Transport CommitteeWritten evidence from the Department for Transport (AS 87)

Background

1. The Department for Transport published in July a draft Aviation Policy Framework (APF), setting out the importance of aviation to the UK economy and the Government's proposals on how aviation can grow and deliver for the economy while meeting its noise, climate change and habitat obligations. The Government aims to adopt the final APF next spring. As such, this response reiterates the position in the draft APF document. The draft APF is currently subject to consultation. As such this memorandum where it draws upon the APF represents the Government's current thinking but it should not be taken as a definitive statement of policy.

2. Alongside publishing the draft APF in July, The Government announced a package of short term measures to make the best use of existing capacity, encourage investment in our airports and improve surface access provision to our airports to the benefit of passengers and the wider economy. Relevant measures are outlined in response to the questions below.

3. Additionally, on 7 September, a Written Ministerial Statement confirmed that the Government had appointed Sir Howard Davies to chair an independent commission tasked with identifying and recommending to Government options for maintaining this country's status as an international hub for aviation. The Commission will provide an interim report by the end of 2013 and a final report by summer 2015. Further details on the full membership of the Airports Commission and its Terms of Reference will be published shortly.

1. What should be the objectives of Government policy on aviation?

(a) How important is international aviation connectivity to the UK aviation industry and
(b) What are the benefits of aviation to the UK economy?

4. Aviation benefits the UK economy through its direct contribution to Gross Domestic Product (GDP) and employment, and by facilitating trade and investment, manufacturing supply chains, skills development and tourism. The whole UK aviation sector's turnover in 2010 was around £50 billion and it generated around £16 billion of economic output. The sector employs over 220,000 workers directly and supports many more indirectly1. Aviation also brings many wider benefits to society and individuals, including travel for leisure and visiting family and friends.

5. Aviation plays a crucial role in supporting the UK's trade in services worth over £310 billion in 2011—£194 billion of which were service exports2. Furthermore air freight accounted for £116 billion of trade in goods in 2011–35% by value of all trade with non-EU countries3.

6. Aviation connects UK industry and consumers with the global market place:

The UK is one of the best connected countries in the world, our air links directly connect us with over 360 international destinations4;

Our aviation network ranks as the third largest in the world behind only the USA and China (available seat kilometres)5; and

In 2011 UK airports catered for 219 million passengers (over 50 million of whom were on business) and over 2 million flights6.

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

7. It is important to recognise that international aviation is generally not subject to tax on fuel and, in contrast to many other countries that apply VAT on domestic flights, there is no such VAT in the UK. The Government has acknowledged that recent economic conditions have been difficult for both consumers and the aviation sector. The rise in APD has been limited to inflation over the period 2010–12 and, recognising the need for airlines to plan ahead, has sought to provide airlines and passengers with clarity on future rates.

8. In terms of the impact on demand, in general competitive industries like the UK aviation industry tend to pass on costs such as APD to passengers. As set out in the Department for Transport's UK Aviation Forecasts (August 2011), overall passenger demand for air travel is relatively unresponsive to changes in price although this can vary by sector with business passengers being much less responsive than leisure travellers. So overall, APD is likely to have a limited effect on aviation demand.

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

9. The Government thinks it is important that it works closely with airports and airlines to deliver good passenger aviation experience. Airports are often a visitor's first impression of Britain. Long delays either at security, immigration or for operational reasons have a negative impact and potential economic costs. As such the Government is pursuing a suite of measures with the industry to improve the passenger experience in the short term. For example, we are among other things:

Improving efficiency at the border. The Home Secretary is working to improve efficiency at the border, including reviewing the UK's visa regime, to ensure that our border policy supports our prosperity agenda whilst maintaining effective security. Any changes to the UK's visa regime will be implemented during the course of 2013. The Home Office has also brought forward the recruitment of 70 additional staff at Heathrow to provide additional flexibility to secure the border while dealing with increased passenger numbers. And it is looking at how we can improve the role of automation in the expedited clearance of passengers, linked to the development of a registered traveller scheme to replace the current IRIS scheme which has been extended.

Improving reliability and reducing delay at Heathrow through the current trial of operational freedoms to improve resilience and reduce delay and by taking forward other recommendations of the South East Airports Taskforce, such as airport performance charters which will set out the level of service that airlines and their passengers should expect. Further details on this are provided at 2a.

Reforming the economic regulation of airports to promote passenger interests through the Aviation Regulation Bill currently in Parliament

Delivering better surface access to airports. In total over this spending review period the Government is supporting investment of £1.4 billion on rail and road schemes which will directly or indirectly benefit airports across the UK. The Government is also inviting train companies to explore the potential of "code-sharing" between flights and long-distance train services, to enhance competition between trains and domestic flights.

Exploring with the US authorities and others, the feasibility of US pre-clearance facilities being made available in the UK, which could improve the competitive offer airports operating such a scheme would be able to make.

10. Airports across the UK are improving the passenger experience by responding to local demands. Below are a few such examples:

At Heathrow Airport, a £5 billion capital investment programme will redevelop all its terminals.

Gatwick Airport is taking forward a £1 bn capital investment programme to improve its terminals and airfield.

Birmingham Airport has recently completed a terminal development project that allows the airport to better meet increasing passenger demand while also making the airport more attractive and efficient for users.

Southend Airport has completed a programme of investment that has transformed the airport. A new terminal has been constructed, a runway extension that allows the operation of newer generation, high-efficiency, medium capacity aircraft has been completed, and an airport railway station that offers direct rail links to London opened in September 2011.

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

11. The Department's vision is for a transport system that is an engine for economic growth but one that is also greener and safer and improves quality of life in our communities. By improving the links that help to move goods and people around, and by targeting investment in new projects that promote green growth, we can help to build the balanced, dynamic and low-carbon economy that is essential for our future prosperity.

12. One of the Department's Business Plan priorities is to promote sustainable aviation; to create a sustainable framework for aviation in the UK, improve passenger experience at airports and maintain high standards of safety and security for passengers and freight.

13. The Department is producing a new transport strategy which will set out more clearly how our policies across different transport modes work as a whole to deliver our priorities. As well as a vision for transport, it will outline how the Department's activities fit together to deliver the Government's transport priorities. The strategy does not replace or duplicate our work on aviation, but will set it in a wider context.

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?

14. The Government is working with industry to improve reliability and reduce delay at Heathrow, our biggest and busiest airport, through a trial of measures introducing greater operational flexibility. If operational freedoms show clear benefits in terms of resilience, reducing delays and allowing planes to land more effectively, thereby reducing the impact of noise for residents under the flight path, then we will consult on making these benefits permanent.

15. We are also taking forward the other recommendations of the South East Airports Taskforce, such as airport performance charters which will set out the level of service that airlines and their passengers should expect, as well as new guidelines developed in a Civil Aviation Authority (CAA) chaired industry group which will aim to make the best use of existing capacity.

16. In addition, Government is in the APF consulting on:

Further liberalising the UK aviation market to encourage new routes by extending to Gatwick and Stansted the ability for foreign airlines to pick up passengers when flying to other destinations.

Looking to identify options, within the EU legislative framework, aimed at ensuring that slots at our congested airports are used in the most economically beneficial way for the UK. The focus of this work is on seeking to optimise the functioning of the secondary trading market for airport slots.

Considering the potential for new rules by airport operators to improve the use of existing capacity at our busiest airports—for example, by limiting access to smaller planes.

17. We expect to engage with key stakeholders later in the summer and publish a progress report in the Autumn. We are also working with the EU, in the context of the Commission's proposals on reform of the rules on landing slots to secure measures to support UK regional connectivity, such as protecting the provision of air services between Northern Ireland and Heathrow.

(b) What more could be done to improve passenger experience and airport resilience?

18. The Governments proposals to improve the passenger experience were covered in 1d, this section will therefore focus on resilience.

19. The UK's aviation industry has significantly improved air passengers' experience in the light of disruption to air services during the winters of 2009 and 2010 through measures to increase resilience. The busiest UK airports, Heathrow and Gatwick, have substantially increased their snow and ice clearance vehicle fleets and revised operational command and control procedures alongside airlines. Other UK airports have similarly revised and updated their operational response procedures. Airlines, airport operators and aircraft de-icing companies have reviewed and improved de-icer supply/contract arrangements.

20. Airport operators and airlines also maintain detailed contingency plans to deal with weather and non-weather related factors that might disrupt air services. These plans are continually updated and tested through simulation exercises with other local and statutory agencies.

21. The Civil Aviation Authority monitors the aviation industry's performance in dealing with weather disruptions, including recovery of normal operations and compliance with European legislation on assisting passengers whose flights are delayed or cancelled. The Civil Aviation Bill proposes giving the Civil Aviation Authority powers to regulate airports more effectively, including measures to ensure airports maximise operational resilience.

(c) Does the Government's current strategy make the best use of existing capacity at airports outside the south east? How could this be improved?

22. The question of the UK's airport capacity is crucial to the country's long-term competitiveness, but is also highly contentious. History demonstrates that without an agreed evidence base and a high degree of political consensus, it will not be possible to deliver a lasting solution that is right for the UK.

23. The Government is clear that airports outside London and the South East have an important role in helping maintain the UK's air connectivity, and potential to relieve some of the pressure from constrained South East airports. Operators of some airports outside the South East have made robust representations setting out how they might use their spare capacity to do this, and the Government welcomes their input to the debate. The process we are taking forward, based on our Aviation Policy Framework and the independent Commission, will examine options for how this might be best achieved.

24 The Government is working to remove bilateral restrictions on air services on a case-by-case basis. This will mean open access to airports outside the South East for new air services, in order to facilitate inward investment in new routes and extra choice for business and passengers without necessarily having to secure reciprocal access for UK airlines to the airports of the other country.

25. The Government is working with BIS, UKTI, and others to market the benefits of flying to a range of UK airports and to target new carriers, particularly carriers in emerging markets such as Latin America, India and South East Asia. Government is using the Olympics and GREAT brand to deliver a new and strengthened marketing campaign.

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

26. We are improving surface access to airports with significant new investment. In total over this spending review period the Government is supporting investment of £1.4 billion on rail and road schemes which will directly or indirectly benefit airports across the UK.

27. This includes a fleet of 30 thirty new electric trains on the Stansted Express to London which entered service last year and a £53 million upgrade of Gatwick Airport station with improved passenger facilities, an extra platform and more track and signalling by 2013 and a Regional Growth Fund contribution of £19.5 million for junction enhancements to be completed by 2014 which will improve access from the M1 to Luton Airport.

28. Elsewhere the Metrolink extension to Manchester Airport is due to open in 2016 which will provide a tram every 12 minutes between Manchester Airport and Manchester City Centre, while Birmingham Airport will benefit from improvements to the A45 corridor.

29. In the future, Luton and Gatwick will receive improved rail services through the Thameslink programme and we expect Heathrow passengers to benefit from Crossrail.

30. Funding has been committed of up to £500 million towards a western rail link to Heathrow, subject to a business case and conclusion of agreements with the aviation industry. This recognises the continued importance of Heathrow as our major international hub. Businesses west of the airport have been calling for this vital investment for many years. It will cut typically 30 minutes off the journey to Heathrow from the west of England and south Wales, with significant benefits for growing cities like Swindon, Bristol and Cardiff. The service could come into operation as early as 2021.

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?

31. The Government's overall policy on noise is set out in the Noise Policy Statement for England. This contains a long term vision of promoting good health and good quality of life through the effective management of noise in the context of Government policy on sustainable development.

32. In terms of reducing the impact of aviation noise on local residents, noise continues to be a real source of tension between a number of airports and local communities. If airport capacity is allowed to grow, it is essential that the aviation industry continues to tackle its noise impact in order that the benefits are shared between airports and local communities.

33. The Government's aim is to establish a framework which more strongly incentivises noise reduction and mitigation and also encourages better engagement between airports and local communities and greater transparency to facilitate an informed debate. The draft APF document proposes to retain the existing high level objective to limit, and where possible reduce, the number of people significantly affected by aircraft noise. It discusses a number of ways of reducing and mitigating noise, covering areas such as noise abatement operational measures, the use of noise envelopes, different noise metrics, noise limits, monitoring and penalties, landing fees, compensation schemes and air quality.

34. The Government also sets the noise controls at Heathrow, Gatwick and Stansted and as part of the draft APF consultation we have asked if the Government should continue to do this.

35. At other airports, consistent with the Government's localism policy, we take the view that noise controls should continue to be agreed locally rather than being imposed by central Government. Noise controls at these airports are based on local authority powers to impose planning conditions on new developments, EU requirements for airports to develop and implement Noise Action Plans following consultation, voluntary arrangements through the influence of Airport Consultative Committees or a combination of these measures. Most airports of significant size have measures in place which are similar to those set by the Government at Heathrow, Stansted and Gatwick.

36. Noise Abatement measures at Heathrow Gatwick and Stansted airports, at which the Government sets noise controls, include departure noise limits and height limits, noise preferential routes and the use of continuous descent approach. The Aircraft Noise Management Advisory Committee (ANMAC) which advises the Department for Transport on technical and policy aspects on noise mitigation at Heathrow, Gatwick and Stansted, has been tasked to review these measures. In addition, in the night period at these airports there is a restriction on the number of movements and a ban on the noisiest aircraft. The Government announced on 26 March 2012 an extension of the existing night flying restrictions at these airports until October 2014. On steps to replace the current regime we will launch a first stage consultation towards the end of this year seeking detailed evidence, followed by a second consultation next year which will enable us to take account of adopted policy when developing specific measures for the new regime.

(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?

37. Government's objective is to ensure that the aviation sector makes a significant and cost effective contribution towards reducing global emissions. The Government believes that delivering this reduction is best delivered through global action, with action at European level a second best option that provides a potentially valuable step towards wider international agreement. We will take action at a national level where that is appropriate and justified.

38. The Government is working at an international level to secure agreement within ICAO for a global aviation climate change agreement. ICAO has already committed to agreeing an international CO₂ standard for aircraft by 2013. In addition an agreement to global aspirational goals of carbon neutral growth from 2020 and annual fuel efficiency improvements of 2% per year out to 2050 has been reached. The Government fully supports these developments and will continue to press for more progress to be made.

39. In the absence of a comprehensive global deal the Government remains committed and focused to action at a European Level. The EU has agreed a comprehensive strategy to tackle climate change emissions based upon four pillars: reduction of emissions at source; research and development; modernisation of air traffic management and market-based measures. Two of the key components of the strategy are implementing the EU Emissions Trading System (EU ETS) and improving EU airspace design through the Single European Sky programme.

40. At a national level there are a number of actions that the Government is considering or already taking to help reduce aviation's emissions and make it more sustainable. The Government is determined to strengthen the CAA's environmental role both though its air navigation role but also proposing new information powers to enable greater transparency.

41. A number of additional Government Programmes are working towards making aviation more sustainable. The Government's High Speed Rail proposals combined with its actions to create "super-connected" cities through broadband improvement will help provide alternatives to air travel in some circumstances and to physical travel in others. Meanwhile new technologies are continually delivering improvements in aviation's environmental performance. The Government believes the UK is well placed to lead these efforts and provides tax relief to these research and development activities.

42. All of the above, along with other actions will help secure a more sustainable future for aviation, which is vital to ensure the long term success of UK's aviation industry and its contribution to supporting economic growth and competitiveness.

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

43. Except for the previously mentioned environmental initiatives the Government's belief is that its role should be largely confined to facilitating the existing competitive aviation market within a proportionate international and domestic regulatory framework to ensure a level playing field, and the maintenance of high standards of safety and security. In this regard we will continue to work with EU agencies on regulatory proposals to promote and protect UK interests—including in the areas of safety and operational regulations; airport slot allocation, aviation security, consumer protection and passenger rights.

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

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

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

44. The Government believes that maintaining the UK's status as a leading global aviation hub is fundamental to our long term international competitiveness. But the Government is also mindful of the need to take full account of the social, environmental and other impacts of any expansions in airport capacity.

45. Therefore the Government has asked Sir Howard Davies to chair an independent commission tasked with identifying and recommending to Government options for maintaining this country's status as an international hub for aviation. The commission will provide an interim report to the Government no later than the end of 2013 and will then publish by the summer of 2015 a final report, for consideration by the Government and opposition parties.

22 October 2012