The Future of Air Transport The Future of Air Transport

in the UKin the UK

Scene-setting

Laurie Price

Regional Economic Development and Air Access

to Heathrow and Gatwick; Seminar

May 4th 2004

Agenda

The Aviation White Paper on the Future of Air

Transport in the UK laid out a general approach

for the next 30 years, to general approval

BUT:

Three major problems still have to be resolved:

– Access to London’s hub airports from the regions

– Slot scarcity and slot allocation regulations

– The use of Public Service Obligations (PSOs)

Total Terminal Passengers at UK Airports 1972 - 2003

0

20

40

60

80

100

120

140

160

180

200

1970 1975 1980 1985 1990 1995 2000

Tot

al T

erm

inal

Pas

seng

ers

(mill

ions

)

1974 Fuel Crisis

1977 Bermuda II

1979 US Deregulation

1981 Fuel Crisis + Recession

1982 Falklands War

1983 Europe Deregulation

1991 Gulf War

1995 Introduction of Low-Cost Airlines

Source: CAA Airport Statistics

1985/86 Libya/Chernobyl

1988 Lockerbie

2001 Terrorist Attacks

DfT Forecast of UK Terminal Passengers 2000-2030

0

100

200

300

400

500

600

1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030

Te

rmin

al P

ass

en

ge

rs (

mill

ion

s)

Total UK

London Airports

Regional Airports

Source: CAA; DfT Forecast for RASCO/SERAS

3.45% p.a.

3.20% p.a.

3.90% p.a.

6.15% p.a.

5.65% p.a.

7.20% p.a.

Propensity to Fly by UK Region

+ 2.50

1.50 - 2.49

1.00 - 1.49

0.75 - 0.99

- 0.74

Trips per Head

of Population

0.00 0.50 1.00 1.50 2.00 2.50 3.00

UNITED KINGDOM

ENGLAND

North East

Wales

Yorkshire and the Humber

South West

West Midlands

East Midlands

Eastern

North West

Northern Ireland

South East

Scotland

London

International Passenger Journeys per Head of Population, 2000Source: CAA/ONS

South East

Eastern

South West

E. Midlands

W. Midlands Wales

North West

North East

Northern Ireland

Scotland

Yorks & Humber

London

The problems

Regional Services

A key issue for the UK air transport industry and regional

economies is the access for regional air services to London’s hub

airports of Heathrow and Gatwick

Many regions have already lost their scheduled service links with

Heathrow and Gatwick, while the remainder are at increasing risk

In a free market, a good big’un will always beat a good littl’un:

Heathrow – Leeds will never be able to compete with Heathrow –

Chicago for scarce slots

Regional air services to London are under threat

INVABZ

DND

GLA EDI

NCL

CAXBFS

BHDIOM

MME

LBA

LPL HUYMAN

EMA

BHX

NWI

PLHEXT

NQY

GCI JER

Routes operated Summer 2003

LHR and LGW services

LHR service only(Services MOST at risk)

LGW service only

No service to LHR or LGW(but operated in 1986)

Regional services lost 1986-2003

LGW 7LHR 11

*Note: All these Regional Airports operated services to LHR and/or LGW in 1986

Source: OAG

The problems

Slots and slot allocation priorities

Heathrow and Gatwick are full today – there are no spare slots

Slots are changing hands at Heathrow for up to £10m a pair, and

the price will continue to soar

In a free market, small aircraft travelling short distances will not be

able to compete in the long-term without some form of

government protection

The EU is preparing to modify slot allocation legislation, but don’t

hold your breath

Slot shortages are a direct result of insufficient runways in the

South East – and we can see no extra runway for at least 10 years

Heathrow Summer 2001 DemandDEPARTURE MOVEMENTS (Typical week - all times local time)

0

10

20

30

40

50

60

06:0

007

:00

08:0

009

:00

10:0

011

:00

12:0

013

:00

14:0

015

:00

16:0

017

:00

18:0

019

:00

20:0

021

:00

22:0

0

CAPACITY DEMAND

0

10

20

30

40

50

60

06:0

007

:00

08:0

009

:00

10:0

011

:00

12:0

013

:00

14:0

015

:00

16:0

017

:00

18:0

019

:00

20:0

021

:00

22:0

0

CAPACITY DEMANDSource: ACL 2001

The problems

Public Service Obligations (PSOs)

These are used throughout Europe to provide air links to peripheral

regions that might otherwise not be provided

Normally, this involves the provision of some level of public

subsidy, but it ain’t necessarily so

PSOs can also be used to requisition scarce slots at congested

airports to protect links from peripheral regions, without any

financial subsidy

The DfT is to hold a consultation on PSOs to see if they can help to

solve some intractable problems of access

It is hoped we can discuss some of these today…

Heathrow and Gatwick – the only true London hub airports Aug. 2003 Schedules Heathrow Gatwick Stansted Luton London

City

Total Destinations served

Full Fare -

Low Cost -

168

168

0

126

123

15

100

24

84

28

11

19

20

20

0

Total Weekly Departures

Full Fare -

Low Cost -

4,506

4,506

0

1,804

1,550

254

1,572

235

1,337

502

60

442

445

439

6

Long Haul DestinationsUSA - 14 16 0 0 0

Long Haul DestinationsOther - 77 23 0 0 0

Passengers(Year 2002 – millions) 63.1 29.5 16.1 6.5 1.6

ATMs (Year 2002 – thousands) 461 235 155 58 54

Source: OAG

Public Service Obligations (PSOs)

According to the White Paper,

“The Government will apply PSOs where, in accordance with the existing EU Regulation 2408/92, three criteria are met:

The route is to a peripheral region, or to a development

region, or is a ‘thin’ route;

The air service concerned is vital to economic development

for the region; and

A PSO is required to ensure an adequate level of service.”

Source: The Aviation White Paper, Dec. 2003

The Government’s PSO Pledge

“ We propose that, where there is an existing service,

PSOs would be imposed only when an airline’s

withdrawal from a currently operated route would

reduce the frequency level below an adequate level. In

judging whether there was an adequate service, we

would take into account the frequency of services, the

timing of the services, and the seat capacity offered.”

Source: The Aviation White Paper, Dec. 2003

Implications

Unless we can rapidly offer additional runways in the South

East and/or modify the DfT’s application of PSO policy to

peripheral routes to and from Heathrow and Gatwick,

regional economies will remain at risk

Airlines and airports favour the status quo – larger aircraft

and longer routes spell greater profits. They do not have to

consider the wider economic benefits that domestic air

services to London may bring to the regions

The pressure for change must be applied by the regions

Air Transport White Paper – Summary of recommendations for the South East

1 new runway at Stansted - 2011/12 – although this felt to

be an optimistic timescale

1 new runway at Heathrow (if environmental conditions are

met) – 2015-2020

Land for extra runway at Gatwick to be safeguarded in

case no runway allowed at Heathrow, but no development

before 2019

Luton encouraged to lengthen its runway and maximise its

number of movements as soon as possible

Stansted

Heathrow

Air Transport White Paper – Summary of recommendations for the Regions

A new runway at Birmingham

Terminal expansion at Manchester and Cardiff

Runway extensions for Bristol, Liverpool and Newcastle

East Midlands granted permission to expand, but with strict

night noise controls

Land safeguarded at Edinburgh for new runway and terminal

Land safeguarded at Glasgow for additional terminal capacity

Development encouraged at Prestwick, Aberdeen, Dundee and

Inverness

These developments must be consistent with the Government’s environmental objectivesThe Government has proposed a framework of local controls to manage the

environmental impact of aviation and airport development so that:

Noise impacts are limited, and where possible reduced over time

Local air quality is maintained within legal limits across all relevant pollutants…

Loss of landscape and built heritage is avoided wherever possible, and otherwise

minimised and mitigated to the greatest extent possible

All relevant water quality and other mandatory environmental standards are met

Surface access to airports is designed to help limit local environmental impacts

Impacts on biodiversity, such as disturbance of habitats and species, are minimised.

Source: Aviation White Paper, Dec. 2003

The Compromises needed

More runways in the South east, but less impact on the

environment

More links from the regions to London, but no

reduction of the necessary intercontinental flights from

Heathrow

More development of regional economies, but not at

the expense of London and the South East

Summary

A political challenge for both local government and

national government to achieve the best results for the

whole nation