Transport CommitteeFurther written evidence from Gatwick Airport (AS 68A)

I hope you are well. Thank you again for the opportunity to appear before your committee to provide Gatwick’s perspective on current and future aviation strategy.

During my oral evidence, I made reference to the fact that today overall demand at London’s six major airports1 to “transfer”2 is significantly lower than many believe. In the evidence session that followed my own, another witness also made reference to independent research obtained—but not yet published—by Gatwick which highlights that the actual number of “transfer passengers” using Heathrow is consistently lower than reported by many publications, industry organisations and commercial stakeholders, and in some cases Heathrow themselves.

I was sorry not to be in a position to submit this research as written evidence to your inquiry. Unfortunately, we did not obtain it in time to meet the deadline for written evidence to be submitted. However, I understand that the committee is interested to learn more about its basis and origins. As such, I am pleased to provide some clarification and further information. We are of course happy for your committee, should it wish to do so, to take it this information into account in producing its final recommendations, and for this letter to be published alongside any such report.

Implications for your Inquiry

I believe it is particularly important that your committee assesses any requirement there may be for future new capacity in the South East on the basis of demand that we know exists today. Analysis of various independent data sources shows that the vast majority of this demand is for travel to and from London’s airports; not for the use of London as a transfer point. London is the largest aviation market in the world and the vast majority of passengers want to travel to or from it. London is the hub for aviation. Not one single airport.

Whilst the South East and the UK does need “hub capacity” in order to support some direct services to a number of destinations, the degree of demand that there is to “transfer” at a London airport is far less than many reports suggest. As a result, the demand that exists for more “hub capacity” in London—whether that is through an expanded Heathrow or a new airport elsewhere- is consistently exaggerated.

Overall Demand to use London’s Airports Today

The research obtained by Gatwick assesses the overall number of “passenger journeys” through London’s airports on an annual basis. This information is collected by the International Air Transport Association (IATA) and available for analysis by subscribers. Further information on the nature of this data, how it is collected, and IATA’s full definition of a “passenger journey” is included in Appendix One to this letter. The IATA data that I referred to outlines that approximately 125 million passenger journeys were supported by London’s six major airports in 2011.3 I have outlined this information graphically, by airport, in Appendix Two to this letter.

IATA’s analysis indicates that of these 125 million passenger journeys through London’s airports in 2011, approximately 116 million (or 93%) either began or ended their air trip in London. Only nine million passenger journeys (or 7%) were purely taken to “transfer” from one flight to another at one of London’s airports. Eight million of these were through Heathrow, and one million through Gatwick. I have also outlined this information graphically in Appendix Two to this letter. This was the basis for my statement to your committee that:

“If you look at the way in which London and the south-east operates today, of all the passenger journeys in that region 93% involve passengers who either originate in London or have London as their destination; they either start or finish their journeys in London. Of the passenger journeys, the number of those who transfer through London and the south-east is about 7%, so the vast majority of passengers are either starting or finishing their journeys in London.”

Since each transfer passenger fills a seat on both one arriving flight inbound to London and one departing flight outbound from London, the overall percentage of total London airport passengers (enplaned plus deplaned) accounted for by “transfers” passengers is approximately 13%, or approximately twice the transfer percentage of passenger journeys involving London.

As such, The overall demand by passengers to use London’s airports purely to travel to and from London is far higher than many are aware, at approximately 93% of total passenger journeys, and 87% of total enplaned and deplaned passengers at the London airports. The overwhelming presence of passengers for whom London is either the trip origin or trip destination—commonly termed “London origin-destination (or O&D) passengers”—should not be surprising in that London is by far the largest market in the world for these kinds of passengers.

Proportion of Transfer “Journeys” at Heathrow Airport

IATA’s data indicates that in 2011, eight million passenger journeys were transfers at Heathrow Airport. Heathrow Airport also confirm this in their report Connecting for growth: the role of Britain’s hub airport in economic recovery.4 In his oral evidence to your committee, a fellow witness stated:

“The CAA figures show that about one third of Heathrow’s passengers are transfers. There is a dispute about that. The IATA figures suggest that the proportion is perhaps only half of that”.

IATA in fact outline that there are “16 million passengers who transfer at Heathrow every year”. This is because, as described above and outlined in Appendix One, a single “transfer” passenger will be onboard two flights at the transfer airport—the arriving flight into the airport and the subsequent departing flight from the transfer airport. As a result, a single transfer passenger is normally counted as two passengers in an airport’s reported passenger traffic statistics. Heathrow confirms that this as their normal practice in a footnote to their above mentioned published report.5

On this basis approximately 23% of Heathrow’s total 2011 passenger traffic was comprised of transfer passengers, with the remaining 77% of total Heathrow passengers accounted for by London O&D passengers.

Other Sources of Information Around “Transfer Passengers”

I believe it is important that the committee considers the various sources of information that are available on airport passengers and airport passenger demand, as well as the manner in which they are compiled. Many stakeholders refer to the annual survey conducted by the Civil Aviation Authority (CAA) when outlining the proportion of transfer passengers using Heathrow airport every year. Heathrow Airport does the same in information that they make publicly available.6 Indeed, in giving oral evidence to your inquiry, Heathrow again stated that “of the total [traffic at Heathrow], on average, about one third is transfer traffic”.

The 2011 CAA annual passenger survey, and the Heathrow Airport website, state that 35% of passengers using Heathrow in 2011 (or 24 million) were “transfer passengers”. We have concerns that this figure overstates the percentage of Heathrow’s passenger traffic represented by transfer passengers. Indeed, Heathrow have themselves publicly acknowledged that “there is some dispute about how many passengers transfer at different airports”.7

This is because the CAA does not assess any actual data relating to air tickets actually bought by passengers. Instead, a sample of passengers is interviewed, and that sample is used to project what the overall number of transfer passengers at an airport could be8. In contrast, the information gathered by IATA is comprised of data concerning the actual tickets bought by air passengers. In our view, IATA’s database provides a better and more accurate estimate of the actual percentage of passengers who are transferring at Heathrow and the other London airports. In Appendix Three to this letter, I have outlined how the assessments of the number of passengers “transferring” at London’s airports differ depending on whether the IATA or CAA data is used.

Why this Matters for Future Aviation Policy

These points have real implications for how policy towards airport infrastructure should evolve in the UK in future. Our view continues to be that, in the long term, the Government should be working towards the establishment of a true airports system for London, which comprises three competing airports, each with two runways. It is in this context that I believe that Gatwick should be the next airport where new runway capacity is added. The majority of passenger demand to and from the Southeast region today is geographically dispersed, and not best served through a single hub airport. We hope in the near future to provide you and your committee with further information on this vision, the precedents for it, and the manner in which it might best be enabled.

18 December 2012

APPENDIX ONE

ORIGIN AND NATURE OF GATWICK ANALYSIS

Gatwick’s recent research originates from the International Air Transport Association (IATA) Passenger Intelligence Service (PaxIS). IATA refers to this as “the most comprehensive airline passenger market intelligence database available today”.9 The data within it is gathered through the use of the IATA Billing and Settlement Plan (BSP), which IATA describe as a “system designed to facilitate and simplify the selling, reporting and remitting procedures of IATA Accredited Passenger Sales Agents”. Information gathered as part of the PaxIS system is available on subscription from IATA.

IATA’s PaxIS service is commonly used to measure current demand to use airports, and individual routes operated by airlines, all over the world and is a commonly accepted planning tool within the aviation industry. IATA name a range of airlines and airports that currently make use of this information including: Airbus, Air Canada, Air China, Jet Airways, Malaysia Airlines, Southwest Airlines & United Airlines. A full list is available on request from IATA.

Frontier Economics’ report for Heathrow,10 and numerous other market studies also make use of this data source.

Key Terms

Journey: IATA define a “journey” as “travel between an airport/city where travel commences and an airport/city where travel ultimately terminates. A journey may be comprised of one or more segments”.11 In essence, a “journey” reflects a ticket bought by a passenger from an IATA accredited agent to fly from one location to another. This would include a passenger who may have travelled via another airport to reach their final destination. For example, a passenger that travels from London to Dehli via Dubai would be counted by IATA as having taken one “journey”. The number of journeys will generally reflect the overall demand there is to use a particular airport or fly on a particular route.

Passenger: Simply put, this is the overall number of journeys through the airport on an annual basis, normally on an annual basis. The overall level of demand to use an airport is not necessarily the same as the overall number of journeys recorded as using it. This may appear counter-intuitive, but it is generally because a “transfer” passenger is effectively “double counted” in terms of “journeys” in many assessments. Whereas a passenger starting or ending their journey at an airport would count as one “journey”, a “transfer” passenger at that airport (who does neither) will often be counted as two. One journey on their outward bound leg, and another one on their return. This can lead to an inflated understanding of demand that may exist on the part of passengers to use an airport to “hub”—or transfer from one plane to another.

Origin & Destination Passenger: Also known as “O&D” or as a passenger who either starts or ends their journey at a given airport, and classed by IATA as an “Origin and Destination” passenger. It is important to distinguish between this term and another that is often used—“Point to Point”. As outlined above, an Origin & Destination passenger could have travelled “via” another airport to get to where they want to go, or return to where they came from. A “Point to Point” passenger would not have done. In our view, any debate about the nature of demand to use London’s airports should focus on the terms and definition of passengers that are respectively “Origin & Destination” and “Transfer” and not “Point-to-Point” and “Transfer”.

APPENDIX TWO

THE NATURE OF DEMAND TO USE LONDON’S AIRPORTS

Source: IATA PaxIS data analysis

APPENDIX THREE

VARIABLE ASSESMENTS OF TRANSFER PASSENGERS AT LONDON AIRPORTS

LHR Transfer %	13%	23%	34%
LGW Transfer %	2%	4%	9%
LON Transfer %	7%	13%	20%