Transport CommitteeWritten evidence from Gatwick Airport (AS 68)

Summary

London and the UK is one of the world’s leading aviation markets. The UK is exceptionally well connected and has direct flights to some 360 destinations which is more than any other country except for China and the USA. It is critical that London and the UK retains and builds on this superior air connectivity.

Gatwick is beginning work on evaluating options for a new runway against the criteria which it anticipates will be used by the Independent Airports Commission to make recommendations to the Government. There is clearly much work to be done. However, Gatwick anticipates that the case for a new runway at the airport is likely to be stronger than other options when assessed against relevant criteria.

Today, London is served by several airports rather than a single “hub”. This has worked well in terms of convenience of access. The population of London and the South East is spread over a large area with congested road and rail systems. A new runway at Gatwick would enable the airport to grow to a similar size as Heathrow’s ultimate capacity as a two runway operation. London’s airport system could continue to evolve in a similar way to other world cities, including New York, which is served by multiple airports that support multiple airline business models providing a wide choice of destinations, frequencies and service offerings.

The environmental impact of a new Gatwick runway in terms of noise and emissions would be far less than at Heathrow. The passenger experience is likely to be better than at a “mega hub’, especially given no original design ever envisaged such an expansion. Gatwick is also conveniently located for a large population and is well served by road and rail links. A new runway at Gatwick would also not suffer from the physical capacity constraints of the relatively short third runway option at Heathrow.

Gatwick will adhere to its legal agreement not to begin construction of an additional runway before 2019. However, given lead times in the policy and planning process, the preclusion of construction of a new runway before 2019 is no longer of practical relevance. Following a public consultation process in 2011, Gatwick published a Master Plan in July 2012 that outlined how a new runway could be developed. In partnership with the Local Authorities, Gatwick continues to safeguard land that would be required for one.

Gatwick believes that there is significant spare capacity at London’s airports today. There is sufficient time for a considered review of longer term options for new runway capacity. Gatwick estimates that capacity at London airports will be some 190 million passengers per annum by 2020 which is over 40% more than the 132 million passengers per annum handled in 2011.

Gatwick also believes that there is much that airport operators, airlines and the Government can do to make better use of and expand capacity at London’s airports before adding a new runway. Airport operators can, for example, encourage larger aircraft and higher load factors; incentivise the use of existing “off-peak” runway capacity; and increase hourly runway throughput through more efficient management. Gatwick is actively pursuing all these strategies and is currently mid-way through implementing a plan to boost runway capacity at times of peak demand.

The CAA should, with the support of the Government, remove economic regulation from both Gatwick and Stansted. The Government should also support the EU slot reform to encourage better and fuller use of available slots. The Government should also take action to improve surface access through, for example, its approach to letting rail franchises.

(1) What should be the objectives of Government Policy on Aviation?
(a) How important is international aviation connectivity to the UK aviation industry?

1. London and the UK is one of the world’s leading aviation markets. There is huge demand from both businesses and leisure traffic. This has shaped the UK aviation industry and how it has grown.

2. The UK has a broader network of direct air connections than any other country apart from China and the USA.1 There are currently direct flights from the UK to some 360 destinations. This success has been achieved through multiple airports located conveniently around London and the UK.

3. Passengers prefer direct flights. A new generation aircraft with low operating costs is being phased into the world’s fleet, the current trend away from hub airports which serve connecting passengers towards direct point-to-point services will continue and accelerate. This trend has been highlighted by, amongst others, Boeing.2

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

4. Aviation provides crucial access to global markets. It also enhances communications and interactions between and within business and provides access to a large labour pool. These supply side or “catalytic” effects are permanent and raise the long term productivity of the UK economy as a whole.3

5. Studies have quantified the overall economic value of these benefits, either in sum or separately, to the UK. The most recent study showed that the aviation sector contributes £53 billion a year to the UK economy, or 3.4% of UK GDP as a whole, and that the activities of the sector support 963,000 jobs.4

6. Other studies have used different definitions of the aviation sector. They have, for example, not included the aerospace supply chain, instead focusing solely on airlines, airports and the activities of their services providers and excluded “catalytic” spending, such as that by inbound tourists. Even with this narrower definition, aviation has been estimated to generate £8.8 billion of Gross Value Add (GVA) every year, and 141,000 jobs.5 Today, Gatwick itself adds £2 billion of GVA to the economy of London and the South East alone.6

7. Aviation’s broader “enabling effects”, such as trade and inward investment, are also a major source of growth for the UK economy. It has been estimated that a 10% increase in the UK’s international connectivity would add £890 million a year to UK.7 Clearly aviation plays a critical role not just in underpinning productivity of the economy, but also in terms of potential sources of growth.

(c) What is the impact of APD on the UK aviation sector?

8. High and growing rates of APD are damaging the UK aviation sector. Gatwick provided oral evidence to a recent report published by the All Party Group on Aviation on this issue. A recent example of the direct impact of APD was the cancellation by Air Asia X of its services from Gatwick to Malaysia,8 which it attributed to the high, and escalating, rates of APD in the UK.

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

9. Research commissioned by Gatwick from YouGov helps to demonstrate that passengers prefer direct flights; airports that are convenient and easy to access; punctual airline services; and a friendly, efficient, pleasant airport experience. Passengers like their travel experience to be as stress free as possible. They also appreciate airports with shorter walking times and quick, predictable processing with minimum queuing.

10. These preferences should be reflected in the Government’s aviation policy. First, the Government should consider convenience and adequacy of surface access when planning how and where capacity should be expanded throughout the system. London’s distribution of population over a very wide area means that accessibility is maximised through a multi-airport system. Second, the Government should consider the negative consequences for passenger experience of the creation of a “mega-hub” airport. Finally, the Government should continue to develop a policy and regulatory framework that both encourages and allows the airports freedom to compete with each other.

11. The current system of economic regulation was designed around BAA’s historic near monopoly of London’s airport system. Gatwick came under separate ownership in December 2009, since when it has been competing vigorously with other airports. There is no longer a need for it to be subject to economic regulation. Gatwick’s freedom to compete is constrained by the same economic regulation which, although under review, has not yet changed. For example, Gatwick is highly constrained in being able to offer different service and price packages for different types of air services. Gatwick would like more freedom to make quicker investment decisions to meet the needs of its individual airline customers and compete more effectively with Heathrow and the other London airports.

12. Gatwick is making progress with its transformation. Its investment programme is designed to create a real alternative to Heathrow and the other London airports. Gatwick will complete its current £1.2 billion investment programme in 2014. Gatwick has proposed a further £1.1 billion programme to run from 2014–2020. Its investment has focused on the passenger experience. New security areas, terminal forecourts, transparent performance indicators, as well as innovative approaches to baggage reclaim, check-in and working with UK Border Force have all been features of a programme that has seen passenger complaints fall by 48% between 2009 and 2011 and compliments more than double over the same period9. Gatwick meets all its service targets set by the CAA. A truly liberalised Gatwick, free from economic regulation, would be able to go further and faster in these efforts.

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

13. The UK’s overall transport strategy must recognise and ensure that the aviation sector’s significant economic and social benefits are fully brought to bear for the UK as a whole. Air transport’s unique role in maintaining the UK’s global connectivity must be maintained and enhanced.

14. Aviation must be at the core of the UK’s transport strategy. Much greater emphasis should be given to integrating the development of road and rail infrastructure with the expansion of airports. Air traffic control planning and services also need to be co-ordinated with airport growth.

(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?

15. There is substantial actual and latent spare capacity at London’s airports. There are measures that the Government, airport operators and airlines can take to improve utilisation of the existing system and services.

16. Capacity can be looked at in several ways—movements, passengers as well as overall and peak capacities.10 There is extensive capacity available in the South East market, which could today support 30% extra air traffic movements (ATMs) and over 40% more passengers to and from the region.11 There is unused peak period capacity at Stansted and Luton. More capacity can be provided through better use of infrastructure at all airports, including by increasing the number of ATMs, using larger aircraft and achieving higher load factors.

17. Gatwick has identified ways to expand capacity from its single runway. First, Gatwick has boosted the efficiency of its operations and expanded its peak capacity. Second, Gatwick has been restructuring airport charges to encourage the use of larger aircraft with higher load factors. Third, Gatwick has been restructuring charges to encourage off-peak utilization. Gatwick has supported these initiatives through a targeted investment programme to ensure that capacity bottlenecks do not emerge elsewhere in the system as its traffic grows.

18. Under its previous ownership, Gatwick’s declared peak time runway throughput was 50 ATMs per hour. Under new ownership and the application of collaborative management, peak hour declared capacity has increased to 53 ATMs per hour and Gatwick is targeting to achieve 55 per hour within two to three years. Gatwick is easily the busiest single runway operation in the world.

19. Gatwick believes that similar initiatives at other airports could expand the capacity of the London system considerably. Greater diversity in the ownership of London’s major airports will encourage still more focus by airport operators in this area.

20. Gatwick also believes that free and open competition between airports must be facilitated if existing capacity in London’s airport system is to be effectively used. The current structure of economic regulation impedes this. A deregulated Gatwick could set the price of the service it offers to airlines through negotiation with them, rather than via a regulator.

21. Gatwick would be able to attract long haul airlines away from Heathrow, and develop the airport to meet the future needs of airlines and passengers. Gatwick has made progress in attracting new, high value, intercontinental long haul routes to China, Vietnam and South Korea. These new routes demonstrate that Gatwick can offer a credible alternative to Heathrow in providing long haul links to key growth economies. Deregulation would promote in anticipation of, and response to, changes in what is a dynamic and competitive industry. Freed from regulation, Gatwick could enhance its commercial proposition for new carriers.

22. The Government’s draft aviation policy makes a range of welcome proposals to facilitate new services. Allowing “fifth freedoms” or the ability for an airline to land at Gatwick, take on passengers, and fly elsewhere is a very positive development and will help to improve the utilisation of London’s airports.

23. The regulations governing the allocation of airport capacity are derived from European Law12. The European Commission has proposed a series of modest reforms which, if implemented in the UK, would lead to significant efficiencies in the way Gatwick’s runway is used at times of peak demand. The Government should press for these measures to be enacted at EU level and introduced in the UK as soon as possible.

24. If these reforms had been in force during Gatwick’s busiest week in Summer 2011, more than 10% of the “slots” currently allocated to airlines but not fully used would have been released for other airlines to use in Summer 2012. This translates to 371 more flights that could have taken off or landed from Gatwick in a single week or 55,000 more passengers in single week.13

25. By releasing capacity at times of peak demand, these reforms would assist Gatwick’s growth. Most new airlines want to establish full, year round, consistent schedules. Only 60% of Gatwick’s capacity is used in some months, whereas up to 88% is used in August.14 Implementing the European Commission’s proposals would improve the scope for new long haul routes to be established from Gatwick by releasing some peak slots in the congested summer months.

(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?

26. There is currently substantial excess airport capacity outside the London area. Traffic demand has been flat or negative in most of the UK’s regions since 2008 caused primarily by weak consumer demand and escalating APD. The key issue will continue to be capacity in the South East of England, not the regions. This problem can be solved by making better use of existing facilities in the short to medium term and making the right decisions on where to add capacity in the South East in the longer term.

27. Clearly, the regions have an important role to play. However, they will not be able to relieve the need for capacity in the South East of England. Approximately 12 million people live within one hour’s travel of Gatwick.15 People who live in London and the Greater London area have a 40% greater propensity to fly than those who do not.16 Both the UK’s broader population density and the demands of that population dictate that the South East is where demand to fly is concentrated.

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

28. 54% of business passengers cite the cost and convenience of reaching their departure airport as the most important factor in their decision.17 Good road and rail links are critical for airports. The quality of the Gatwick Express rail service has been deteriorating and is under further threat depending on how the next rail franchise is specified. Of 75 rail services recently surveyed nationwide, the Gatwick Express was one of only five that saw a distinct drop in passenger satisfaction.18

29. Improving rail access is critical to attracting new traffic to Gatwick. This could be delivered through a set of clear specifications around the quality and nature of service that Gatwick requires in the forthcoming Thameslink franchise, which may operate nearly all rail links in and out of the airport from 2015 onwards, depending on the recently announced review of the franchising system. The tender should require a non-stop express service, which is dedicated to running solely between Gatwick and London Victoria with high quality accessible rolling stock that is appropriate for air passengers. The tender should require the franchise to provide increases in capacity and frequency as demand grows.

30. More broadly, in designing tender documents for new rail franchises which will serve major international airports, the Government should specify clear requirements on any operator to deliver high-quality air-rail services and lay down the specific characteristics of service that airports need. They should also ensure that bids are appropriately weighted to the quality and suitability of services that franchisees provide, and not predominantly on the overall direct contribution that they propose to contribute to the exchequer over the life of the franchise.

31. In the medium to long term, rail timetables and infrastructure have to be designed to cater for growth in air passengers and commuters. Gatwick’s recent report, Supporting UK growth and global market access: The case for high quality rail services to Gatwick airport outlines this concept in more detail. It includes a full timetable plan for the new Thameslink franchise from 2018.

(3) What constraints are there on increasing UK 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?

32. Gatwick is wholly supportive of the ambition outlined in the draft aviation policy of limiting, and where possible reducing, the number of UK residents significantly impacted by aircraft noise. Existing arrangements are proving effective in moving towards this objective. Gatwick has been making progress in mitigating its noise impacts. The number of individuals contacting Gatwick on noise issues fell by 40% in the period 2006–2010, as did the total number of actual complaints19. Heathrow saw, respectively, a 29% rise and 8% rise of complainers and individual complaints between 2009 and 2011.

33. In addition, a comparison between the first three months of 2011 and first three months of 2012 at Heathrow shows rises of 54% and 55% in individuals complaining and total complaints respectively.20 The Phase one “operational freedoms” trial, whose characteristics are similar to “mixed mode” operations for limited periods was ongoing during the first two months of 2012.

(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. The Government is focused on taking action at a global level to address aviation’s contribution to climate change. Gatwick shares that objective, and will continue to play a key role in ensuring the UK aviation sector makes a significant and cost-effective contribution to global emissions. There is a great deal of potential in timely implementation of the EU Emissions Trading Scheme (EU ETS). UK Aviation can already maintain 2005 levels of net carbon emissions to 2050, even with the Government’s projected levels of growth in air travel in the UK taken into account. EU ETS has potential to cut this level further21 delivering a net reduction.

35. In the long term, there is potential for sustainable biofuels to reduce carbon emissions from UK aviation. There is a role for Government in supporting the production of a sufficient amount of sustainable base material for biofuels to make their widespread introduction economic for airlines.

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

36. Current EU aviation policy is focused on the “EU Airports Package”. This should deliver a range of reforms to regulations governing handling of baggage, noise impact mitigation, and airport “slot” or capacity allocation (see paragraphs 23–25). Moves at EU level to develop union-wide air service agreements with non-Member States have an impact on efforts to ensure that London’s existing airport capacity is efficiently used. The Government should approach any negotiating strategy on these initiatives with this consideration in mind. It is important that air service agreements do not contain specific airport limitations in the UK.

(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?

37. There is no short-to-medium term aviation capacity crisis today in the South East. Gatwick estimates that the capacity of the London system will be some 190 million passengers per annum by 2020 compared with actual throughput of 132 million passengers in 2011. This estimate largely excludes the impact of greater operational efficiency and new technology on airport capacity. There is now much greater uncertainty about the likely rate of traffic growth given low economic growth and increasing aviation costs including taxes.

38. In the longer-term, a step-change in UK aviation capacity will be necessary. It will need to be in the South East of England. The most economic and environmentally acceptable approach will be to add an additional runway at an existing London airport. On this basis there are only three credible options: Heathrow, Gatwick and Stansted. Heathrow faces major challenges on noise and air quality impacts on a very large population. The incremental capacity provided by an additional runway at Heathrow would also be relatively limited. Stansted’s main challenges relate to its business case and poor surface access.

39. An expanded Gatwick has the potential to address the long term connectivity problems that the UK faces. There are a range of precedents around the world where multiple large airports support the needs of the same large conurbation and for these airports to deliver a mixture of short haul and long traffic that helps to meet the connectivity needs of the city or country they serve.22 Gatwick is aware of no independent evidence that suggests this could not happen in the UK or that it would be necessary to link the airports concerned by high speed rail to achieve it.

40. The core demand for this model is clear. The London aviation market is larger than New York’s, where JFK/Newark/LaGuardia fulfill such a role for that city.23 In our view, it is therefore London that is the “hub” for UK aviation not Heathrow. Heathrow is already a blended “hub/”point to point” airport, given that 65% of its traffic is currently “point to point”.24 With a larger market size than New York, there is sufficient demand in London to support a range of airports that cater for a blend of airline business models should the appropriate infrastructure be developed.

41. Adding a new runway to Gatwick could enable it to grow to a similar size as Heathrow’s ultimate capacity as a two runway operation and potentially develop in the same way providing greater competition in the process. Stansted, Luton, London City and Southend could continue to provide a supporting role in the system. More broadly, London could develop its multi-airport system further to meet London’s and the UK’s connectivity needs in a similar way as New York’s.

42. Finally, a new runway at Gatwick would also provide travellers with a choice of airports on more routes enabling them to choose airports which are most convenient. The passenger experience at Gatwick and the other London airports is likely to be more pleasant than would be the case with the development of a “mega hub”.

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

43. In partnership with the Local Authorities, land next to Gatwick is currently safeguarded to ensure that additional runway capacity could be constructed easily and efficiently. In July 2011, the Government reaffirmed this requirement in its Draft Aviation Policy.25 In July 2012, after 12 weeks of public consultation in 2011, Gatwick published a Master Plan that outlined how a new runway could be developed when the existing runway reaches capacity. Gatwick projects that this will not occur until the mid-2020s at the earliest and maybe beyond that.

44. A new runway at Gatwick was not the principal option proposed by the previous Government principally because of the binding 1979 legal agreement precluding construction of a new runway before 2019. Gatwick remains committed to this agreement. However, Gatwick is now beginning detailed work on the options for a new runway, which will be submitted to the independent airports commission to be chaired by Sir Howard Davies.

45. Gatwick’s work programme will look in detail at the implications, costs and benefits of a new runway and will cover all the issues which it anticipates will be relevant to the commission and the eventual policy decision by Government on airport expansion. While detailed studies are currently being initiated, Gatwick believes that the additional capacity, flexibility and resilience that could be provided by a new runway at the airport would help to ensure that London’s airports provide the South East and the UK with the long term connectivity solutions they need.

46. At this stage, Gatwick would point to a range of studies that outline that the number of people affected by noise from a third runway at Heathrow is significantly larger than would be affected by a new runway at Gatwick. At Heathrow at least 304,000 people will be affected within the 57 dBA contour compared with only 13,200 at Gatwick.26 The area within which people would be affected by a third runway at Heathrow is 60 Km² greater than it would be at Gatwick with a new runway. This is the same size as Manhattan and corresponds to 120,000 more homes than would be the case at Gatwick, a ratio of 25:1.

47. If stricter measures are used27 the total number of people affected by noise from a three runway Heathrow would be 710,600. Under the same measure, Gatwick with a new runway would affect 29,600. The number of households affected at Heathrow would be 308,800, compared with11,900 at Gatwick. The size of the area concerned would be 254 Km² at Heathrow and 138.6 Km² at Gatwick. The difference in area size is equivalent to one the size of Dublin.

48. Heathrow already regularly breaches the European limit for NO² emissions28 at three monitoring sites around the airport. It is very close to breaching it at several others. Another runway is predicted to expose an extra 35,000 people to levels above this limit. Gatwick has never breached this limit at its monitoring sites and it is not expected to with a new runway. In total, Heathrow emitted just short of 7,500 tonnes of NO² in 2010 and 340 tonnes of particulate matter. In the same period Gatwick emitted just over 2,000 tonnes of NO² and 82 tonnes of particulate matter.29

49. Stansted’s geographical position makes it much less attractive to airlines and their passengers than other London airports. It is losing traffic, with a 25% decline since 2007. In our view, current rail infrastructure is insufficient to support the high quality express link that is of key importance to promoting passenger demand. Today, Stansted airport “express” trains cannot pass slower trains, particularly at peak time, meaning the journey time is delayed. There are also 19 level crossings on the route. Improving the Stansted “proposition” could involve widening the entire 35 mile track line length from London, which would also entail track bed widening, a particularly expensive process.30

19 October 2012