon and aviation related. Airlines are already doing their part to minimise impact- two way partnership shows government is taking the matter as seriously as the airlines are

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

TUI Travel will support the need for additional sustainable capacity at those airports that have demonstrated that they are capacity constrained where the only solution is to increase capacity at that airport. This situation currently only affects the South East airports. Gatwick is currently our largest aircraft base where we sustain the operation of 15 aircraft, whilst meeting the catchment area demands of our customers enabling them to fly from their local airport. It is not a feasible option to suggest that passengers living in, say, Brighton should be forced to travel to Stansted in order to catch their holiday flight. Our policy is to base aircraft where the demand is, and thus we do not believe that government policy should dictate from which airport a consumer must fly. It should be noted that previous attempts, by government, at traffic distribution between Scottish and London airports have failed either through legal challenge4 or through market forces when such restrictions were lifted.

Conclusion

TUI Travel believes there is a need for a clear strategy that sets out a long term vision for aviation in the UK. Ideally, such a strategy should have cross-party support that would prevent the see sawing of aviation policy that we have experienced during the last 50 years. Such an aviation policy should be consistent with the UK Committee on Climate change recognition that aviation can still grow within the UK’s climate policy up to 2050. The government strategy needs to recognise each sector as equal partners and not favour one sector over another in coming to its policy and strategy conclusions.

TUI Travel welcomes the opportunity to submit this written evidence to the Committee and regrets that it was not possible on this occasion to appear during the oral hearings.

We would be pleased to supply any supplementary responses to any further questions that you may have following the submission of this response.

9 November 2012