Transport CommitteeWritten evidence from the Freight Transport Association (AS 53)


1. The Freight Transport Association (FTA) is pleased to respond to the Committee’s inquiry into aviation strategy.

2. FTA is one of the UK’s largest trade associations and represents over 14,000 companies relying on or providing the transport of freight both domestically and internationally, to or from the UK. Our members include hauliers, freight forwarders, rail and air freight operators, through to customers—producers, manufacturers, wholesalers and retailers. They cover all modes of transport—road, rail, air and sea. FTA members operate over 200,000 commercial goods vehicles in the UK, approximately half of the UK fleet of goods vehicles, 90% of goods moved by rail and around 70% of goods moved by air and sea.

3. Please find below FTA’s views on the issues raised by the Committee. We will respond to the questions that address issues that affect our members or where we have a view we wish to express.

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?

4. Air freight is crucial to the UK economy not because it is a major employer and generator of revenue—though it is those things. But because it provides a service which the rest of UK industry relies upon to be competitive in the global market.

5. The volume of freight travelling by air is very small when measured by weight—around 0.5%1 of the total. However, it has a high value—about 40% of the UK’s extra-EU trade. 2 Air freight has a disproportionate importance as it serves industries which are core to the UK’s economic future as a service economy. These include the major export industries such as electronics, telecoms, financial and business services. Air freight also serves industry where urgency is a key factor—pharmaceuticals and biotech industries as well as food products are heavy users of air freight. UK manufacturing relies on air freight to import and export key components to keep factories working.

6. Amongst other uses, air freight allows the operation of express delivery services connecting businesses globally on a next day basis—the accepted standard to which UK companies high value business operations have to work today. We note that an Oxford Economics report in 20113 found that over 80% of UK businesses surveyed state that their businesses would be badly affected if international next-day delivery services were no longer available.

7. One area where air freight is particularly vital is in facilitating trade with the developing world—especially Africa. Air freight allows areas such as this to trade in fresh produce, such as food or flowers with Europe—a key area of the economy for many African nations. For example, the export of fresh fruit and vegetables to the UK alone contributes almost £35 million per year to the economy of Kenya—95% of these products have to be sent by air. The distances involved usually make it impossible to serve these markets by sea freight due to the extra time that would take. Overall, more than one million African rural livelihoods are supported by UK consumption of their fruit and vegetables.4

Heathrow is the most significant airport for freight in the UK. In fact it carries more freight each year than all other UK airports put together. It competes as a mixed use hub with the major Continental alternatives—Paris, Frankfurt, Amsterdam and Madrid. The two key freight hub transshipment airports in the UK are East Midlands (EMA) and Stansted. These airports have a considerable strategic importance to regional economies as well as UK plc. Manchester and Gatwick are also major freight airports.

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

8. APD does not directly apply to freight. However, it is indirectly part of the price of doing aviation business in the UK and therefore also affects logistics. As noted, the majority of freight flies in the hold of mixed-use aircraft. The level of APD is factored into the cost of operating those services and therefore some impact is felt by freight services using those flights. To the extent that APD makes any possible services uneconomic, this would have an equal impact on freight in terms of reduction of UK service on offer. Other countries would quickly fill this void, and jobs would move overseas.

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

9. Air freight fits into businesses’ strategies as a complement to deep-sea shipping services for companies with a global supply chain. It is used for perishable, urgent or high value goods. High volume goods will move by sea unless they have a short self life.

10. It is a service required for the UK to maintain our place as a global centre of business—both for services and high end manufacturing.

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?

11. In order to continue to get the most out of the existing London airports the current night-flights restrictions should not be further tightened in the upcoming DfT consultation.

12. Night flight capability for imports and exports is crucial to the competitiveness of UK businesses. These flights allow express delivery companies to offer late customer collections and guaranteed business-to-business, time-definite delivery around the world the next day. The only way to achieve this is by moving the parcels and packages by air at night.

13. A 2006 study5 found that the closure at night of specific UK airports, with a strategic express freight function, including East Midlands and Stansted, could reduce UK GDP by about £6 billion a year by 2024. Over a twenty year period, the cumulative cost in terms of forgone GDP would be over £35 billion.

14. Demand is driven by customers from across the UK economy for example in pharmaceuticals and advanced manufacturing, and these companies need to move their time-critical or high-value goods quickly and efficiently. Again we would note that an Oxford Economics report in 2011 on the Economic Impact of Express Services found that over 80% of UK businesses surveyed state that their businesses would be badly affected if international next-day delivery services were no longer available.

15. To meet the rising demand associated with longer-term economic growth, and to remain competitive in the global marketplace, the UK must retain the capability to expand the number of night flights.

16. Further restrictions would negatively affect utilisation of the airports and damage the quality of the UK international supply chain. Aside from the direct economic impacts if express operators were to relocate more operations outside the UK, UK businesses would face a decrease in available UK services and would be compelled to utilise air freight logistics based out of continental airports. This adds cost and delay as well as reducing the resilience of the supply chain. It also has the potential to increase emissions, as goods will be flown to the Continent and then trucked across.

17. FTA would also welcome a relaxation of the any night time restrictions by just half an hour in certain defined extreme weather conditions eg the Icelandic volcanic ash cloud. This short relaxation would allow the airport to deal with the backlog of flights that can develop during the day in extreme weather, causing those scheduled night flights carrying freight at the latest available time to lose their slots.

(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?

18. Airport use is driven by customer need—this is true for both passenger and freight services. Where there is an insufficient market demand, increased levels of flights cannot be sustained.

19. The airports outside London have a crucial role to play for freight. East Midlands and Manchester airports each handle substantial volumes of freight. Airports outside London such as these are particularly vital to express delivery services for allowing flexible access to all regions of the UK that facilitate next day deliveries. For this reason, the same arguments that apply to night flights at the London airports also apply to the other UK airports, and should continue to do so.

20. Several of the airports also play a significant role for general air cargo, however this should be understood in context. Heathrow carries more freight than all other UK airports put together. This is, in immediate terms, because it is a global hub with sufficient passenger volumes to justify the range of services around the world that such a facility requires. Stansted and Gatwick are both also in the top five for UK freight airports. The reason for the collective predominance of the London airports fundamentally is the economic weight of the London/south east England region.

21. Freight use of airports outside London is not generally held back by constraints on airport availability through the day—it is primarily driven by the commercial need for such services from the airports’ economic hinterland.

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

22. Failure by the EU to agree and implement a single air traffic control area is a constraint. The increased efficiency would enable better utilisation of airspace and airport capacity. It would cut emissions significantly as aircraft would not be spending extra flying time waiting for a landing slot.

(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?

23. In regulating aviation it must be remembered that it is fundamentally a global business. UK decisions alone will not change the kind of planes that are being developed or how airlines plan their operations. If the UK acts alone on aviation issues, all it can do is to push services out of the UK. Regulation that prejudices aviation from the UK Government does not hinder aviation as a whole, it only hinders UK aviation, and UK connectivity.

24. The aviation industry is acting on noise and work will continue to improve performance in the future. According to IATA, today’s aircraft are 50% quieter than 10 years ago and research initiatives target a further reduction of 50% by 2020. Over time as new aircraft are purchased noise impacts will reduce. This shows the efficacy of a global and co-operative approach to changing industry performance.

25. However the UK should not rush to force UK operations to adopt standards that would make them uncompetitive in the European and global context. Natural industry processes will see aircraft replaced in due course. But such timescales are unlikely to be advanced in response to UK-only regulation. A new freight aircraft such as the Boeing 767 300 Freighter costs over £115 million—such investments are unlikely to be made before the are operationally required just to service the UK. The effect of local or national regulation would therefore be to see service levels reduce as operations switch to the Continent, to the cost of the UK economy.

26. The aviation industry and Governments have agreed to follow a globally agreed approach to address aircraft noise problems—the ICAO “Balanced Approach”. The core principle of the Balanced Approach is that the situation at each airport is different and that there is no one-size-fits-all approach to aircraft noise. It should not be automatically assumed that there is a noise problem at every airport—each case should be considered on its own merits and blanket regulation is not the answer.

27. In its proposal for a Regulation adopted in December 2011, the European Commission underlined its objective to apply the Balanced Approach in the selection of noise mitigation measures. FTA would advocate the Government continue to follow the global community by working within the Balanced Approach framework.

(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?

28. The Government is correct to state in the draft Aviation Policy Framework that emphasis should be on action at a global level as the best means of securing emissions reduction, with action at European level very much a second best option, if it is as a potential step towards wider international agreement. Certainly action by the UK alone would only see services relocating elsewhere—to the economic disbenefit of the UK, whilst achieving nothing for the environment. Aviation is a global industry, and national and regional schemes are not only highly divisive, they have the potential to undermine the achievement of a single global carbon reduction scheme in ICAO. Differing schemes around the world would add complexity, cost and compliance difficulties.

29. Global regulation—potentially through market based measures such as carbon offsetting and trading schemes—is the correct way to go to manage aviation environmental impacts in the least economically disruptive fashion possible.

30. The UK should certainly avoid adopting UK level or aviation specific targets. To enforce such an approach would just subsidise operations in other EU countries without achieving total carbon reduction. The primary positive feature of the EU’s Emission Trading Scheme is that it allows all industries to work together to reduce carbon emissions in the most economically efficient way possible. It makes no sense environmentally to single out one industry for different treatment.

31. Government policy should be to work with the aviation industry to help deliver the necessary environmental improvements. The International Air Transport Association (IATA), have set targets for a 1.5% average annual improvement in fuel efficiency to 2020, to deliver carbon-neutral growth through a cap on “net” emissions from 2020 onwards and to cut net emissions in half by 2050 compared with 2005 levels. We believe this demonstrates what can be achieved by working with industry at a global level, rather than by crudely regulating at the individual airport level.

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

32. The EU has pursued a robust approach to climate change emissions reduction in aviation—incorporating the industry in to its regional carbon trading scheme—the Emission Trading Scheme. As noted, the scheme has the benefit of allowing all industries to work together to reduce carbon emissions in the most economically efficient way possible. Any UK approach of country or industry specific targets would not reduce overall carbon emission but would only bring economic cost onto the UK, and advantage operations in competing continental Member States.

33. The EU approach of going it alone has proved to be divisive internationally. The UK should use its influence within the EU to find a global solution. In regard to maritime transport, the EU is not pursuing an ETS (at this stage) and has proposed a monitoring proposal based on fuel consumption and a commitment work within the International Maritime Organisation to develop an internationally acceptable market based measure.

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

34. The UK economy would benefit from an improved quality of global hub located in the UK. The greater the range of direct destinations the easier it is to trade with other parts of the world. Less congestion at a hub than we currently face would improve service and reduce costs. Not having to rely on Continental hubs would reduce delay and increase the resilience of the UK supply chain, as well as avoiding handing an advantage to business located in those countries when trading internationally.

35. Hub airports are vital to the freight industry as they allow a necessary concentration of routes and volume in one location, making the development of freight facilities viable. A hub airport allows airlines to offer a comprehensive global network.

36. As noted in the BCC’s 2009 report on hub airports6 (which FTA commends) “because of Heathrow’s transferring passengers, UK businesses have access to more direct destinations, at higher frequencies and lower priced fares.” The point about fares also applies to freight rates.

37. Heathrow is full. It operates at level so close to capacity that it could potentially undermine the quality and resilience of the service. The lack of availability of slots is reducing the range of destinations served. According to previous information from BAA, since 1990 Heathrow has lost nearly 20% of its destinations due to runway capacity constraining the availability of slots. Heathrow’s list of destinations has declined from over 220 to around 180, Paris’s list has increased from around 180 to over 240—a picture mirrored by Frankfurt and Amsterdam—all of which have more runway capacity than Heathrow.

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

38. We believe Heathrow is the UK’s only viable option for a hub status in the UK. Its location, close to the UK’s economic centre, London, and its connection to global passenger flight networks means that it is the only UK airport that can fulfil this role.

39. UK regional airports are not able to replicate this as they are too far from London to service that market and their own economic hinterland would not provide enough traffic to sustain a global hub. Europe’s hub airports are currently: Frankfurt Main; Amsterdam Schiphol; Paris Charles de Gaulle; Madrid Barajas; and Heathrow. We would note from this list that markets of the size of Rome and Berlin do not sustain global hubs. In the light of this, the suggestion that non-London areas of the UK could sustain a hub seems unrealistic.

40. Theoretically a new airport located close to London with good enough transport links could replicate the attractions of Heathrow, and FTA is not opposed to the concept. However it is not clear to FTA that the demand levels in London/south-east England could sustain a second global hub. The alternative of Heathrow being purchased and closed down in order to make a new airport viable seems highly unlikely to occur. Further it seems unlikely that either private investors or the Government would pay for the required development and transport links needed to create a facility of the required standard.

41. Therefore, to address the issues raised above we believe that Heathrow should be allowed to expand—specifically via the development of a third runway.

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

42. Adding a third runway at Heathrow appears to be the only cost effective option for addressing the UK’s hub capacity problem. As noted above, the economic case for building a new airport as a replacement or alternative to Heathrow does not appear to have been made. No non-London location would be viable as a hub even if all the infrastructure were provided.

43. Increasing capacity in this fashion would, even without increasing the number of flights, aid the resilience and performance of the UK supply chain, to the benefit of UK business.

44. Increased aircraft movements would have environmental implications and could have social impacts. Environmental considerations should be addressed, as noted elsewhere in this submission, via the incorporation of aviation into a global emissions trading scheme, not via restricting any individual airport. Taking this latter approach would just lead to an unnecessarily inefficient system of addressing climate change emissions. For some airports increased flights might have noise impacts. As noted above, this should be judged on a case by cases basis as regards both the airport in question and the suggestion being made, rather than relying on any blanket policy.

19 October 2012

1 DfT Focus on Freight, 2006

2 DfT The air freight end-to-end journey

3 Oxford Economics, the Economic Impact of Express Services

4 International Institute for Environment and Development

5 Oxford Economic Forecasting and Mott MacDonald “The Economic Impact of Express Carriers for UK plc”

6 Economic Impacts Of Hub Airports, July 2009

Prepared 31st May 2013