The varying fortunes of three UK regional airports post COVID; part one: Intro + London City

Multiple hits on the UK airport sector, and while the going is good right now, there are more to come

The UK was particularly badly hit by the COVID-19 pandemic, in the form of an often-confusing response by the government to the need to control the spread of the disease by air travel.

That took the form of a tightening of already severe regulations, followed by an immediate and dramatic relaxation in the early months of 2022, which caused long lines at airports as there were insufficient numbers of employees to handle the sudden swell of passengers.

Then the effect of the war in Ukraine kicked in, causing inflation at levels not seen for decades and limits on disposable incomes. Surprisingly, and initially buoyed by the capacity supplied by low cost carriers, that influx of passengers was sustained and multiplied. Most airports have returned to the levels of utilisation experienced up until 2019, and can expect the same until the end of 2024.

Beyond that, the picture is cloudier, as warnings about a decrease in demand grow throughout Europe and beyond its shores.

In the UK the election of a new government has not done much to bolster confidence, as it embarks on austerity measures not too dissimilar to those experienced during the financial crisis from 2008 onwards, as well as tax increases that will hit the middle class and higher-earning working class, and probably their propensity to travel.

And there is always the fear with a Labour government in place, one that historically has supported environmentally targeted policies, that it will introduce new taxes or increase existing ones that will badly hurt the air transport sector.

Three examples of recovery or otherwise are considered in this analysis report: UK airports that do not handle more than five million passengers annually.

They are London City Airport - which CAPA - Centre for Aviation has frequently commented on in recent years - and, in the North of England, Leeds Bradford and Teesside airports. The first two are under private sector control, while the third has gone back into public ownership, but with the private sector still interested in making a deal.

London City Airport - under the cosh from all sides, but winning its planning battles

Situated close to the newer financial district of London and around six miles (9.6 km) from the older one, London City (LCY) unashamedly caters to business passengers first and foremost. It can be counted as a regional airport because, in the main, it serves a particular region of London, but its catchment area does go quite a lot further.

At the cutting edge of security technology

LCY was the first in the country, coincidentally with Teesside Airport, to introduce the next-generation CT scanners, which removed the need for the 100ml liquids and gels in cabin baggage regulation, at the same time as larger airports were saying that they couldn't do it before Jun-2025.

That is not surprising, as LCY claims to be one of the fastest kerb-to-gate airports in the UK.

While LCY claims to have made an average 50% reduction in passenger queue times, its prescience has now been called into question by EU rulings on the efficacy of the machines.

Still mainly a business airport

Over the years LCY has tried to attract leisure routes, especially at weekends; even though it has, at times, been thwarted by the propensity of the British Airways subsidiary, BA City Flyer (which has over 60% of the total capacity at the airport) to shift aircraft to other airports during that period.

The changing nature of LCY is shown in this network map, embracing business, leisure and VFR routes, all short to mid haul.

London City Airport: network map, for the week commencing 16-Sep-2024

Source: CAPA - Centre for Aviation and OAG.

The business traveller was the reason for a private-sector construction company to build LCY in the first place, as access to Heathrow Airport was time-consuming from parts of the city with a big commercial travel demand, even though it was at one time difficult to access LCY on the surface.

Competition in the air and on the ground

Almost four decades on, there is far more competition though, from airports at Stansted and Southend, both of which also carry the 'London' tag (there are six in all with commercial operations) and from the high-speed Elizabeth Line (still better known as Crossrail). That line runs from east of London underneath the capital to Heathrow Airport and beyond, with stops in LCY's catchment area, even while - incredibly - LCY itself is not on the line.

The Elizabeth Line, London

Source: Transport for London.

And that isn't to mention the Eurotunnel rail service to major cities in northern Europe, some of which were LCY's 'bread and butter.'

Out of favour politically …

As might be understood accordingly from the text above, LCY has never really been a favourite of London's mayors.

Ken Livingstone opposed its expansion whenever he could. It got in the way of Boris Johnson's grand plan for a huge new airport dubbed 'Boris Island' in the River Thames Estuary to the east, to replace Heathrow. The current Mayor, Sadiq Khan, is at best ambivalent about it.

And Mr Khan has recently objected to the new government's granting of LCY's request to increase its annual passenger capacity from 6.5 million to nine million, and boost the number of early morning flights, while opting not to drop an existing Saturday afternoon 'curfew' period, which is meant to provide respite from the noise for local inhabitants. Ergo, LCY's request to extend Saturday operations until 18:30 has been rejected.

So LCY has managed to get at least part of what it wanted, although it will do so without additional infrastructure, a pledge it made earlier. And LCY says its planning application does not include any increase in the number of annual flights permitted, hinting at higher loads being targeted, possibly larger aircraft.

LCY faces a consistent and coordinated barrage of criticism from climate campaigners, who are up-in-arms about this latest granting of expansion rights, along with perennial harping from the London boroughs of Newham and Tower Hamlets, which monitor aircraft movements closely.

As the 'net zero' year of 2030 approaches, that criticism will only increase in intensity.

…and with climate activists

LCY is under examination, too, from proponents of rail travel: a recent research report by the New Economics Foundation [NEF] (strap line 'Together we can change the rules to protect the planet') and the charity 'Possible' claims that more than half of the journeys taken from there in 2023 could have been made by train in six hours or less. Moreover, the airport's two most popular routes, Amsterdam and Edinburgh, can be reached by train in four hours and four hours and 20 minutes respectively.

These allegations are worryingly close to those made in France, which resulted in the banning of short range flights in favour of rail travel being introduced two years ago. Once such comparisons are made, whatever their value, they spread like a virus, as indeed they have in the case of Amsterdam's and the main Brussels' airports.

The NEF and Possible take the line that the passenger cap expansion would only benefit "wealthy frequent flyers". They quote statistics, such as that around 43% of LCY's passengers fly at least six times a year, and the median income of passengers travelling through the airport for leisure is 34% higher than the average UK air traveller.

That begs the question - so what? Are those in a higher income bracket to be directed to an airport of the government's choosing in the NEF's philosophy? Is 'competition' passé, now?

And they are wealth creators; they are not usually flying to meet long lost Uncle Fred, or to lose a weekend at a 'stag do'. The NEF is more likely to find those at Stansted.

Traffic returned post-pandemic, but has since stalled

Despite these assaults, LCY, which has learned to live with them, has done well to claw back traffic that it lost heavily during the pandemic, when it closed altogether for a time.

It grew back to more than 3.4 million passengers in 2023, which was a 14% increase over 2022, a year in which it recovered by 318% from the low of 2021, when it failed even to count 750,000 of them.

And that is despite the new austerity of the times.

However, growth so far in 1H2024 has settled at 1.9%, well below that of Heathrow (6.9%), Gatwick (7.7%) and Stansted (7.3%) which suggests that the recovery has petered out. Or at least in the business/commercial segment in which LCY is most active, which should then act as an alarm for the government.

London City Airport: annual traffic, passenger numbers/growth, 2009-1H2024

Source: CAPA - Centre for Aviation and London City Airport and UK Civil Aviation Authority.

At LCY there have been more than over five million passengers in one year - 2019 - and its track record for consistent development before that was a good one. There may be other reasons why it has not yet got within a million passengers of its previous record.

'Brexit', for example, kicked in officially from Jan-2020, and its potential reduction on European business travel may only now be apparent. (A previous CAPA - Centre for Aviation report in Mar-2024 detailed how some short haul routes between the UK and Brussels, for example, have been heavily cut back, or even cancelled altogether).

Then there is the advent of the Elizabeth Line, which belatedly opened in May-2022 just as COVID-19 restrictions on air travel were being withdrawn. It must have had an impact, just as LCY was trying to re-establish itself with its customer base.

In some ways the jury still remains out on LCY's long term future, 37 years after it opened.

Governments, politicians of all shapes and sizes, and ecologists alike are lined up to make life as hard for it as possible, while some of its competitors seem to get a free pass. Even though their level of noise and emissions pollution must be higher.

It's highly specialised market could be drying up?

It does have its own highly specialised market, but it does not appear to be growing right now as fast as it was previously envisaged, and that naturally also calls into question any further expansion.

Assuming no further 'Black Swans' the next couple of years may be instrumental in shaping its future role. It has changed hands twice, and on both occasions for a huge multiple of its previous price, and that is as much for the value (potentially for housing) of the land it is built on as for its route network and physical assets.

Further reading on London City Airport:

Jul-2023: London City encounters barriers to modest expansion plans: part one - disruption blamed for verdict

Jul-2023: London City encounters barriers to modest expansion plans: part two - years of consistent growth