London Stansted Airport
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Owned and operated by Manchester Airports Group, it having been sold by Heathrow Airport Holdings Ltd (BAA) on 28-Feb-2013, London Stansted Airport is the third largest airport serving Greater London and is located in the District of Uttlesford in Essex. Hosting regional and international passenger and cargo services for over 20 airlines, London Stansted is a major hub for low-cost and charter airlines including Easyjet, Ryanair, Thomas Cook Airlines and Thomson Airways.
Location of London Stansted Airport, United Kingdom
Ground Handlers servicing London Stansted Airport
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The regular quinquennial review of airport charges at London’s three biggest airports has finally come to its conclusion. As always, this has been an exercise in attempting to reconcile the irreconcilable. Nevertheless, with the publication of its final decisions on 10-Jan-2014 (not to be confused with its ‘final proposals’, published in Oct-2013), the UK’s Civil Aviation Authority (CAA) has ruled a line between the wishes of the airlines and airports.
After very substantial price increases in the previous regulatory period, the clamour from airlines for the CAA to place more aggressive caps on airport charges for the period 2014 to 2019 appears to have been heard. At Heathrow and Gatwick, the CAA’s price caps are below inflation. Not low enough, say the airlines, but their comments do not have the same vehemence as in the past, while these two airports sound genuinely dismayed by the decisions and by the changes since Oct-2013.
At Stansted, price regulation is to be abandoned altogether as the CAA now judges that the airport no longer has substantial market power after long term agreements, incorporating price discounts, were struck directly with the main airlines there.
The UK’s Airports Commission, tasked with looking into the need for additional UK airport capacity, has reached an important provisional conclusion. On 7-Oct-2013, the Commission’s Chairman Sir Howard Davies said: “We will need some net additional runway capacity in the south east of England in the coming decades”. Relying only on existing runways would “produce a distinctly sub-optimal solution for passengers, connectivity and the economy”.
Meanwhile, campaign group Stop Stansted Expansion is seeking to launch a legal challenge to the Commission’s work. This is on the grounds that one of the Commission’s former members, ex-CEO of Manchester Airports Group Geoff Muirhead, who stepped down in Sep-2013, may have been able to influence it in MAG’s favour.
This illustrates one of the difficulties in making decisions about future airport capacity. Whatever its final recommendations in 2015, it will be impossible to reconcile the different views of national politicians, local politicians, airlines, airports, environmental campaigners and NIMBY-ism (‘not in my back yard’). Nevertheless, the UK’s future as a global aviation hub demands that a clear decision be taken.
The UK CAA’s mind-numbingly long and complex review of airport charges at Heathrow, Gatwick and Stansted is almost complete. In the five-yearly process, the regulator consults with airports and airlines. It publishes proposals and amends proposals, trying to reconcile the irreconcilable.
Between 2007 and 2012, aeronautical income per passenger at Heathrow almost doubled; at Gatwick it rose by more than two thirds; and at Stansted it grew by 43%. They all beat the 14% increase in the UK’s Retail Price Index over this period. Airlines now want prices to fall, while airports seek further increases to pay for planned capital expenditure and to reward investors.
The usual result of the review is that neither side is pleased. After the publication on 3-Oct-2013 of the CAA’s ‘final’ proposals for price caps from 2014 to 2019, the usual result looks likely again at Heathrow. At Gatwick, the CAA might just find common ground between the two sides. At Stansted, it seems the regulator has been by-passed entirely. Final decisions are due in Jan-2014.
This week Ryanair celebrated 16 years of being listed on the Irish Stock Exchange. Its market capitalisation of around EUR9 billion makes it Ireland’s second largest public company and it has been Europe’s most profitable airline for many years. It is also the largest airline in Europe, ranked by seats, and recently signed a new 10 year growth deal with its largest airport, London Stansted (analysed by CAPA on 27-Sep-2013). But it does not seem content to sit back and congratulate itself.
Following a profit warning in early Sep-2013, CEO Michael O’Leary admitted that the airline recently dubbed as “the international code word for consumer trauma” (David McWilliams, Financial Times, 28-Sep-2013) needs to soften its image. It has announced plans to develop its distribution policy and to position itself as more customer friendly.
Is this a sudden and significant change in Ryanair’s approach, prompted by fears over falling profits as suggested by much of the recent media coverage? Or is it a further evolution of a business that has always adapted?
On 16-Sep-2013, Ryanair announced a 10 year agreement with Manchester Airport Group (MAG), the new owner of Stansted Airport, to add more than 50% to its 2012 traffic base of 13.2 million passengers and carry more than 20 million passengers per annum at the airport.
Ryanair CEO Michael O’Leary sounded very happy with the change of management at Stansted, where tariff increases under the previous owner led to a 27% fall in total passenger numbers from 2007 to 2012: “This agreement… proves how UK airports can flourish when released from the dead hand of the BAA monopoly and is the first dramatic initiative by MAG to reverse 7 years of decline”.
In this report, we examine the relationship between Ryanair, which is Stansted’s largest airline, and Stansted, which is Ryanair’s largest airport. In a separate report, we will look at recent indications by Ryanair that it wants to be more customer friendly and consider how this fits in with its passenger growth targets.
easyJet's May-2013 traffic statistics show that it has carried more than 60 million passengers in a 12 month period for the first time. In her 1H2013 results presentation, CEO Carolyn McCall identified the significant further growth opportunity she sees to take market share from traditional carriers on point-to-point routes at easyJet’s existing airports.
The LCC’s principal attraction versus these competitors is its low fares and this has been the main driver of demand. However, easyJet is evolving its product in order to broaden the basis of competition.
easyJet has initiated a number of digital developments, improved its CRM capabilities, built its brand strength, introduced allocated seating and is making its proposition more attractive to business travellers. CAPA spoke to group commercial director Catherine Lynn about these initiatives.
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