15-Oct-2013 3:47 PM

UK Airports Commission: the UK's runway capacity farce continues as opponents dig in

Analysis

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.

Summary

The UK's Airports Commission has concluded that additional runway capacity is needed in the south east of England in the coming decades.
The Commission is facing a legal challenge from campaign group Stop Stansted Expansion, who claim that one of the Commission's former members may have influenced the decision in favour of Manchester Airports Group.
The decision on airport capacity is a complex and politically sensitive issue, with conflicting views from national and local politicians, airlines, airports, environmental campaigners, and NIMBY-ism.
The Airports Commission will produce an interim report by the end of 2013, including recommendations for short-term improvements and a shortlist of options for longer-term capacity solutions.
The UK government has postponed the final decision on airport capacity until after the 2015 general election, in order to de-politicize the issue.
The Commission has received 52 proposals for long-term capacity options, including new airports, expansion of smaller airports, and development of existing airports.

Airports Commission: assess options to maintain the UK's hub status

The Airports Commission was established by the UK Government in Nov-2012 and started its work in Feb-2013 with the issue of discussion and guidance papers. Its remit is to identify and recommend to the government options for maintaining the UK's status as a global aviation hub. Its task is to assess how any need for additional capacity should be met in the short, medium and long term.

Taking a UK-wide perspective, it is required to consider economic, environmental and social costs and benefits in addition to operational and technical feasibility.

Top five countries in the IATA and World Economic Forum connectivity rankings: 2012

The Commission will produce an interim report before the end of 2013. This will include recommendations for short term improvements in the use of existing runway capacity and a shortlist of options for longer term capacity solutions. Its final report, with its recommendations on the best choice from among the options, is to be published by the summer of 2015.

It is a political minefield - and there are no heroes stepping up

In this way, the Conservative-led coalition government achieved two political objectives. First, it re-opened all options for UK airport capacity expansion, including the possibility of new runway capacity at London Heathrow. This has historically been the favoured approach of leading UK hub carriers, although recent comments from IAG CEO Willie Walsh over Heathrow's high charges appear to have lessened British Airways' previously unshakeable commitment to its hub.

The previous Labour government had favoured the expansion of Heathrow, but the Conservative party opposed it in the 2010 general election campaign and it is also opposed by their coalition partners, the Liberal Democrats. However, opposition to Heathrow expansion is not uniform within the Conservative party and the chief result of reversing the previous government's position on this issue is that the UK has been left with no clear direction on future airport capacity.

The second objective achieved is that any final decision on airport capacity will be postponed until after the next UK general election in May-2015 and so it should not be an election issue in 2015. Moreover, after years of political heat surrounding the issue, the government has ensured that the decision will be de-politicised as far as possible.

The recommendations in the Commission's interim report later this year should be broad enough to keep all parties' options open. In 2015, whichever party is then in government will be able to say that it will back the decision of an independent commission that has had a number of years to study the matter.

This delay in making a final decision has not been met with universal approval. Former Labour Transport Secretary Lord Adonis said Heathrow had effectively "erected a giant 'closed for business' sign to most new business flights which require an international hub". He added that delaying a decision on how to improve airport capacity in the UK until after the 2015 general election is both economically damaging and "poor politics" (CITAM/ globalairportcities.com, 09-Oct-2013). Nevertheless, the government's choice to outsource the decision may have been the only way to make a decision.

The Commission has received 52 proposals on long term capacity

Nevertheless, the Commission's work remains a big challenge. It has received 52 proposals in connection with long term airport capacity options (see table below). These include three from the Mayor of London, Boris Johnson: one 30 miles east of London at the Isle of Grain, one 50 miles east of London in the Outer Thames Estuary (dubbed 'Boris Island' in the UK media) and one at London Stansted Airport.

In addition to proposals centred on the three biggest London airports - Heathrow, Gatwick and Stansted - there are also a number of proposals for new airports, for the expansion of smaller airports in the southeast, and for the development of Birmingham, Cardiff and Manchester airports. Narrowing these submissions down to a shortlist and then making final recommendations will be a difficult task.

Long term proposals received by Airports Commission: July 2013

Proposer	Location
Aras Global	Heathrow Airport
Avery Water Schabas	Surface Access Options
Beckett Rankine	Goodwin Sands
Birmingham Airport	Birmingham Airport
Buro fur MEHR	Various
Exhaustless	Various
Fairoaks Airport	Fairoaks Airport
First Class Partnership	Stansted Airport
Flagship Concepts	Foulness
Foster and Partners	Isle of Grain
Gatwick Airport	Gatwick Airport
Greengauge 21	Surface Access Options
Grimshaw	London Hub City
Heathow Hub	Heathrow Airport
Heathrow Airport Ltd	Heathrow Airport
Imperial College	Dispersed London Hub
Infratil Airports Europe	ManstonAirport
Interlinking Transit Solution Ltd	Surface Access Options
International Aviation Advisory Group (IAAG)	Cliffe
Kent County Council	Dispersed London Hub
London Medway Airport	Cliffe
MAKE Architects	Stansted Airport
Manchester Airport Group	Stansted Airport and Manchester Airport
Metrotidal Tunnel and Thames Reach Airport	Isle of Grain
MSP Solutions	Severn Estuary
MSP Solutions	Stansted Airport
Pleiade Associates	Oxfordshire
Policy Exchange	Heathrow Airport
Private Individual	East London
Private Individual	Gatwick & Lydd
Private Individual	Heathrow
Private Individual	Heathrow & Stansted
Private Individual	Hub Airports
Private Individual	Maplin Sands
Private Individual	MERLIN -Surface Access
Private Individual	Severn Estuary
Private Individual	Surface Access Options
Private Individual	Thurrock
Private Individual	Twyford
Private Individual	Universal Hub - Surface Access
Private Individual	Walland Marsh
Private Individual2	Heathrow
Private Individual2	Surface Access Options
Progressive Aviation Group	RAF Croughton & Steventon
Quaestus(Poppleton) Ltd	Surface Access Options
Richmond Heathrow Campaign	Various
Thames Esturay Research and Development Company (TESTRAD)	Outer Thames Estuary
Transport for London	Inner Thames Estuary
Transport for London	Outer Thames Estuary
Transport for London	Stansted Airport
Western Gateway Group	Cardiff Airport
WestonWilliamson and Partners	Luton Airport

Consultative process, with plenty to discuss

Sir Howard Davies' speech of 7-Oct-2013 came after several months of consultation and submissions from stakeholders including airlines, airports, engine and airframe manufacturers, environmental groups, MPs, local politicians and local government. Topics for consultation include demand forecasting, air connectivity and the economy, climate change and the airline industry, the respective roles of hub airports and point-to-point routes and noise and aviation. It is now seeking further comments (until 31-Oct-2013) on its emerging thinking and the analysis in Sir Howard's speech.

The Commission is keen to stress the breadth of its approach, integrating climate changes, employment, surface transport, the quality of the environment and the "character of life in a modern global city". Distinguishing his work from previous attempts to point the way for future airport capacity, Sir Howard added: "We are also taking account of the dynamic nature of the aviation industry, which has been changing shape dramatically in recent years, with the rapid growth of low cost carriers and new competitors - airlines and airports - in the Middle East and Asia in particular."

Overseas visitors to the UK by mode and country of residence (thousands): 2011

The starting point is should there be any capacity expansion at all?

The principal purpose of Sir Howard's speech seems to have been to declare his hand on the important question of whether any expansion of capacity is needed at all:

"The commission began its work in a state of agnosticism on this point. As citizens working in business, academia or public service we had heard the arguments in favour of new runways and airports, but none of us had taken a firm public view on the subject.So where are we now on this underlying issue? We think it would be helpful to inform continuing debate on the options if we gave an indication now of how our thinking has evolved so far."

Before concluding that net additional capacity will be needed, Sir Howard outlined four principal arguments against new airport capacity in London and the southeast. These are:

Forecasts of demand for air travel are over-optimistic
Growth can be accommodated by current capacity
New airport capacity is not consistent with environmental objectives
Regional airports outside the southeast can cope with increased demand

Earlier over-optimistic passenger demand forecasts complicate the issue

This argument points to the track record of official demand forecasts by the UK's Department for Transport. It is certainly the case that forecasts prepared before the recession were too high. In particular, they failed to anticipate the impact of higher oil prices and lower GDP growth.

Historic Department for Transport forecast performance

Nevertheless, as Sir Howard observes, "the long-term record of expansion is striking, especially since the low cost carriers began making air travel more widely available than ever before. There is little sign that globally these markets are yet saturated."

There is an argument that Western European air traffic markets are maturing and the UK has still not recovered its 2007 levels. However, the UK is on an upward path and there is healthy growth in Eastern Europe, Asia and elsewhere.

Technologies such as video-conferencing provide a limited substitute, mainly for business travel, but not for visiting relatives or going on holiday.

Terminal passengers (millions) at UK airports and UK GDP (GBP millions): 1950 to 2012

On this point, Sir Howard concludes that "the weight of opinion we have heard suggests that demand for air travel to and from the UK is likely to continue to rise over time, and that the weight of that increased demand is likely to remain focused on London and the south east."

He adds that, even if some growth can be accommodated by larger aircraft, there will be a need for new routes and this means additional slots. He cites Eurocontrol's recent report 'Challenges of growth 2013', which identifies the UK as one country where capacity constraints will begin to bite sooner than elsewhere.

Growth may be accommodated by current capacity

Given the above, it is not surprising that Sir Howard is far from convinced that demand growth will be met by current capacity: "The persistent and tightening capacity constraints at key airports in the south east indicate that the market alone will not resolve this issue."

A number of respondents to the Commission's consultations argued that the market would reallocate demand to airports with spare capacity, or find ways to increase capacity at congested airports.

The Commission's interim report before the end of 2012 will consider the possibility of operational improvements leading to "some modest additional capacity", but Sir Howard is doubtful that there are "transformational gains to be had". Larger aircraft (e.g. the A380) could help, but, for example, the replacement of some 747s with 787s will have the opposite effect. Load factor gains may also be a contributory factor to squeezing more traffic from existing capacity, but new route development and the consequent use of smaller aircraft may act against this.

"So will the industry respond to congestion instead by reallocating services to underused airports?" asks Sir Howard.

He points out that the airline sector is not homogeneous, but is made up of different kinds of airline serving different markets and with different infrastructure needs. Airlines fly from airports that best suit their passengers. The Commission will devote more attention to the segmentation of future demand, for example visiting friends and relatives (VFR) versus business travel, which types of new destination will open and the development of network airlines versus LCCs.

Its current view is that the industry cannot necessarily be expected to fill all currently available airport capacity if it does not meet passenger needs. Moreover, the market may not "necessarily provide capacity to meet fully whatever level of unconstrained demand is forecast". The Commission will need to consider the requirement of private sector investors to earn a return when providing capacity.

New airport capacity is not consistent with environmental objectives

Historical UK CO2 emissions from aviation

The UK has statutory commitments to reduce carbon emission by 80% by 2050 relative to 1990. There are those who argue that airport capacity should not just be built to meet whatever level of demand might emerge.

Growth in air traffic would impose significant requirements on other sectors of the economy to reduce their emissions and this could lead, for example, to higher energy bills. Constraining airport capacity may be the best way to constrain air traffic growth and emissions, say some environmental campaigners.

Existing carbon budgets assume an emissions pathway that allows for emissions from international aviation and shipping

There are also market based mechanisms to constrain emissions, but the full implementation of the EU's Emissions Trading System has been suspended pending ICAO's attempts to find a global solution. As Sir Howard notes, "the best outcome would clearly be a global deal on aviation", but he concedes that such a deal may be some time off and that a "second best solution" could be to "hold down aviation growth by not building new airports and runways".

In a Dec-2009 report, the UK's Committee on Climate Change agreed that further growth in aviation could be reconciled with the government's climate change objectives. However, this requires emissions cuts elsewhere in the economy and improvements in aviation's fuel and operating efficiencies.

Historical improvements in aircraft fuel efficiency

Relative to 2005, the Committee suggested that UK-sourced demand could grow by around 60% by 2050. Sir Howard says that the Airport Commission is updating this analysis, but it seems "unlikely that …the fundamental message will be different". The question then is whether existing UK airport capacity can accommodate the growth that is consistent with the UK's emissions commitments.

However, Sir Howard also believes in the need to "deliver the best solution for the UK overall, which has to be one that both achieves our carbon targets and delivers the connections that our economy and society demand." He does not see these as irreconcilable goals: "How do we deliver the maximum connectivity bang for each of our carbon bucks?"

DfT forecast ranges for UK aviation CO2 emissions: 2010-2050

One argument: regional airports could take more of the strain

An argument put to the Commission is that the government should intervene to incentivise the redistribution of traffic to airports with spare capacity outside the southeast. Passengers from these regions currently use airports in the south east and might prefer to use local airports.

Air transport movements at major UK airports: 2012

Sir Howard welcomes recent growth in some regional airports, based on cheaper landing fees, faster boarding times and cheaper parking for passengers. "There is nothing to prevent that happening", he says, but he also notes that "the largest market and the highest propensity to fly are in the south east of England".

Residents of Greater London fly 2.5 times a year, on average, compared with 1.5 times for the UK as a whole. "This will always make it an attractive market for airlines, even before you take into account the significant projected population growth in the region."

There is also the reality that some routes will always require the economies of scale offered by large airports. Many regional submissions to the Commission have emphasised the importance of access to the international connectivity available in London and the south east.

Sir Howard argues that links to other European hubs from regional airports are "not always the best solution either for passengers or for the environment", noting that flying from Glasgow to Chicago via Frankfurt is 17% longer than via London.

Passengers flying abroad per head of population, by UK region and purpose of travel

His speech gives some consideration to the impact of hubs in the Gulf on the provision to the UK regions of connections to Asia-Pacific destinations. While "there are some routes which these are well-placed to serve", he also argues that "these airports will not provide the most attractive option for every journey". On routes that can be served more quickly via a London connection, there are benefits to the passenger in terms of convenience and to the environment in terms of carbon emissions.

Moreover, there are limits to the government's ability to influence airlines in their choice of airports. European rules on traffic distribution and on subsidies restrict the scope for intervention.

The Airports Commission has received suggestions that varying the levels of Airport Passenger Duty (APD) could be used to encourage new routes. It will explore the options in its interim report, but Sir Howard says, "our early analysis has suggested that even with a significant differential the effects would not necessarily be substantial." He also refers to possible "perverse consequences" such as a higher number of flights from a number of airports to achieve the same level of connectivity to a destination for the UK as a whole.

"…an overall framework for managing emissions growth" will be the best way to meet opponents' concerns

In addition to Stop Stansted Expansion's proposed legal challenge to the Commission, Sir Howard faces opposition from other local groups opposed to the development of their local airport. Gatwick Area Conservation Campaign chairman Brendon Sewill does not find it surprising that Sir Howard believes some additional runway capacity will be needed: "If he had said that no new runway was needed he would have done himself out of a job! What was significant was that he felt the need to answer the growing volume of opinion against any new runway."

While there is significant local opposition to individual proposals on new capacity, the only organised opposition to all new capacity comes from environmental campaigners. Addressing their concerns, particularly over carbon emissions, will probably be the key to ensuring the future capacity needs of the UK can be met somewhere.

As Sir Howard says, "…additional capacity will need to be provided, alongside an overall framework for managing emissions growth, if we are to deliver the best outcomes in both environmental and connectivity terms".

Choosing where that 'somewhere' is will be tricky. It will be a politically difficult decision for a government of any complexion to implement the decision when it comes.

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