Transport CommitteeWritten evidence from Aberdeen Airport (AS 15)

1. 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 economy?

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 strategy?

A key objective for the Government should be to nurture and support UK airlines and airports, particularly during these challenging economic times. The UK aviation industry is amongst the most heavily taxed in Europe. As a result, growth in the industry is being stifled—at a time when the aviation industry could be helping to fuel economic recovery.

The aviation industry is a key driver for the UK economy, particularly in regional Scotland, where it also provides an important social lifeline. A study undertaken by the Airport Operators Association shows that the aviation sector generated £18.5 billion, or 1.5% of the UK economy. The sector also supports 234,000 jobs across the UK.

Aberdeen Airport alone contributes £126 million a year to the Scottish economy and supports almost 3,900 jobs. Based on current levels of employment and passenger growth forecasts, an additional 1,110 jobs are expected to be created by 2040, generating an extra £42 million GVA for the Scottish economy per annum.

The airport is also an important enabler for the oil and gas industry, both as the gateway to Europe’s energy capital but also as a commercial heliport serving the oil and gas rigs in the north sea. Aviation also supports inbound tourism in the north east. In 2010, the Aberdeen region attracted almost 1.4 million UK and international visitors, generating almost £300 million for the local economy; 92% of those visitors arrived by air.

In 2011, a new £10 million runway extension was opened at Aberdeen Airport. The investment is designed to expand Aberdeen’s international reach by accommodating larger aircraft that can travel longer distances. Ultimately, our aim is to offer more international destinations, particularly in the underserved leisure market.

Aberdeen Airport is performing well through the recession but there is no doubt that our ability to grow our international route network is being compromised by Air Passenger Duty, which is already the highest in the world and rising. At a time of recession, and with so many jobs dependent on the aviation sector, we believe that the UK Government should reconsider future increases in APD.

We have serious concerns that Scotland’s ability to compete for international routes—in what is already an intensely competitive market—will be undermined by further rises in APD. It already costs airlines more to fly to Scotland because our relative isolation means that airlines require more fuel and cannot operate as many rotations during the course of a day. As a result, Scotland is already at a competitive disadvantage, even before APD is added to the mix.

There is therefore a real risk that airlines looking to serve new markets will choose other European countries at the expense of Scotland. This in turn will have an impact on employment, business connectivity—including exports—and inbound tourism.

A recent study commissioned by BAA in Scotland found that further increases in APD could cost Scotland’s airports around 1.2 million passengers over three years.

The loss of so many passengers would have a particularly serious impact on Scotland’s tourism industry, at a time when the tourism market in Scotland is showing little growth. The BAA study suggests that around 148,000 trips and £77 million in visitor spend will be lost over the next three years as cost conscious visitors abandon Scotland for other, perceived better value destinations.

The UK Government has already taken action to reduce APD in Northern Ireland, and devolve responsibility for the tax to the Northern Ireland Assembly. We believe the Government should take similar action in Scotland in order to give our airlines and airports a fighting chance to compete.

APD was originally introduced as an environmental measure but successive Governments have simply used this tax to generate income for the Treasury, with no benefit to the environment. Given the environmental advances made by the aviation industry, including the creation of a European wide emissions trading scheme, we believe there can be no justification for further rises in APD.

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?

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?

Scotland’s geographic location on the periphery of Europe means that air links are vital to the country’s global competitiveness. Aberdeen’s distance from London and other key cities makes rail travel largely impractical, particularly for time pressured business travellers.

Access to London, in particular, is of critical importance to the north east, given Aberdeen’s status as an energy capital and financial centre. Aberdeen is relatively well connected to London’s airports, with daily services to Heathrow, Gatwick, Luton and a recently launched service to London City—a route which is of particular importance to the business community.

However, for many regional airports, Heathrow remains the greatest prize, not just in terms of point to point travel, but in terms of the international connections it provides as the UK’s hub airport.

In recent years, the number of regional airports with links to Heathrow has diminished significantly. In 1990, 18 UK destinations were served from Heathrow. Today, only seven UK airports—Aberdeen, Belfast City, Belfast International, Edinburgh, Glasgow, Leeds Bradford (from December) and Manchester—have access. It is worth noting that Paris CDG and Amsterdam serve more UK regional airports than our own hub airport.

The lack of capacity at Heathrow also has a direct impact on Scotland, both in terms of the passenger experience—flights are often cancelled during bad weather and flights are routinely held in air traffic control holding patterns—and in the number of available services.

A number of Scottish airports have recently lost services to Heathrow—Inverness in 2008 and Glasgow in 2011. With Heathrow operating at near capacity, UK based airlines—under pressure to maximise their commercial return—have increasingly opted to switch from serving the domestic market to operating in the more lucrative medium and long haul sectors. This was evidently the case at Glasgow in 2011 when operator BMI announced new services to North Africa and the Middle East on the day it suspended its Glasgow service.

The loss of bmi, which serves Edinburgh and Aberdeen, will further dilute the number of services operating between Scotland and Heathrow. We welcome the prospect of a new operator utilising the remedy slots between Aberdeen and Heathrow and the additional capacity this will produce for our domestic market . However, this will not address the fundamental problem: the lack of physical capacity at Heathrow and, increasingly, at Gatwick.

Additional runway capacity would undoubtedly address some of the congestion issues at Heathrow, and ultimately deliver a better service for passengers (with fewer flight delays). It would also enable Heathrow to deliver a wider network of international destinations—which would also ultimately benefit the regions.

However, a third—or fourth runway—at Heathrow would not necessarily guarantee regional access to the hub—airlines would likely use the additional landing slots to serve lucrative medium and long haul destinations, at the expense of UK regions. Therefore, we believe there is a need for Government to intervene to safeguard slots, particularly at Heathrow.

We welcome the recent Opinion of the Committee of the Regions (2012/C 277/11), which considered this issue and called for “appropriate measures to ensure that regions are connected to the worldwide aviation network.” We would urge the UK Government to consider all possible options to enable regional airports, such as Aberdeen, to maintain their links with Heathrow.

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?

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

The UK aviation industry has made real progress in terms of managing its environmental impacts. BAA was instrumental in setting up a European wide emissions trading scheme, and many UK airlines, such as Virgin Atlantic and easyJet, are pioneering new sustainable fuel technologies. Noise is a challenge for all airports; and one Aberdeen Airport takes extremely seriously. The industry has shown its willingness to respond to community concerns on this issue through the development of quieter, cleaner aircraft. At a local level, senior manager from Aberdeen Airport—including the Managing Director—meet regularly to discuss concerns with local residents, and the recently published draft Aberdeen Airport Master Plan outlines a series of measures designed to mitigate the environmental impacts of airport growth, including noise. Providing the industry maintains its willingness to engage constructively on this issue, and airports commit to delivering sustainable growth, it should be possible to strike a balance between securing growth—with all the social and economic benefits that generates—while managing concerns about the environment. It is a difficult balancing act, but absolutely achievable.

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?

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

There is absolutely a need for a step change in UK aviation policy. More than two years into the Coalition Government, there is no sense of a strategic long term vision for the UK aviation industry.

The UK is widely regarded as the aviation hub of the world, with Heathrow still the world’s busiest international gateway. But for how long? Airports across Europe and the Gulf are investing heavily in additional runway capacity, while successive UK Governments have continued to ponder the future of Heathrow.

Frankfurt has recently opened its fourth runway, Amsterdam is planning its seventh runway and a new airport—set to become the world’s busiest—has opened in Dubai. Meanwhile, China and India are building new airports at a remarkable pace.

While Heathrow remains the busiest international hub, many of its European rivals—Amsterdam, Paris CDG and Frankfurt, for example—offer a more extensive global network of destinations, particularly to the emerging markets of Brazil, India and China. With significantly more runway capacity than Heathrow, all three are expected to overtake Heathrow in terms of passenger numbers by 2020.

Airlines such as British Airways and Etihad have recently warned that the lack of capacity in the south-east and Heathrow, in particular, is harming Britain’s competitiveness and will ultimately damage the UK’s status as the aviation hub of the world.

The issue of air capacity is a controversial one but it is one we must address once and for all if we are to maintain our status as the world’s aviation hub. If not, we risk losing our competitive edge to airports in Europe and the Gulf. While we welcome the appointment of an independent commission to consider this issue, the proposed timeline means that we are three years away from any meaningful decision on the future of Heathrow. That uncertainty is bad for business and bad for our airline partners.

11 October 2012

Prepared 31st May 2013