A New Direction for Aviation Policy?

"We need aviation to do the right thing to enable our businesses to grow, survive and flourish." Richard Prouse, Eversheds. (Image via the conference organiser)

Stephen Vaughan reports from December’s UK aviation policy conference in London.
With the current British Government having firmly pledged not to expand airport capacity in the south-east of England, a recent seminar examined the possibilities and alternatives in the absence of new runways.  In the presence of keynote speaker and Minister for Aviation, the Rt Hon Theresa Villiers MP, strong feelings were voiced and emotions ran high as representative from airports, airlines, pressure groups and business organisations all joined together in London for a one-day conference entitled ‘A New Direction for Aviation Policy’.
 
Lack of Expansion
Unquestionably the overriding concern expressed by those present was the capacity constraints of London’s three principal airports. Chairman Laurie Price, Director of Aviation Strategy for management consultancy Mott MacDonald, cited a speech he had recently delivered at the University of Amsterdam.  Presenting to 400 aviation management students – a increase of 300 on the same event four years earlier – Price noted that, in a country with a population one third of the UK, it was “sobering” that Holland has the scope to facilitate careers and development in aviation, whereas in the UK such potential is held back by capacity constraints and poor infrastructure.

"We need aviation to do the right thing to enable our businesses to grow, survive and flourish." Richard Prouse, Eversheds. (Image via the conference organiser)

The event was hosted by international law firm Eversheds.  Richard Prowse, Eversheds’ Head of Aviation, underlined the common interest among his clients to ensure UK plc was served by a vibrant and successful aviation sector.
“We need aviation to do the right thing to enable our businesses to grow, survive and flourish,” he said.  “If Government policy doesn’t deliver the capacity and experience we need, businesses like ours won’t be able to deliver to their potential.”
Prowse noted that Eversheds has recognised for many years that its future lay in connecting with markets outside the UK, including access to brand new ones.  He also added a commonly voiced view from the seminar, that “when businesses come to Britain they need to have a good airport experience”.
Prowse concluded that if the aviation sector could service the future economic prosperity of Britain just by doing things “a bit more efficiently”, he looked forward “to being persuaded of that”.  However, he gave the impression that without seismic change – ideally in the shape of runway development and airport expansion – he was unconvinced that such prosperity could be achieved.
Richard Prowse’s introduction acted as a foretaste of what was to come.
 
Business Leaders’ Anxiety
As Chief Executive of London First, Baroness Jo Valentine represents the business interests of the capital, her mission to make London the best city in the world in which to do business.
“What does business consider to be world class?” she asked.  “What does it require from our international links and what will it need in the future to satisfy what the Prime Minister recently referred to as ‘its hunger for growth as it constantly works to gain an edge in a competitive world?’”
London’s success drives the country’s success, added Valentine.  London and the south-east provide a third of the country’s GDP; London is 30% more productive than the rest of the UK and generates a fifth of the country’s total output.  It is also the number-one European destination for foreign direct investment, worth approximately £50 billion to the UK economy.  Success, she claimed, relies on accelerating investment in people and infrastructure – in particular, investment in our “creaking” infrastructure.
“Whilst the Government recognises this, and has focused considerable money and effort on Tube modernisation, Crossrail and Thameslink, there has been no comparable commitment to London’s airports.  This is a worrying blind spot. Business leaders are clear – London’s international links are critical to their businesses.  They need direct flights to a growing range of destinations.”
Passenger numbers at the UK’s airports more than quadrupled between 1980 and 2008 from 50 million to 230 million.  According to Valentine, the Government’s own demand forecast sees passenger numbers at London’s three largest airports growing by a further 60% by 2030.
“If London is to remain globally competitive we first need to improve customer service,” she said.  “Progress has been made, especially at Heathrow, but there is still work to be done.  The 45-minute queuing time target for non-EU passengers at immigration – and that’s just the target – was breached more than 20% of the time at Heathrow T4 at the beginning of the year.  We cannot accept this.”
Despite the importance of the customer experience, unsurprisingly Valentine remarked that this will “only take us so far”, adding:  “The biggest driver for service quality remains flight delays – and when it comes to delays, quality and capacity are no strangers.”  With Heathrow running at 99% capacity it remains one of the most delayed airports in Europe due to runway congestion.  Gatwick, Valentine noted, is also nearly full at peak times.
“No airport of Heathrow’s size and economic significance can ever truly be world class when it is fit to burst.  Its rival European hubs operate at only 75% capacity.  Meanwhile almost all other countries are expanding the range and frequency of their long-haul destinations to business centres.”
Valentine sees Heathrow’s offer shrinking.  “The writing is not on the wall, but on the destination boards.” She claims that Heathrow currently offers its lowest number of destinations since the early 1980s.  While it has direct flights to three Chinese cites, Amsterdam has five and Frankfurt six.
 
Destination
Valentine’s concerns centre on the notion that measures such as slot removals or managing demand downwards will mean that London will become less appealing to travel to, move to or do business with.  She also believes that a high-speed rail network will likely lead to more business for the airport, not less.
“Passengers are increasingly likely to catch a fast train to Paris, Amsterdam or Frankfurt and fly from there.  It might not be long before they ask themselves: ‘Why don’t we move our offices to where we like to fly from?’  The industry and the Government need to apply fresh thinking beyond old and dogmatic mantras.  London’s success faces clear and present dangers.  A policy that rules out growth of London’s three largest airports, and rules out new runway capacity in the south-east, would be a lame response to them.”
Whilst Valentine made it clear she was not wedded to any one solution, she remains 100% focused on London being able to compete for trade and to grow businesses that will generate investment, tax revenue and jobs for Britain.
“There are difficult balances to strike,” she said, “but they can, and must, be struck.  The local environmental impact of new runway capacity must be firmly and credibly contained.  Having set thresholds for acceptable levels of noise and air pollution, flights should be removed if they are breached.  Any new runways should be conditional on entrenched and continuous improvement in service quality – there should be no new flights unless service levels compare to the best in Europe, and slot allocation should be managed so that runway use doesn’t always ratchet upwards.  In addition, a standard should be set for delays which, if breached, would require flight numbers to reduce.”
She ended with a message to Government:  “If you are serious in wanting to rebalance the economy towards exports, to deliver the infrastructure that will underpin private sector investment and trade, then don’t begin your policy discussions by ruling out half the options.”
 
Service at Heathrow
The spotlight now shifted to exclusively to Heathrow (LHR).  Nigel Milton, Director of Policy and Political Relations for BAA, was quick to acknowledge that “unless we get better we have no mandate to grow”, adding: “One of reasons we failed in our attempt to secure a third runway was that there were concerns at our ability to run a two-runway airport.  I think these concerns were valid.”
Milton felt that the key was in improving all aspects of service at LHR so that, if the capacity issue were to come back into the policy framework in the future, the airport would be on firmer footing to argue for an expansion to take place.
He did, however, take some pleasure in highlighting Heathrow’s latest Airport Service Quality scores, proving that its service product when measured against other airports was on the rise [this conference took place a few days before snow severely impacted Heathrow’s operation in December – Ed].
“We might not be able to meet the standards of the likes of Zurich and Copenhagen, let alone Changi and Incheon, but we need to aspire.  While we are pleased with progress made we acknowledge there is still a long way to go.”
Service standard improvements were highlighted with an outline of Heathrow’s current investment schemes.  These include improved wayfinding; quicker security; better baggage handling for luggage to arrive quicker at the carousel; and, overall, making Heathrow a better, lighter and calmer place to be.  Milton did however acknowledge that slot removal is being considered as a means of cutting congestion.
He was strongly in favour of high-speed rail at Heathrow.  However, like Baroness Valentine before him, he saw it as strengthening the case for expansion rather than as an alternative: “We think it increases the attraction of LHR and [its] numbers of passengers.”  He also underlined the desire to make the airport even more of an integrated transport hub than it is currently, citing the need to link more into a national rail network that passes close by, as well as the plan to make more use of coaches and buses.
“I would assert that the story of Heathrow is that we have accepted the challenges business set during our conversations over the runway-three debate,” he said.  “We needed to focus on getting better; we are getting better.  We have still got a long way to go but, given the policy framework we are working in at least until the next election in 2015, we are focusing on that.  We need to focus on getting people on-side and to view LHR as something to be proud of in this country.”
 
Keynote Speech
Chairman Laurie Price set the tone for the Rt Hon Theresa Villiers MP, Minister of Aviation, by summing up the morning’s presentations for her before asking how we can expect to maintain the vital contribution the aviation industry makes to the UK (including 250,000 jobs), the value it adds to GDP and the wealth it creates within the current capacity constraints.
“The point we’ve made this morning,” he said, “is that we’re not going to stop people from flying just because we don’t have the capacity.  They will travel by rail or fly from elsewhere.”
After highlighting the testing times the industry has been through in recent years – not least fluctuating oil prices, a global recession and, more recently, the Icelandic volcano – Theresa Villiers acknowledged the formidable challenges the industry currently faces.
“I am certain no-one would dispute the fact that international travel provides a hugely positive contribution to the quality of life of millions of families in the UK,” she said.  “But nor can there be any doubt that the local environmental impact of aviation, such as noise, can have a corrosive impact on quality of life for those under the flight path.  The task we face today is to find a way to enable the aviation industry to deliver the benefits we want in a sustainable way with reduced environmental impacts.  With our decision to reject new runways at Heathrow, Gatwick and Stansted, we need to start a new chapter in the history of aviation, one that promotes a competitive industry supporting UK economic growth while recognising the need for restraint.  Key to achieving that is making the best use of the capacity we have and improving the quality of the passenger experience at UK airports.”
Villiers then outlined some of the key projects the Government is undertaking to usher in a new chapter in aviation policy.  These were broken down into short, medium and longer-term initiatives.
 
Short Term
In order to improve the passenger experience at Heathrow, Gatwick and Stansted, the Government has established the South East Airports Taskforce.  The minister was quick to emphasise that, despite this apparent southern bias, the Government recognised the vital importance of regional airports across the country.
“A key part of our approach to aviation is to seek to create the right conditions for regional airports to flourish,” she said.  “We believe they have a valuable part to play in delivering the Coalition’s commitment to rebalancing our economy and reducing the prosperity gap between north and south.”
According to Villiers the taskforce is to focus on three main areas: resilience and delays; border controls; and security.  “Clearly the decision we have made to reject new runways in London makes it more important than ever that we use the capacity we have in an efficient way.  I have asked the Civil Aviation Authority (CAA) to work with taskforce members to explore what further measures might be taken to improve the overall performance of these airports within their existing capacity limits.”
With regards to border controls, Villiers underlined the importance of securing borders to combat illegal immigration and turn away criminals – while at the same time recognising the importance of providing an efficient system for processing passengers, and not underestimating the impact first impressions can have on visitors arriving in the UK.
“The Department of Transport (DfT) is working with the Home Office and the Borders and Immigration Agency to find workable solutions.  For example, electronic gates that will accept the new generation of chipped passports have real potential to improve performance.”
In matters of security, the minister made it clear there would be no compromise on the current high standards.  However, she also recognised that the aviation industry has been arguing for some time that the regulatory framework for aviation security needs reform, and agrees that changing the way aviation security is delivered could yield greater efficiency without compromising passenger security.
“We inherited a system from the previous Government that mandates highly detailed processes for delivering aviation security standards,” she said.  “We are working on a fresh approach, one where the Government concentrates on setting rigorous security outcomes to be achieved – but gives industry much more flexibility to devise the processes which will deliver those outcomes in the most efficient and passenger-friendly way.”
 
Medium Term
The DfT’s medium-term plans include progress on the Single European Sky project with its potential to cut down on delays.  However, medium-term priority is the modernisation of the framework for economic regulation of airports.
“Both the industry and the CAA agree the current airport economic regulation model is outdated and in need of reform,” said Villiers.  “We want to replace the existing framework for setting price caps at regulated airports with a more flexible system.  Rather than focusing the bulk of regulatory action on a single price review every few years we want to give the CAA the powers it needs to become a more responsive regulator throughout the regulatory control period.  New enforcement powers, including financial penalties, should enable the CAA to tackle poor performance more effectively.”
 
Long Term
In the spring, the DfT will release a document setting out the key issues the Government is seeking to address in its overall strategy for aviation.  According to the minister, these will be strategies to support economic growth, protect Heathrow’s status as a successful global hub and addresses aviation’s environmental impacts.  The Government will then open up a dialogue with all stakeholders to seek their views and draw on their knowledge and experience.  The DfT plans to publish a draft policy document for formal consultation early in 2012 with a view to adopting the new aviation strategy in 2013.
“We want this to be a very open and inclusive process,” said Villiers.  “Input from all of these diverse interests and perspectives will be hugely beneficial in helping us get the right answers on aviation answers, which improve connectivity, generate prosperity and continue to provide millions of people with the benefits that travel abroad can bring; but do so in a way which does not impose an unacceptable cost in terms of our environment or our quality of life.  I do not underestimate how difficult this task will be but it is vital that we achieve it.”
Despite an impressive speech it was hard to escape the fact that most of those in the room felt the Coalition’s refusal to consider any sort of expansion at London’s primary airports would, in the longer term, stymie British aviation and dilute the UK’s competitiveness.
“Let me make it clear,” said Villiers during questioning, “both Coalition partners were elected on a manifesto of no extra runways at Heathrow, Gatwick or Stansted.  We are not in the business of reneging on such promises.  The numbers of runways are not the be-all and end-all in determining economic prosperity.  I’ve never bought the idea that Heathrow is about to topple over.”
Nigel Milton of the BAA was one of three delegates to draw the minister’s attention to a case study that he believed could help her in the Government’s existing policy direction.
“Japan is an island trading nation with twice our population and GDP, and fewer commercial runways,” he said.  “Japanese airports are experts at getting more out of less. I strongly suggest the minister look at the example of Japan when making its plans.”
If there was any doubt about the Government’s intransigence over the great runway debate, the issue was put to bed once and for all at this seminar.  Many delegates voiced their concerns about this perceived lack of flexibility but it is clear that nothing will change in this area at least until the next election, and possibly well beyond.  For now it is vital that all stakeholders contribute to the document outlining the Government’s aviation strategy.