Transport CommitteeWritten evidence from the WWF-UK (AS 69)

Summary

WWF believes that it is possible for the UK to maintain its premiere hub status and connectivity without major airport expansion. This will require better use of existing capacity, reforming slot allocation, renegotiating bilateral agreements, and moving flights of lower economic value to less congested airports.

WWF is not opposed to flying. However, we believe aviation must operate within environmental limits, as recommended by the Committee on Climate Change (CCC), and do its fair share to tackle climate change.

The CCC makes it clear that unconstrained expansion of airports is not consistent with the Climate Change Act and our legally binding climate target to reduce UK greenhouse gases by 80% by 2050, in comparison to 2005 levels.

A strategy for aviation capacity should be based on the CCC’s recommended limits to aviation growth; these allow for a 60% increase in passenger demand and 55% increase in Air Traffic Movements to 2050, compared to 2005 levels.ⁱ

WWF/AEF analysis of UK airport capacityⁱⁱ shows that there is ample capacity, even in the South East, to accommodate aviation growth to 2050 within these recommended limits.

WWF believes that the Coalition Government is right to reject new runways at Heathrow, Stansted and Gatwick. WWF also believes that a Thames Estuary airport or other new hub would endanger UK climate targets and is not needed to meet future demand.

Government Policy Objectives on Aviation (Answering Questions a, b, c and e)

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

1. International aviation connectivity is important to the UK aviation industry because more routes can provide greater revenue and profitability for those companies. A better question to ask is whether the UK has sufficient international connectivity to serve the interests of UK business and leisure travellers, now and in future, while accepting the need for capacity constraint within environmental limits and economic needs. Research by AirportWatchⁱⁱⁱ (commissioned by WWF) shows that Heathrow holds the position as the top European hub and it is not at any risk of losing its competitiveness. Heathrow offers more flights to key business destinations than any other airport in Europe, more than the combined total of its two nearest rivals, Charles de Gaulle and Frankfurt. Heathrow offers greater connectivity to 20 out of 27 key business destinations in North America, the Middle East and Asia. It also has more flights to Hong Kong (Asia’s leading hub with its excellent links to second-tier Chinese cities) and the emerging economies of India and South Africa than other Continental airports. There is clear evidence that it is possible to increase flights to emerging markets using spare airport capacity. This is already happening at Gatwick and Birmingham airports where more routes to China, Korea and Vietnam are being added.^iv Most recent passenger figures at Heathrow and Gatwick also show a significant increase in flights to emerging markets,^v without any increase in airport capacity.

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

2. WWF accepts the economic importance of UK airports. However, this is routinely overstated in terms of net financial contribution to the economy taking into account the tourism deficit (which was £11.2 billion in 2011^vi), jobs created by the sector (120,000 according to ONS figures^vii rather than the “200,000” often stated) and the assumption that business needs aviation growth in order to be profitable and competitive. WWF’s Moving On research^viii surveying FTSE-500 companies shows that the UK’s leading businesses are flying less, not more and have discovered significant benefits from doing so. This is also confirmed by WWF’s own programme, the One in Five Challenge which encourages lower carbon alternatives to flying. These companies have, on average, cut 41% of flights over two years saving £2.4 million and 3,600 tonnes CO₂ per company.^ix WWF rejects the simplistic argument that airport expansion will somehow lift the UK out of recession. The earliest any proposed expansion option could be ready is at least 10 years away, so not in the timeframe to provide immediate help to the economy. There is also no clear link between airport expansion and GDP growth. A recent study by Prime Economics shows similar rates of GDP growth in France, the Netherlands and UK, despite the former two countries having invested far more in airport expansion over the last decade.^x

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

3. The UK aviation industry is relatively under-taxed compared to others sectors. It does not pay either fuel duty or VAT, which together are estimated to be worth around £10 billion per year.^xi APD provides a tax take of only £2.7 billion in 2011–12.^xii WWF questions whether this is a fair contribution towards the public purse. It is unlikely that APD has a significant impact on the demand for UK flights because it only represents a small percentage of total holiday cost. APD does not appear to have affected bookings to high APD destinations such as the Caribbean.^xiii

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

4. Aviation emissions are the fastest growing source of UK greenhouse gas emissions and have more than doubled since 1990, at the same time that road transport emissions have only grown by 2% and emissions in other sectors have fallen.^xiv Therefore it is only right that aviation is included in UK carbon budgets and contributes its fair share to reducing emissions consistent with UK climate targets. WWF would like to see aviation and rail strategies more closely aligned to meet our connectivity needs, focusing particularly on modal shift. Rail travel has a much lower carbon footprint, approximately 25% that of air travel.^xv The Government should promote greater modal shift from air to rail for domestic and short haul travel where practical. In fact, this trend is already happening. WWF research^xvi found that 61% of FTSE-500 companies expect to travel more by train in future. In future, the UK needs to be planning greater “intermodality”, with airports and High Speed Rail (HSR) links being planned together to provide international connectivity.

Making the Best Use of Existing Aviation Capacity (Answering Questions a and b)

(a) How do we make the best use of existing London airport capacity? Are the Government’s current measures sufficient?

5. Existing airport capacity is sufficient for the needs of London, the South East and the UK as a whole. However, there are measures the Government should take to make better use of existing capacity to ensure the greatest economic benefit to the UK economy, even when this might not favour the profitability of the aviation industry itself.

6. Evidence shows that there is not a “capacity crunch” in the South East which would support any major airport expansion. WWF/AEF analysis of UK airport capacity^xvii shows that there is ample capacity, even in the South East, to accommodate aviation growth to 2050 within the environmental limits consistent with achieving UK climate targets, as recommended by the CCC, without needing to build new runways or terminals. This analysis shows that there will be less than a 1% shortfall in South East runway capacity, based on larger planes and increased plane loading at Heathrow. Even the Government’s own forecasts^xviii—which are based on highly optimistic, even naïve, assumptions—suggest that there is sufficient UK airport capacity to 2030. These forecasts would be brought down substantially by various factors including lower rates of economic growth, higher oil prices or greater aviation taxation.^xix These trends would make it even less likely that the UK will run out of airport capacity.

7. There is sufficient capacity at Heathrow, which although “full” in terms of runway capacity under present usage, can still accommodate an extra 20 million passengers^xx in its terminals and increase passenger loading on departing flights, which are currently only 75% full.^xxi The trend towards larger planes such as the A380, which according to BAA forecasts will increase average loading at Heathrow from 143 to 198 passengers per aircraft,^xxii is also welcome and will help boost passenger numbers without more flights. The Government’s stated policy of no new runways at Heathrow, Gatwick and Stansted should therefore be upheld, as existing airports should be used better rather than requiring expansion. Other major London airports have considerable amounts of spare capacity: 25% at Gatwick, 45% at Stansted and 15% at Luton.^xxiii This capacity should be filled in preference to building new airports or runways.

8. There are several measures the Government could take to facilitate better use of existing capacity, including: reforming slot allocation; renegotiating bilateral treaties with key destinations such as China; and moving flights with lower economic benefit and fewer transfer passengers to less congested airports.

(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?

9. WWF believes that Heathrow should remain the UK’s biggest hub airport. It should therefore prioritise long-haul business flights and those with a high percentage of transfer passengers. Regional airports, in contrast, should primarily provide point-to-point flights to leisure markets which have lower economic value, making use of their far greater levels of spare capacity than in the South East. Of all regional airports, Birmingham Airport has the most potential to function as a secondary (overflow) hub to Heathrow, especially once the HSR link is built. WWF believes there is much of merit in Birmingham Airport’s proposal to balance UK aviation away from a single mega-hub,^xxiv although we would prefer to see Birmingham Airport better linked to key hubs in emerging markets rather than offering more point-to-point flights to secondary destinations.

Constraints on Increasing UK Aviation Capacity (Answering Questions b and c)

(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?

10. The Government is not taking sufficient account of aviation’s climate change impacts in setting UK aviation policy. Given that aviation is the fastest growing source of UK greenhouse gas emissions and there is an extra warming effect at high altitude, roughly double the warming impact of CO₂ alone,^xxv any Government policy on aviation must have climate change impacts at its heart and should explicitly refer to the advice of its statutory advisor, the CCC.

11. WWF believes that the best way to reduce aviation emissions is to include them in the UK Climate Change Act and supporting carbon budgets, as recommended by the CCC in April 2012.^xxvi The CCC noted that the inclusion of international aviation and shipping emissions would have no additional costs, given that these reflect commitments that have already been made to currently legislated budgets, to inclusion of aviation in the EU ETS, and to the International Maritime Organisation’s policy for reducing shipping emissions.

12. The Government should follow the advice of the CCC in ensuring aviation growth remains fully consistent with UK climate targets.^xxvii The CCC analysis rules out an “unconstrained expansion” scenario, and WWF believes its “likely scenario” provides the best basis for UK aviation policy going forward. This scenario allows a 60% increase in passengers and 55% increase in ATMs to 2050.

13. Although WWF welcomes efforts by parts of the aviation industry, such as the Sustainable Aviation coalition, to reduce emissions through technology and operational improvements, the fact remains that aviation growth outstrips efficiency improvements. The CCC states that a fleet fuel efficiency improvement of 0.8% annually to 2050 is likely given current technological trends and investment intentions.^xxviii This is in contrast to global passenger growth of 4–5% per year.^xxix WWF believes that sustainable biofuels could have a significant role in reducing residual aviation emissions, having first sought to reduce demand through capacity constraint, modal shift, greater use of alternatives, taxation and other policy levers. However, there will be limited availability of sustainable biofuels for the foreseeable future, and many competitive uses outside the aviation sector, which will limit its ability to fuel aviation growth while at the same time reducing emissions.

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

14. WWF welcomes Government support for the inclusion of aviation in EU Emissions Trading Scheme, which we view as an important first step towards achieving a global agreement through the International Civil Aviation Organisation (ICAO) for addressing international aviation emissions. As an ICAO agreement is still probably years away, it is important for the UK and EU Member State governments to continue to uphold aviation in ETS. WWF also supports the CCC’s recommendation to include international aviation emissions in the UK Climate Change Act and carbon budgets, using the UK’s share of the ETS cap as the basis for inclusion.^xxx We believe that the relationship between the Government’s climate and aviation policy and EU aviation policies are closely interlinked and provide a multilateral basis for including aviation emissions in UK carbon budgets.

15. Based on the UK’s share of its ETS cap, UK aviation emissions should not exceed 31MtCO₂e/year.^xxxi Current UK international aviation emissions are 31.8MTCO₂e^xxxii with domestic aviation providing another 2.0MTCO₂e^xxxiii so the UK is already exceeding its EU cap. A third runway at Heathrow would exceed this cap by approximately 5 MtCO₂/year^xxxiv and a Thames Estuary airport more than twice the size of Heathrow could be expected to emit more than 34MtCO₂/year,^xxxv excluding the carbon footprint of construction and new infrastructure. Such expansion would therefore greatly exceed the cap consistent with meeting our UK climate targets. It would also pass on a high level of environmental debt to other sectors, expecting them to decarbonise in order to allow aviation to continue to grow, which will become increasingly difficult and expensive over time.^xxxvi

A Step-change in Connectivity, not Additional Capacity (Answering Questions a and b)

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

16. WWF believes that we need a step-change in how we ensure future UK air connectivity. This requires new thinking about how to maintain the UK’s importance as an international hub based on a complementary rather than competitive approach. If every major hub airport were to try to offer more routes and destinations than its competitors, the result would be a global oversupply which would be a highly unsustainable way of increasing connectivity. The world is facing a carbon-constrained future and global economic shifts are likely to favour Asian hubs. The UK should therefore move away from a protectionist approach to hubs and seek instead to function more as an interchange to those hubs offering the best links to emerging markets, such as Dubai and China (including Hong Kong). Maximising such hub-to-hub links will increase UK connectivity to secondary destinations while reducing the need for point-to-point flights that are unlikely to be economically viable. At the same time, a UK hub should be seeking to increase routes and frequency to major business centres in key emerging markets, such as Brazil and mainland China, which are currently underserved by UK airports but where there is already significant UK trade and interest. The UK should also continue to exploit its current strengths (both geographically and historically) as the European gateway to North America, as well as offering the best connectivity to ex-colonies such as India, Hong Kong and South Africa. As explained above, WWF does not believe that there is any need for a new hub airport as there is already more than ample existing capacity, even in the South East to allow for aviation growth to 2050 as recommended by the CCC. Not only is a new hub not needed nor likely to be economically viable, it would also endanger UK carbon targets by vastly increasing aviation emissions.

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

17. Any cost:benefit appraisal of airport expansion needs to consider environmental and social costs and be based on realistic future carbon prices. WWF, together with RSPB and HACAN, have recently commissioned CE Delft to prepare a new economic framework for aviation which will consider these issues and evaluate other cost:benefit appraisals on South East airport expansion. This work will be published in March 2013 and will be submitted as evidence to the Commission chaired by Sir Howard Davies. Previous work by WWF to appraise the cost:benefit of a third runway at Heathrow^xxxvii showed a £5 billion loss, based on a higher future cost of carbon than the Government’s assessment. WWF still stands by our assessment and can see no reason why these results would have changed. A third runway at Heathrow remains economically unviable.

19 October 2012

References

ⁱ http://downloads.theccc.org.uk/Aviation%20Report%2009/21667B%20CCC%20Exec%20Summary%20AW%20v2.pdf

ⁱⁱ http://assets.wwf.org.uk/downloads/airport_capacity_report_july_2011.pdf

ⁱⁱⁱ http://www.aef.org.uk/downloads/Business_Connectivity_Report_August2011.pdf

^iv http://www.gatwickairport.com/business/media-centre/press-releases/air-china-to-launch-gatwick-beijing-services-in-2012/ ; http://www.abtn.co.uk/news/2717289-birmingham-sets-sights-china-flights

^v http://www.abtn.co.uk/news/1117950-asian-routes-boost-heathrow-and-gatwick

^vi http://www.ons.gov.uk/ons/dcp171776_274235.pdf

^vii http://www.ons.gov.uk/ons/rel/abs/annual-business-survey/2010-revised-results/index.html

^viii wwf.org.uk/movingon

^ix http://assets.wwf.org.uk/downloads/second_one_in_five_challenge_annual_report_2010_11_1.pdf

^x http://www.primeeconomics.org/wp-content/uploads/2012/09/Heathrow-3rd-runway-03092012.pdf

^xi http://fullfact.org/factchecks/airline_industry_subsidies_green_taxes-3256

^xii http://cdn.hm-treasury.gov.uk/budget2012_complete.pdf

^xiii http://www.e-tid.com/apd-ae%cb%9cshows-little-impact-on-salesae-for-long-haul/27293/

^xiv http://assets.dft.gov.uk/statistics/series/energy-and-environment/climatechangefactsheets.pdf

^xv http://www.greengauge21.net/wp-content/uploads/HSR-CarbonEmissions.pdf

^xvi wwf.org.uk/movingon

^xvii http://assets.wwf.org.uk/downloads/airport_capacity_report_july_2011.pdf

^xviii http://assets.dft.gov.uk/publications/uk-aviation-forecasts-2011/uk-aviation-forecasts.pdf

^xix http://www.aef.org.uk/uploads/AEF_Passenger_Forecasts_SUMMARY_1.pdf

^xx Civil Aviation Authority data (2009) compared to total Heathrow capacity including Terminal 5

^xxi BAA monthly data (2010-2012)

^xxii http://www.lbhf.gov.uk/Images/ERSP_Interim_Master_Plan_Report_tcm21-39448.pdf

^xxiii Gatwick, Stansted and Luton airport passenger and ATM traffic data (2011)

^xxiv http://www.westbournecoms.com/wp-content/uploads/2012/06/WES1684_westbourne_aviation_report_06.12_web.pdf

^xxv http://www.tiaca.org/images/tiaca/PDF/IndustryAffairs/2009%20IPCC%20authors%20update.pdf

^xxvi http://www.theccc.org.uk/reports/international-aviation-a-shipping

^xxvii http://downloads.theccc.org.uk/Aviation%20Report%2009/21667B%20CCC%20Aviation%20AW%20COMP%20v8.pdf

^xxviii http://downloads.theccc.org.uk/Aviation%20Report%2009/21667B%20CCC%20Aviation%20AW%20COMP%20v8.pdf

^xxix http://www.iata.org/pressroom/facts_figures/fact_sheets/Documents/industry-facts.pdf

^xxx http://www.theccc.org.uk/reports/international-aviation-a-shipping

^xxxi http://hmccc.s3.amazonaws.com/IA&S/CCC_IAS_Core_ScopeOfBudgets_April2012.pdf

^xxxii http://www.decc.gov.uk/assets/decc/11/stats/climate-change/4282-statistical-release-2010-uk-greenhouse-gas-emissi.pdf

^xxxiii http://www.dft.gov.uk/statistics/tables/env0201/

^xxxiv http://www.greenpeace.org.uk/files/pdfs/climate/case-against-heathrow-expansion.pdf

^xxxv http://www.heathrowairport.com/static/Heathrow/Downloads/PDF/LHR_Climate_brochure.pdf

^xxxvi ????

^xxxvii http://www.wwf.org.uk/filelibrary/pdf/alchemy_economics.pdf