Bruce Hales-Dutton explains that now may not be a particularly good time to be an airport lobbyist.
A glance at the post-election list of UK Department for Transport ministers might daunt the most optimistic supporter of airport expansion, particularly at the London gateways.
In opposition Theresa Villiers promised that the Conservatives would not only reverse the Labour government’s approval of plans for a third runway at Heathrow, but also oppose any others in the south-east. The Tories favoured high-speed rail as an alternative to short-haul air travel.
Villiers is now minister of state at the department. Joining her in the ministerial line-up is Norman Baker who, as a Liberal-Democrat transport spokesman gained a reputation for believing the Tories weren’t being tough enough on the aviation industry. He is now a junior transport minister.
Hardly surprising then that the agreement leading to the formation of the Conservative-Liberal-Democrat government listed the cancellation of Heathrow’s third runway and rejection of additional ones at Gatwick and Stansted among measures intended: “to fulfil our joint ambitions for a low carbon and eco-friendly economy.”
The second coalition agreement published on May 20 is longer but gives few more details of the new government’s approach to airports policy. But it’s clear that the previous administration’s 2003 White Paper on the future of aviation is well on its way to the dustbin of history. But then that might have happened whatever the outcome of the general election.
During the campaign, one analyst declared: “The best way to support the industry seems to be to vote Labour.” But it wasn’t clear whether or not he’d read the small print in the party’s manifesto. Labour certainly pledged its support for the third runway: “subject to strict conditions on environmental impact and flight numbers.” But it also said: “We will not allow additional runways to proceed at any other airport in the next Parliament.”
So far industry representatives have been fairly measured in their response to the coalition government’s approach. Perhaps they want to give it time to settle down or possibly they’ve had other priorities. But in late May airport operator BAA issued its first response to the government’s announcement in two carefully-worded statements which also hinted that the debate on future of London’s airports is far from over.
On May 24 it announced it would stop work on Heathrow’s third runway and that, after a period of notice, would buy no more properties in Simpson, the village which has now been reprieved by the government’s decision. Chief executive Colin Matthews said: “We recognise the importance of government policy in a matter as significant and controversial as runway capacity. The policy intentions of the new government are clear and it is no longer appropriate for us to purchase properties. Equally important is our intention to stand behind our commitment made to provide time for those local residents who wish to sell their properties to us, to do so.”
But Matthews added: “Heathrow plays an important role for the UK and supports thousands of jobs. We continue to believe that new capacity would strengthen the UK’s trading links with the global markets on which our economy and our competitiveness depend.”
In a parallel statement, Stansted Airport said it was withdrawing its application to build a second runway. It was ending its provision for assisted re-location under which local people were able to sell their properties to the airport operator. Managing director David Johnston said: “We have reflected carefully on the new government’s clear intention to change its airports policy and have moved quickly to withdraw this application. Stansted Airport is a key driver of economic growth in this part of England, and we will continue to work hard to bring new business here and to work with our neighbours and the wider community to provide jobs and strong business and travel opportunities in the months and years ahead.” Johnson added: “We continue to believe that new airport capacity is needed in the South East of England, to strengthen the UK’s international trading links.”
What these words conceal is the cost of the aborted projects. According to the Daily Telegraph, BAA has spent £220m on its plans for expanding the two London airports. At Stansted the company is reported to have spent £110m on property and another £80m on preparatory works, including legal fees, for the projected £2bn second runway. Among the properties are a pub and at least one cottage which, according to the paper: “fits the chocolate box stereotype”.
The Heathrow project was younger so BAA’s outlay there is consequently lower. It has spent around £30m including £10m on properties at Sipson, most of which would have been demolished to make way for the new runway. BAA denied the money had been wasted. “We remain of the view that new airport capacity in the south east will strengthen the UK’s trading position at a time of significant international competition,” a spokesman told the Telegraph. “The work we have done on each project is valuable.”
Where does the industry go from here? Airports International invited all three of the London airports to provide an answer to that question. “Heathrow is an important asset for its shareholders and the UK, whether it has two runways or three,” said Heathrow spokesperson Lisa O’Brien. “Make no mistake, Heathrow today is a good business. We are investing £1 billion a year to modernise facilities and further improve customer service. That work goes on.”
Stansted Airport confirmed it has withdrawn its entire Generation 2 project. Spokesman Melvyn Nice said: “In the short to medium term Stansted is in a strong position to grow as we have permission to increase our passenger numbers to 35 million a year from our current 20 million. This means that as the economy recovers and passenger numbers begin to rise we will be well placed to meet demand.”
Mr Nice added that the airport was now anxious to attract airlines to use the airport outside its busiest times. “Our peaks are now early morning, midday and early evening when the airport is pretty well full. We would now like to try and expand outside those times.”
Gatwick, of course, is no longer owned by BAA, which in 1979, promised not to build a second runway there for 40 years. In February airport Chairman Sir David Rowlands insisted he had: “not a shred of interest” in building a second runway.” He added that there was: “enough to do at Gatwick to improve the airport for passengers and airlines.” Opponents, however, remain sceptical. Brendon Sewall, Chairman of the Gatwick Airport Consultative Committee, said: “The Government and BAA have previously ruled out new runways only to announce them a few years later.”
Spokesman Damon Hunt told Airports International that Gatwick: “looks forward to working with the new government on a range of issues including regulation, taxation, customer service and the environment. Currently, we are concentrating on improving the airport experience for our passengers and airlines, competing to attract new business and increasing the efficiency of our operations. Airport expansion is therefore not a priority for us. However, for the UK airport sector, the continued safeguarding of land for potential development in the future needs to be addressed.”
Roger Wiltshire, general secretary of the British Air Transport Association, told Airports International he was: “disappointed but not surprised” at the new government’s attitude. It would, he said, be: “particularly painful for Heathrow which is full for much of the day. But the issue is not just about Heathrow, it’s about the future of the whole industry.”
Among the first senior members of the new government to acknowledge the scale of the problem now facing the industry is, appropriately enough, Transport Secretary Philip Hammond. He told the London Evening Standard: “We have to aspire to having an airport at Heathrow with two runways which is a world-class airport. It’s a big challenge.”
To meet the challenge the government has revealed plans to improve passenger service. The Queen’s Speech at the beginning of the new Parliament included a pledge to: “reform the regulation of airports to benefit passengers.”
According to Hammond, this means setting targets and standards for a whole range of services. Check-in and security queues, car parking and even traffic hold-ups in the access tunnel to the Central Area will be included in the new regulatory system, which will replace one originally devised to control charges to airlines for using the busiest airports.
Hammond said the airport operator would be paid more: “when they make the queues shorter.” The present regulatory system, he said, is: “hopelessly out of date”. Hammond added: “It’s mired in Seventies’ thinking.”
Changing the economic regulatory formula cannot, of course, increase capacity. Before the May 6 election, many key figures in the industry were openly critical of the Conservatives’ approach but since the poll it has been left to others to voice the criticism. Mark Tanzer, Chief Executive of the Association of British Travel Agents, said: “Before the government makes final decisions about individual airports it needs to consider the overall capacity needs of the UK. Banning any airport expansion will severely damage UK PLC without significant environmental benefits as air traffic will simply migrate to our competitors on the continent.”
Despite blocking projected new runways, the government has no: “alternative plan”, argues veteran industry watcher Malcolm Ginsberg. “High speed rail is fine for domestic use only,” he said. “The idea of any regional airport establishing itself as a hub is a non-starter. How many times has British Airways tried to run a New York service from Manchester and failed?”
Another seasoned observer, who didn’t want to be named, accused the government of: “myopia” in pressing green policies at the expense of: “social cohesion”. It had, he said, failed to recognise that: “a nation which aspires to be a global centre of business and enterprise has a need for infrastructure to support that aspiration.”
That thought has prompted Ginsberg to pose another question: “Will David Cameron go down in the future as the Prime Minister who destroyed London as the world centre for international air travel?” And it’s one which is beginning to resonate with other sectors of the economy that are becoming anxious about policies which may bring changes to the planning system, tax allowances and the structure of the financial services industry. They, like Ginsberg, are wondering if politics: “has got in the way of common sense.”
But in the absence of a change of heart by ministers what are the options? Malcolm Ginsberg, founder of the on-line business travel newsletter AERBT, suggested that increasing aircraft capacity could bring some short-term relief, noting that Air France will operate an Airbus A380 on the short hop between Paris and London this summer. A more obvious way of increasing Heathrow’s runway capacity, and one which the airlines have advocated, is the adoption of mixed mode operations to replace the present segregated mode. That, however, is regarded as highly controversial move and is an option that the previous government had already ruled out.
On behalf of the airlines, BATA promises to press the case for airport development while emphasising the value of air transport to the UK economy. “As a trade association,” says its general secretary, Roger Wiltshire: “we will continue to create opportunities to put our members’ point of view to ministers.”
He may find he’s not alone. Like many new governments, that of David Cameron and Nick Clegg has been enjoying a post-election honeymoon period. But it can’t be long before queues are forming in Downing Street as various sectors of the economy demand time to express their concerns about the impact of the new government’s policies. In the end it might come down to which of them has the greatest lobbying muscle.
Bruce Hales-Dutton explains that now may not be a particularly good time to be an airport lobbyist.