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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 765-v
House of COMMONS
TAKEN BEFORE the
Monday 14 January 2013
Rhian Kelly, Mike Spicer, Corin Taylor, John Dickie
and Stuart Fraser
Emma Antrobus, Jerry Blackett, Garry Clark and Paul Gilbert
Christopher Snelling, Andrew Walters and Brandon O’Reilly
Evidence heard in Public Questions 424 - 533
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Taken before the Transport Committee
on Monday 14 January 2013
Mrs Louise Ellman (Chair)
Examination of Witnesses
Witnesses: Rhian Kelly, Director, Business Development, Confederation of British Industry, Mike Spicer, Senior Policy Adviser, British Chambers of Commerce, Corin Taylor, Senior Economic Adviser, Institute of Directors, John Dickie, Director, Strategy and Policy, London First, and Stuart Fraser, Deputy Chairman, Policy and Resources, City of London Corporation, gave evidence.
Q424 Chair: Good afternoon and welcome to the Transport Select Committee. Could we have your names and organisations, please?
Rhian Kelly: I am Rhian Kelly, Director of Business Environment from the CBI.
Mike Spicer: I am Mike Spicer, Senior Policy Adviser at the British Chambers of Commerce.
Corin Taylor: I am Corin Taylor, Senior Economic Adviser at the Institute of Directors.
Stuart Fraser: I am Stuart Fraser, Deputy Chairman, Policy Committee, City of London Corporation.
John Dickie: I am John Dickie, Director of Strategy and Policy at London First.
Q425 Chair: Thank you very much. We have heard a lot of concerns expressed about the problems that have affected business because of indecision about the issue of aviation capacity. Can any of you give us any specific examples or hard evidence of the problems this has caused to business?
John Dickie: It is very hard to do that, Chair. We have good connectivity at the moment with established markets. The problem we have is reaching new markets. That means that businesses that might put their global or European headquarters in London or the United Kingdom from, say, China are not doing that because they cannot fly here directly. They are going to places like Frankfurt or Paris where they can go directly. Quite how you tell which businesses are not coming here that you would attract is a very difficult thing to do. That is part of the problem in assessing precisely the scale of the impact that poor connectivity is having on the economy.
Q426 Chair: Are there any examples you could give us of businesses that have gone outside the UK that you think would have come here?
John Dickie: That is very difficult. We have talked to London & Partners, which is the inward investment agency for London, to see if they can help give examples of businesses they have talked to which, in the end, have not decided to move here and have moved elsewhere in Europe, but of course it is very difficult for them to track quite why it is that the prospects they had did not land. We have looked into trying to find examples of this, but it has proven very difficult to do.
Q427 Chair: Would anybody else like to comment on this?
Stuart Fraser: If you talk to CEOs a lot, it is to do with their long-term planning, and infrastructure and transport are an important factor in that. Whether or not it is more important than tax and other things is questionable. At the height of the banker bashing, if you like, and everything else that was going on, certainly we were told quite clearly that young people were not coming to London as they would in the past. Hopefully, some of that has gone away a bit. Clearly, bearing in mind where the economic growth is going to be-and we are all agreed that the economic growth in the next 30, 40 or 50 years is not going to be in the west; it is going to be outside, though you can argue by how much-any international business and long-term connectivity to these areas is a big issue for an international firm taking a 15-year business plan.
Q428 Chair: Have any companies left the UK for this reason rather than did not come here in the first place?
Stuart Fraser: I don’t know any who have left. The main routes are well connected, as the report shows. We have good connectivity with New York and everywhere else. Much of the business in China is done through Hong Kong. We have good connections with Hong Kong. The problem is that you have to extend 40 years out and then decide what you think the world will look like in terms of business development. That is the key issue. Historical analysis only tells us where we are; it does not tell us very much about where we need to be.
Q429 Chair: Do any of the other witnesses want to add anything?
Rhian Kelly: I think there are examples of companies who have located in and around the UK, particularly around London, because they like the connections that exist. They may be a US-based company. They come into London and see London as a route into the middle east and Asia. The challenge we have is that, if the capacity is now reaching its maximum and we are going to have more passenger projected numbers going forward, the risk is that those decisions don’t get taken and they think that, instead of coming into London, they will go to Paris or Frankfurt, because they offer a far better range of destinations and flights into emerging markets.
Corin Taylor: I would add to that long-term growth point. We surveyed just over 1,000 IOD members last year. A third of them said that direct flights to emerging markets right now were important to their business and, 10 years out, two thirds are saying that they will be important to their business. It is really about looking at that long-term picture-not just how things are at the moment but how things are likely to develop.
Mike Spicer: BCC produced a report in 2011 that included a number of case studies. It might be helpful if we forward that on to the Committee so that we have concrete examples of how businesses have been affected by issues like capacity and connectivity. There is a case study of a company called Duco. The quote that they include in our report refers to the fact that, if there is a business meeting that they need to get to in China or India, and there is not a direct flight to it, they will still get there and do everything they can to get there, but in doing so they will pick up additional costs, it will take them longer to do it, and that will put them at a disadvantage to their competitors. As Stuart said earlier on, it is difficult to say that business has been lost here in this instance or has moved; it might be something in between. It might be that their business has been made less competitive or they have had to take on additional costs, which they have then had to absorb.
Q430 Chair: The UK is the second largest European investor in Indonesia, but there is not a direct air service there. Is that just an exception, or is there a reason for that?
Stuart Fraser: One has to bear in mind that there are two issues here: one of capacity but also whether routes are economic. They are not going to fly uneconomic routes. The whole point of having a hub is to try and attract more people so that the route becomes economic from transit passengers. I can only say that, if they are not flying to Indonesia from London, there is not the demand at the moment for that. That will be a commercial decision by the airlines.
Corin Taylor: It proves the obvious point that capacity and direct flights are not the only important issue here. You can look at mainland China. Obviously, a lot of our business is routed through Hong Kong, but we do less trade with mainland China than Germany, and we have a lot fewer direct flights to mainland China from Heathrow than Frankfurt airport. There is always the counterfactual with Indonesia. If we had direct flights, perhaps our trade would be that much more. There is always the question of whether the trade causes the flights or the flights cause the trade. I guess they both grow happily together. It is a case then of having enough capacity for both to grow in the long term.
Q431 Kwasi Kwarteng: I want to ask a question to follow up on that point, which you have illustrated very nicely. It is a chicken and egg thing. Clearly, it is not wholly one way or the other. If we did have a connection to Indonesia, then potentially that would help grow the business that we have there. The question I want to quantify is this. Given the fact that most of the routes that we are talking about are to so-called emerging markets, is there clear evidence to suggest that our lack of capacity is impeding our ability to compete in those markets?
Corin Taylor: Yes. There are some figures from Heathrow airport. It serves 26 cities with daily flights to North America and Canada and three in South America. That is a good illustration of that.
Rhian Kelly: There is evidence produced by Frontier that would suggest that we do 20 times more trade where we have a direct route. You are right that the question is: what comes first-the route or the trade? We are halfway through sifting through analysis. We have looked at five airports in developed countries and five airports in emerging countries. We are trying to link backwards for the last couple of decades the routes, trade and investment. We are happy to share that; we just have not quite finalised it. We will have it available in the next month or two. That should help us have more evidence to answer that question about the chicken and egg.
Q432 Kwasi Kwarteng: In terms of the method, what you are doing is looking at the trade levels before the route was established and then comparing that.
Rhian Kelly: Yes.
Q433 Kwasi Kwarteng: How do you strip out things such as the economic cycle and other factors?
Rhian Kelly: We are working with our economics team to do as much of that as possible, but you are right that there is only so far you can go in taking out other variables. In so far as it is possible, we are going to try and tie the two together.
Q434 Chair: Is there any way of quantifying the loss of business to this economy or to individual companies as a result of there being no direct flights?
Rhian Kelly: Again, there is evidence out there that suggests that the UK, on average, is losing something like £1.2 billion per year. Given that we have the Davies Commission coming forward, part of their role is to look at the evidence base and to do it independently. One of the challenges, of course, is that everybody has their own evidence. We need to come to a collective agreement about the same set of evidence upon which we can then make some decisions about what it is we do about our aviation capacity going forward. We were hoping that the analysis we produced might be part of that.
Q435 Chair: When will your report be ready?
Rhian Kelly: We are looking at a mid-February launch.
Q436 Chair: We would be interested to see it as soon as you are able to let us have it.
Rhian Kelly: Yes.
Corin Taylor: If I may add something here, it is also a case of capacity, but there are other issues like aviation tax and our visa and border regime. Those three issues put together are making it more difficult and more expensive to get to the UK, not just for businesses but for tourists as well. It is worth just remembering that and looking at it in that rounded picture.
Q437 Karl McCartney: Stuart, you will know this from the time when we were at the Corporation of London together. There are other factors that you have just touched on, Corin, which are that, once you arrive at an airport, how instrumental in the decisions of businesses to locate somewhere is how quickly they can get to the equivalent of a CBD, i.e. getting to Heathrow, the centre of the City or the west end. You could also talk about Luton, Stansted or Gatwick. As we know, the Gatwick Express is not really the Gatwick Express any more. If you look at other airports, how many people go to Frankfurt-Hahn? Not many. How many go to Frankfurt am Main? Most. If you look at other hubs, how important do you all see that that is for the UK?
Stuart Fraser: We have to say that London is the leading global financial centre. It is the leader in the pack. This is a question of maintaining its status as that in the decades to come. I do not think we are going to have a lot more demand to fly to Frankfurt. We will have a lot more demand to fly to Chinese and Indian cities directly at some point. We are not particularly well represented in Latin America. It is always a leap in the dark. I suggest it was a leap in the dark when they built the tube and the sewage system in London. Did they anticipate that there would be so many users of the tube? No. It is the same with motorways.
If you are capacity-constrained, you do not have the choice. That is the point. You can take 50-year forecasts for whatever you think they are worth, but this has to be an intuitive, "This is the real world. This is where we are going to be in 40 years." We need that capacity.
John Dickie: Chair, it is worth saying that there are important short-term measures that we can take that help our competitiveness, even if we cannot bring in more capacity tomorrow. There are things we can do at the airports in London, at Heathrow and at the other airports. We can deregulate and use the slots that exist more effectively. We can get smaller aircraft out into the business airports like Biggin Hill rather than them going into Heathrow.
There are also things we can do around processing people when they come in so that we maintain border security but you don’t have to queue for two hours to get through it. We can invest in surface connectivity so that the Gatwick Express is an express service, has dedicated trains and works as well as it could do to get passengers from Gatwick to Victoria. We have Crossrail coming in. It is important to be conscious that there are things we can do now, next year and the year after that will make a difference to competitiveness, even though we cannot increase the number of slots until we have built some more runway capacity.
Rhian Kelly: I would like to add to that. Surface access is really important not just to Heathrow but to the regional airports so that people can get to them easily. It is not just private transport but public transport, and increasing the capacity of the public to travel on public transport to all of our airports. There are good projects that have already been supported, and there are more projects that can be supported out of the south-east and the south connecting up East Midlands airport and Newcastle airport. We ought to be focusing on those out to 2020 but probably also out to 2030.
Corin Taylor: And not just on the political side but on the ticketing side as well; so smart ticketing and also code sharing, perhaps, as well. Those are really important things that we can be doing.
Q438 Chair: Would business travellers support services to the far east from non-hub airports-say, from Gatwick?
Stuart Fraser: Our view is that there is only room in the UK for one hub airport. It is a question of mass. It is a question of what attracts. It is a bit like Silicon Valley. Would you move Silicon Valley to another state because it is a poorer state? No; people want to go there. It is where the hub is. It is where everybody gravitates to. I don’t see another airport that could be the hub unless you closed Heathrow. In other words, I don’t think you can support the two. Bear in mind that, if you are going to go to Indonesia, you are probably taking people from all round the world coming into Heathrow to go on.
Rhian Kelly: There are already direct flights from Gatwick into the far east. My guess is that this is a conversation around whether it is a hub or point to point. It is perfectly possible that point-to-point flights could be viable into the far east, particularly with more efficient planes coming online in the future. It is equally true that, to have larger planes, you need to have a hub because you need to have a feed-in capacity. Any strategy that is going to be durable has to take into account both models: hub and point to point.
Q439 Iain Stewart: I want to develop that argument a little. Is there anything specific about the new markets in the far east that we want to serve that might allow another airport such as Gatwick to become a specific hub for far eastern flights?
Mike Spicer: A really important concept here is the idea of reciprocity. For it to be a financially viable route, there has to be demand at either end of that route. It is not just about British businesses and British travellers looking to go overseas; there has to be a reciprocal demand from the other end. This brings us back to the importance of having surface access into the central business district, whether that is London, Birmingham or elsewhere.
For example, if you take Stansted, which has a rail link into London, at the moment that takes about 45 minutes. That is not really consistent with what international business travellers would expect in terms of travelling into a central business district. If there were a dedicated lane for the traffic along that route, that might change, if it could be reduced to, say, 30 minutes. We have to bear that in mind when we are talking about routes and where they go from and to.
Corin Taylor: One thing that has changed in the last decade is that Gatwick and Heathrow are now owned by separate companies and they can compete with each other. I am not sure that we, sitting in this room, can say either way. Gatwick has developed some new routes, but it has also lost a couple of routes. There will be that kind of market that will be established.
John Dickie: That is absolutely right. It is striking to notice the way in which Gatwick, since it became a separately owned and managed business, has managed over the past year or two to win flights to the far east and, in particular, to China and Vietnam. Of course, if we are going to have real competition and choice between airports, which I imagine all of us would want to see as far as there is the possibility of different models-point to point and hub-to compete with each other, that does require there to be spare capacity in the system. At the moment Heathrow is full. Gatwick has spare capacity and is trying to use it, but all the forecasts are that it will be full in 10 to 15 years’ time. It takes us roughly that long to build a runway-not that we have ever managed to build a new runway since the war in the south-east of England, but that is how long it will take.
It is really important if we want to see competition and choice with different kinds of airports and the potential for innovative ways of organising airline travel, which we cannot second-guess now; but look at the rise of low-cost carriers and the potential for low-cost carriers to feed into long-haul carriers. There are all kinds of things that could happen, but they will only happen in this country if we have the capacity to allow it to take place.
Q440 Iain Stewart: I would follow up on that. One of the options that has been put to us has become known as the "O’Leary triple", which is that you build an extra runway at Heathrow, Gatwick and Stansted, and let the market sort it out as between low-cost airlines, point to point and hub capacity. Does that find favour from your business perspective?
Rhian Kelly: What I was going to say in answer to your first question, but which also answers the second question, is that we have to be careful and understand the problems. I think the challenge here is capacity. If we create the capacity, the market will deliver. There might be a risk that, in the instance of not focusing on capacity, people think of other solutions and then think how they can force flights to certain destinations and certain airports. That would be the wrong thing to do. What we ought to be doing is to lift the lid off capacity and let the market decide. I don’t know whether we should be in a world right now where we say, "This is the answer." We have the Davies Commission there to look at all the evidence and to build up a set of arguments. We should not be sitting here today saying, "This is the answer." We should be saying, "Here are some of the parameters for the conversation and then, out of that, the Davies Commission will deliver an answer."
Q441 Chair: But it is important to us to know how business sees this and how business needs would be met. How important is Heathrow in itself? Suppose a new hub were to be built somewhere else; would traffic move to another hub?
Corin Taylor: Only if Heathrow closed. If Heathrow stays open, there is no need-
Q442 Chair: What would the impact be? Say a hub was built somewhere else and Heathrow closed or reduced its services. What would the impact of that be?
Stuart Fraser: The only way you can do that-like they did in Hong Kong-is to build the second airport completely at the same time as you are running Heathrow at full throttle. On day whatever, you would close Heathrow and move it all over to the new airport. That is hugely expensive to do, quite frankly. I am not quite sure what the Committee’s remit is, but, obviously, looking at all of these things, the fundamental problem is that we have 95% to 98% capacity usage. Any single problem at Heathrow disrupts a whole range of passengers. It is not just the connectivity but the delays. If you get a reputation that you are going to be spending a long time in the airport lounge-which, in a way, the airport operators don’t mind-this is the real issue.
The bigger question longer term is how long does a third runway actually last for capacity? You may well be having some discussion about three or four; or three and then something else down the road. Experience has shown, wherever you build a motorway or any form of capacity increase, it gets filled quite rapidly. I would suggest that would be the same. Trade in Asia-the BRICS and everything else like this-is estimated to go from 15% to 46% in the next 30-odd years. That is where the growth is.
Corin Taylor: I would go back to the previous question concerning the O’Leary thing. In our report that we put out in December we recommended expanding Heathrow preferably by two runways and Gatwick by one runway. If you look at Stansted, at the moment it is half empty. The case for a second runway at Stansted is weaker than for the other airports. It is going to have new owners quite soon so that equation may change, but at the moment Heathrow is bursting at the seams. It is about the only capacity increase that does not rely on any forecast increase in demand-it is already full, and Gatwick is very close to being full. Those would seem to me to be the straightforward and obvious solutions.
Q443 Chair: How significant is the resilience issue at Heathrow and the problems that arise because it is virtually full? If there is a problem, there are delays because of that. Does that have a very serious impact on business or is it something that people are just used to?
Rhian Kelly: When we talk to CBI members outside the south and south-east, and certainly when they talk about flying internationally to the far east, they say they don’t want to be held up in queues and that it takes a long time to get through Heathrow. Sometimes it is just easier for them to fly into Frankfurt or Paris. The point we are trying to make today is that it would be ideal if they did want to fly out of a UK airport on a direct flight because that is of benefit to the UK. The risk is that, if they fly out to Frankfurt or Paris, we lose some of the benefit of that.
John Dickie: It is worth saying again, Chair, that the first and best solution to solving the overutilisation of Heathrow is to create more capacity so that we can both have a less overstuffed airport and more flights to more places. There are things, again, that can be done in the short term to make Heathrow more resilient. As I said earlier, we can take out some of the smaller jets that use Heathrow opportunistically when there is space. We can use both runways not to increase capacity but to make it more resilient so that planes can land and take off from both runways at roughly-not exactly-the same time. That is the way they would do it at a single runway airport. Heathrow has been trialling that with the Department for Transport recently. There are things we can do to mitigate this problem, but, as colleagues have said, it is a very substantial problem for a country when people do not want to fly into your hub airport because they think it is just too difficult, too much effort and would rather fly into somewhere else.
Q444 Chair: In terms of extra capacity, what are your top priorities? What would you like to see if you could choose? Is it a third runway at Heathrow? Is that everyone’s top priority? If that could not be done, what else would you like?
Stuart Fraser: Certainly, in discussions with the financial services industry, who are the biggest industry users in terms of international flights, Heathrow is the only one that ever gets mentioned in a way. In proximity to the City, we have Crossrail coming in. We already have good connectivity in that sense. Yes, from a business point of view, Heathrow is absolutely essential.
The other point is that people who travel in this way are often on tight time limits. If I go to China, I probably have a meeting three hours after touching down. If I have a two-hour delay on an aeroplane, then I am getting very fed up. You are absolutely right when saying that it is very important that you have an airport there.
It is arguable that we are already five years behind the times. It takes 11 years to build a runway. Everybody else is building. If you go into Shanghai, they built an airport and then they thought, "Well, we might need another one," so they built one exactly the same next to it. The number of airports that are being developed in China is just huge. They have the resources and everything else, but we have to be able at least to get in. Some of the major cities in China will be 50 million people plus within five years. If it is not the financial services industry, then we should be selling some of our other products that we have there.
Rhian Kelly: You ask what people want. We said that, short term, there are some things we can do around surface access, mixed mode, visas and APD. In the medium term, we said there ought to be some additional capacity in the south. We said you might want to build one runway at Gatwick, Stansted, Heathrow or Birmingham. Long term, we said you need to look at all the options; one of the options might be a hub. These are the sorts of things we think we ought to be considering now.
The challenge is the trick of not putting the cart before the horse. We also need to build an evidence base. We need to understand what the passenger numbers look like, what that would mean in terms of capacity required and then the characteristics of that capacity. That would lead us to an answer rather than the place we are in at the moment, where we have all the answers but we have not maybe worked back through those steps.
Q445 Kwasi Kwarteng: It seems to me that we have had this debate for 10 years, long before I was a Member of Parliament. We have gone through all the arguments. I was interested to see whether business opinion has shifted over the last few years in your experience in terms of a solution to this. That would be my first question. Has there been any shift of opinion among the people who are represented in your organisation?
Corin Taylor: We polled just over 1,000 IOD members last year. Unsurprisingly, they were in favour of a lot of individual options, and then, when you asked them to choose just one, the third runway comes top. When you look at the Thames estuary east of London airport, if it requires the closure of Heathrow, it is the only option that IOD members are actually against. They are in favour of it, but if it includes Heathrow closing, then they are against it.
Can I add to your point on surface access? We have failed for decades and decades to plan air and rail together in the UK, and we really need to be doing that. If we are having a discussion and conversation about a hub airport and capacity, and we are making decisions on the biggest rail investment since the Victorian era and High Speed 2, we should be planning these two together.
John Dickie: We have also failed to plan air capacity at all since the 1930s and 1940s.
Q446 Kwasi Kwarteng: To me, this seems like a theological debate about the nature of the Trinity, which can last for centuries. I am very frustrated by the debate. To be devil’s advocate, if we take the third runway off the table, what does a solution to this problem look like?
Rhian Kelly: To answer your previous question, we did some work about five years ago on aviation capacity as the conversation was happening at that time. What was interesting was that there were some members really strongly in support of the options being presented at that time and some really against, and there were a lot in the middle, who did not seem to have an opinion. What was most striking about all of the work and conversations we had last year is the extent to which pretty much everybody is now engaged. There may be a lot of division about the options. It is not clear to me that there is one stand-out option long term, which is why we said that, in exploring all the options, a hub might be one of them. What is clear is that pretty much every single person we spoke to-and we went up and down the country--had an opinion on this in a way that they had not five years before. There has been quite a shift in the importance that businesses attach to this issue.
Q447 Kwasi Kwarteng: But you are still suggesting that there is no clear winner in terms of where people-
Rhian Kelly: The challenge was that five years ago there was only one answer, which was Heathrow expansion or not. Now, there are a lot of other solutions on the table, so more people feel they can have a discussion about that perhaps.
Mike Spicer: I would echo what Rhian was saying. If there has been a change in business sentiment, it has been the extent to which businesses perceive it as a mission-critical issue for the UK economy. There is now, and probably always will be, a diversity of opinion within the business community about exactly what the nature of any long-term solution would be. If businesses are agreed on one thing, it is the need for the Government at the earliest opportunity to commit to a long-term vision for aviation that makes it clear where the capacity is going to be. We point to the three Cs of cost, connectivity and capacity. Any aviation strategy needs to address all those three things.
Q448 Kwasi Kwarteng: What you have described is that, five years ago, people were agnostic about whether we needed more capacity in terms of the people that you speak to. Today, there is a wide acceptance that we do need more capacity. The question just becomes how we should provide that capacity. How long do you think it will take us to get to a point where people have some sort of consensus about what we should do about the capacity?
Rhian Kelly: I guess there was some discussion on this, because there was a sense last year that we would move forward and Government would have some answers. We know that this is a pretty tricky political problem. The approach they have adopted is to try and create some sort of independent body that would look at the evidence, provide some analysis and try and find a way of politically binding all the parties on this. Ultimately, what business needs is an enduring solution and one that is not kicked around every seven to 10 years and changed. You are right that we have been discussing this particular issue a long time. We are three or four White Papers on. We will probably get to a point where we just need an answer and we need everybody to agree to that answer. The process that has been put in place-
Chair: Analysis and possibilities can go on for ever, but there has to be a decision time. That is what we are trying to get to.
Q449 Graham Stringer: Politicians have ducked this issue for 50 years at least. In that context, I am extremely disappointed in the answers. They are full of abstract nouns, whereas I would have been expecting you to say, "Business needs a third runway at Heathrow and probably a second runway at Gatwick," and whatever else. You actually say, "We support the politicians’ initiative to put this issue into the long grass." One of the reasons we have not had extra capacity is because BAA, when they existed, controlled all the London airports and did not say they wanted extra runway capacity. Aren’t you a bit ashamed of yourselves that you are not demanding greater-
Chair: Mr Fraser, you seem anxious to tell us.
Stuart Fraser: Can I be very explicit?
Graham Stringer: Be as explicit as you wish.
Stuart Fraser: We want a runway at Heathrow. We need it started tomorrow. We do not have time to explore another thousand options, frankly. To be brutally honest, even if you took them, they would be simple guesswork about what life is going to be like in 40 years’ time. You might as well have a crystal ball and go down to the fair and ask that. I do think this is an act of common sense. Where is the growth? London is an international global centre. It needs to be connected. It needs better trade.
Chair: I think that is a clear answer.
John Dickie: I would be just as clear and even more demanding. I would like to see a runway at Heathrow and I would like to see it now. I would like to see another runway at Gatwick and I would like to see it now.
Chair: You are doing well here, Mr Stringer.
Corin Taylor: I would just repeat my answer from before. I think we should have a third and preferably a fourth runway at Heathrow, and a second runway at Gatwick.
Mike Spicer: From our perspective, we don’t think an airport in the Thames estuary would be a pragmatic solution. What we believe is that additional runway capacity in our existing assets-at Stansted, Gatwick and Heathrow-is the way forward. That is the pragmatic solution.
Rhian Kelly: I have already set out the CBI time horizons, but I do think we need an answer that is durable and that does not get changed the moment we have a change of Government.
Q450 Chair: These are all things that go on for ever. We want to know your views, representing business, of what is happening. That is what we are trying to get from today’s session. All the other questions are there and have been and will continue. We want to know what you think.
Corin Taylor: I would add something to that. When it comes to surface access, if you are going to make Heathrow your main hub airport and keep it as your main hub airport, then it seems complete nonsense to build High Speed 2 away from Heathrow and not connect it up. That means running High Speed 2 straight through Heathrow.
Q451 Karen Lumley: Do you think business leaders would use airports like Birmingham and Manchester when HS2 comes online?
Corin Taylor: It is not something we have polled our members on, so I cannot tell you. It makes sense to be running High Speed 2 through Manchester airport as well. You would run it through Heathrow, Birmingham and Manchester. It would obviously connect up quite well to East Midlands too, so you can start to see the connectivity improving there. It is difficult to say. Birmingham airport is very optimistic about what HS2 will do for Birmingham, but it could also bring more traffic into Heathrow. Time will tell on that one, I guess.
Stuart Fraser: I would make one point on this. We are financial services. The financial services industry employs over 1.4 million people. The majority of them are not in the south-east. The success of financial services in London is very important for the regions. We also have to bear that in mind. It is great to have a high speed train but it does not get you to Shanghai.
Rhian Kelly: It is always important that you have as much connectivity, as somebody else said, between surface access and airports. Anything that we can do to make sure that High Speed 2 links up to existing airports has only got to be beneficial. The point you also make is that regional airports should not be forgotten in this and they have an important role to play.
Q452 Chair: What about air passenger duty? What are your views on that in terms of its existence, its rates and the possibility of differential rates outside the south-east? Does anybody have any views on that?
Corin Taylor: Yes. Our report came out with three recommendations on APD. One was to freeze it in cash terms. The second was to offset the impact of the European Union Emissions Trading Scheme. The third was to do a really detailed economic study into its impact.
When the Netherlands introduced their version of APD, there was a study done by a respected consultancy over there that said the tax had raised just under €300 million and cost the Dutch economy €1.2 billion. If you replicate those numbers in the UK, you are talking about £11 billion or £12 billion cost to the economy. I don’t know what the answer is and that is why we should do a study to try and find out.
With regional and differential APD, there would be a big drive to make it revenue- neutral, which would then mean higher APD in London. I don’t think that would be positive. It would not be positive for the regions either. If you are flying from Scotland to Heathrow and then long haul, you would pay less APD from Edinburgh but then more from Heathrow. I am not sure how it would really benefit. I think APD is too high overall.
Q453 Chair: Are there any other views on APD?
Mike Spicer: We largely support everything that Corin has just said. I would make one additional point. We have publicly stated before that we think there is a very strong case for the devolution of APD for Northern Ireland. It shares a land border with another state that could potentially charge a lower rate of air tax. The case is strong in that example, but in terms of other regions and countries of Great Britain the obvious danger of distortions, in our view, makes it something that would be quite problematic and probably not desirable to implement.
Rhian Kelly: We are worried about APD because it is one of the highest APD taxes across Europe. We would not want to see too many further increases in APD going forward, but we would not favour devolved APD. Some of the conversations we have had would suggest you might have perverse disincentives. For example, if you were able to devolve it in Scotland, you might actually lose traffic from Newcastle because people would travel from Newcastle to Edinburgh. We think we have to be really careful with how we do it and would not support devolved APD.
Q454 Chair: What about differential APD?
Rhian Kelly: We would not support differential APD.
Chair: Thank you all very much for coming and answering our questions.
Examination of Witnesses
Witnesses: Emma Antrobus, Policy Manager, Greater Manchester Chamber of Commerce, Jerry Blackett, Chief Executive Officer, Birmingham Chamber of Commerce, Garry Clark, Head of Policy and Public Affair, Scottish Chambers of Commerce, and Paul Gilbert, Chairman, International Trade Committee, Liverpool Chamber of Commerce, gave evidence.
Q455 Chair: Good afternoon and welcome to the Transport Select Committee. Could we have your name and organisation, please?
Garry Clark: I am Garry Clark. I am Head of Policy and Public Affairs at the Scottish Chambers of Commerce.
Jerry Blackett: I am Jerry Blackett. I am the Chief Executive of the Birmingham Chamber of Commerce Group.
Emma Antrobus: I am Emma Antrobus. I am Policy Manager at Greater Manchester Chamber of Commerce.
Paul Gilbert: I am Paul Gilbert. I am Chair of the International Trade Committee at Liverpool Chamber of Commerce.
Q456 Chair: Is there any hard evidence that poor connectivity in the regions outside the south-east has disadvantaged regional businesses? Is there any actual evidence that the current situation has caused a problem?
Jerry Blackett: Every day I am meeting business leaders who say to me that they cannot understand why they can’t get directly from the midlands to the economies that they are trying to do business with. Every day I have to deal with these questions. What I am picking up from our businesses-and we have some terrific brands who are trying to rebalance the economy such as Jaguar, Land Rover, Toyota, Rolls-Royce, IMI and GKF; the list goes on-is that they are all incurring costs that they find are a drag on their competitiveness.
A University of California study that I was reading suggested that, if you get airport provision right in the locality, you can take maybe 10% off your manufacturing costs. I am surrounded by frustrated business people unable to understand why they should be working with one hand behind their backs. We have 12,500 exporters in the midlands. They are fighting the fight for the rebalancing of the economy. 64% of those that could be using Birmingham airport are going elsewhere. That is not because they want to. None of them say to me, "I love it and I am off to Heathrow today," or another airport. It is because the system has produced this problem. It is not a problem of demand. I see demand all around me. It is the supply of aviation that is our problem.
Q457 Chair: Ms Antrobus, what is your experience? Can you give us any examples of problems that the current situation has caused you?
Emma Antrobus: I would very much echo what Mr Blackett has said in terms of businesses being frustrated at having to hub and that they cannot get direct flights from their nearest airport. Clearly, with Manchester, we have a large, regional airport and it currently serves a number of destinations. It is actually higher than Heathrow. However, the majority of those are within Europe and are not to the growing economies of the world.
Q458 Chair: Mr Gilbert, can you give us any examples of problems in the Liverpool area?
Paul Gilbert: Indeed; I am a director of three companies. I am on the National Council of the Institute of Export. I live in Cheshire so I am very much part of the north-west economy. I meet a lot of people coming in from all over the world. They expect me, my colleagues or my businesses to travel to London, which is where they land. It is not just a cost issue but also a time issue. I need to give up my time to come to London to meet people, rather than them spending their more valuable time-because they are only here temporarily-to come up to the north-west. There is a definite challenge and a distinct problem there.
Q459 Chair: Mr Clark, do you want to comment on this?
Garry Clark: From a Scottish perspective, we are very reliant upon air travel, not just in terms of international connectivity but also domestic connectivity. In the region of 85% of journeys between Scotland and London, for example, are undertaken by air. In that context, Glasgow airport, due to the demise of BMI and so on, has seen the number of seats between Glasgow and Heathrow more than halve since 2000. The demand is still there, so it has had an upward pressure on prices. It is basically becoming more and more expensive to travel between Scotland and London, and more and more expensive to access hub airports. It is again probably something we will touch on later, but there has been a recent study undertaken by the Scottish airports that says that, as a result of increases in APD, the number of passenger journeys potentially lost to Scotland by 2016 could reach 2.1 million per year.
Q460 Chair: The airlines have told us that they already operate services that are viable from regional airports and that, if a service was viable, they could operate it. Do you accept that?
Jerry Blackett: No; I just cannot recognise that, again, from the demand that I see around our industrial base. It just does not compute with businesses. We have 12,500 exporters, but only 15% of our exports are going to Asia-Oceania, and yet that is a third of global trade. I am seeing a pent-up demand for more point-to-point reach locally. We are extending the runway at Birmingham airport because we are convinced that our businesses are eager for that extra access. A recent British Chambers of Commerce survey showed that eight out of 10 foreign direct investors won’t put you on their shopping list if they cannot fly directly to you.
Q461 Chair: Can you give us any examples?
Jerry Blackett: Last week I was in my office. There was a middle eastern company that has just set up a small distribution unit in Birmingham, only employing about 30 people. They are going to be making goods ready to go into the middle east, but they also have their eye on India and China. They want to make Birmingham their UK centre for this distribution. The MD was saying to me, "Why can’t I get directly to India and China from Birmingham? I am prepared to make Birmingham my UK destination but I can’t get there."
Q462 Kwasi Kwarteng: We are going quite far into this discussion. I just want to know what the current capacity utilisation of Birmingham runway is at the moment.
Jerry Blackett: It is about 9 million passengers at the moment, but it could go to 18 million without any extra.
Q463 Kwasi Kwarteng: So it is at 50% capacity, given where we are.
Jerry Blackett: Yes.
Kwasi Kwarteng: Yet at the same time you are saying that airlines, for whatever reason, with this huge amount of demand and 50% extra capacity, are not laying on the service. How can one account for that?
Jerry Blackett: How do we reconcile that? I must look at the way that the aviation industry has structured itself around Heathrow over decades.
Q464 Kwasi Kwarteng: On this Committee I am not quite as free market as some, but I am on that side. If someone says to me that there is 50% capacity and you are saying there is huge demand so these new routes will be profitable, I find it very odd and perplexing that these commercially driven businessmen who run the airlines, one would hope, would not be laying on extra services in that way.
Jerry Blackett: I am hoping that we can get under the skin of that as well. Surely, there must be something going on around the use of air passenger duty tax and the way that we have structured aviation on the supply side. I am a free marketeer, and normally free markets work well, but there is something wrong in this field.
Q465 Kwasi Kwarteng: But it could well be that your assessment of the demand might not be the accurate picture-it could well be, but I am just suggesting that, hypothetically, the people who are running the airline businesses-
Jerry Blackett: But I am meeting and seeing them every day.
Kwasi Kwarteng: I know you see them every day in your life, and these are very small margin businesses. By your picture, they should be making big profits given the nature of the demand, but, for whatever reason, they are not laying on that service. Perhaps they think, for whatever reason, that they will not make as much money as you think flying from Birmingham to Shanghai or flying directly from Birmingham to Singapore.
Jerry Blackett: I am not an aviation policy guy at all. I am just here to try and get over to you how much demand there is and the drag on the UK’s performance from the lack of point-to-point connectivity. That is tangible about the way the world works.
Q466 Kwasi Kwarteng: I declare my interest. I represent a south-east seat. The difference between the debate with regard to Heathrow and your airport is that Heathrow is at 99% capacity, whereas Birmingham is at 50% capacity. Even if, hypothetically, there were profitable routes from Heathrow, it is very difficult to see how they could be supplied.
Jerry Blackett: Our businesses also say to me that, if Heathrow is the answer, it is still letting us down, because you can only get to 12 of the 24 fastest-growing Chinese cities from Heathrow. The other 12 you cannot get to.
Q467 Kwasi Kwarteng: Because of this constraint on capacity.
Jerry Blackett: Indeed. There is something to unpack there. I think there is a rich seam of demand in the midlands that, for whatever reason, has not been exploited.
Kwasi Kwarteng: It has not been met.
Q468 Chair: If the demand is there and the airlines are telling us that where it is viable they are flying, what can be done to make regional airports more successful? Mr Gilbert, do you have any suggestions of what you think the Government or anybody else could be doing?
Paul Gilbert: The APD is a challenge. I am sure everybody will say the same thing. It is recognised that it is a challenge. It is more of a challenge to the regional airports than to Heathrow. Indeed, Heathrow is at 99% capacity and I don’t think anyone disputes that that is a superb way to be. What we need is to unlock the additional capacity or build additional capacity and use that as a hub for the UK. That is our general wish.
Q469 Kwasi Kwarteng: There is a big problem if we have capacity that is not being used and there is demand. That is a market failure. If you are suggesting that there are profitable routes out there, that we have capacity in our regional airports but the service is not being provided, that is a big structural problem.
Emma Antrobus: There is an issue about matching up as well. We had some evidence that around 200,000 passengers from the north-west flew to Hong Kong last year, but there is no direct flight from Manchester-they interlined. Clearly, if there was a flight direct to Hong Kong, then they would use it, but there is a big risk that the airlines perceive. You made the point earlier that margins are very tight in the industry. There is a big perception that the business yield on those flights is not as high as they would like and they end up selling the seats cheap.
Q470 Kwasi Kwarteng: So, in short, they don’t think they are going to make money on these routes.
Emma Antrobus: I don’t think they are convinced.
Q471 Chair: I go back to my question to you. Is there anything that you think the Government or any other body could do to resolve this, or is it just that the airlines have a different commercial perspective than the airports?
Jerry Blackett: I would have thought the Government could package up the regional airports and raise awareness through the marketing of the country that there are other ways to come and go from this country. We have built ourselves into a south-east/London presentation overseas that we feel we pick up the crumbs of. In the way the Government promotes the UK’s accessibility, the regional airports have a really good story to tell, so we can see some help there.
Q472 Kwasi Kwarteng: Would you accept that, ultimately, if the airlines don’t think they can make money running these routes, then, short of Government compulsion-the Government forcing them to run these routes-they are simply not going to do so?
Jerry Blackett: Indeed; that is the way the world works.
Paul Gilbert: There is a certain chicken and egg there, of course. We need to open up the regions to make them more attractive to overseas companies to visit. In opening up the regions, then the airlines can make more money by flying into them.
Q473 Chair: Mr Clark, you have had a different experience in Scotland. What can you tell us about the Scottish air route development fund? Does that have any lessons for the problem we are talking about or is that something else?
Garry Clark: There are a couple of aspects of Scottish routes. First, the airlines have demonstrated that they do want to try and invest in Scottish air routes. We have seen British Airways as the sole monopoly operator from Glasgow to Heathrow, for example, increasing its services since it gained that monopoly situation, but we have seen prices increase very substantially, because there is a very high demand on that service but limited capacity at Heathrow in order to serve that market. Again, we have seen Virgin Atlantic coming in as of the end of March this year to serve Heathrow from Edinburgh and Aberdeen airport. That has been as a result of the European Commission’s reserving of slots following the BA takeover of BMI.
In terms of the air route development fund, we did see during the early part of the last decade a very substantial increase in the number of direct flights from Scotland to international destinations, including, for example, a flight that operated by Emirates between Glasgow and Dubai. That has been extremely successful. Last year, Emirates doubled the number of services on that route to two per day. They are running first-class services on pretty much all services now, which has been extremely beneficial, but we have seen the number of international destinations as a whole that Scotland is serving from all of its airports dropping since 2007-08, when we saw the axing of the air route development fund by the Scottish Government and the increasing of air passenger duty by the UK Government.
Q474 Chair: Why was the fund axed?
Garry Clark: It was axed in the belief that it would have breached European state aid rules. That is something that the Scottish Government are currently looking at.
Q475 Chair: That was the reason that was given.
Garry Clark: Yes. I think, however, that Cyprus has managed to come up with some sort of marketing solution for direct air routes in its first year that does seem to be compliant with European regulations. The Scottish Government are looking at that option. Other parts of the UK did operate similar schemes in the last decade.
Q476 Karen Lumley: I declare an interest because I am a midlands MP and I would far rather use Birmingham airport any day. The experience at Birmingham is far better, Mr Kwarteng; if you want to come and join us, we would be delighted.
One of our processes is to rebalance the economy. We are going to have to try and bring jobs into the regions to do that. What role do you see HS2 playing in promoting our regional airports?
Jerry Blackett: I think HS2 is a game changer. It creates aviation capacity for the south-east. We are not afraid in Birmingham of traffic coming up to use Birmingham airport. We see the railways going in both directions. HS2 can take some of the pressure off an overheated south-east aviation problem, but it also brings markets much closer to us too. There are a lot of reasons why business people in the midlands want HS2. They realise it gets them to other places faster, it gets us into Europe and it links us up into that main HS2 European railway system. If you are thinking long term, say, 30 years, and where the integrated transport infrastructure for the UK map sits, and if you do the economics and look at how the regions could be performing-what is the economic potential of the country-and then you map in how your transport can work in an integrated way, high speed rail suddenly changes your thinking. You don’t have all your eggs in one basket. You don’t have everything running through a stressed and highly populated part of the country. You have options. Of course, I am here to tell you about Birmingham as an option, but it is a terrific option because it is so close to London. We can help London and the south-east as well as helping midlands businesses. It is a win-win situation.
Q477 Chair: Ms Antrobus, how does High Speed 2 affect Manchester?
Emma Antrobus: We are certainly very supportive of high speed rail. We are eagerly awaiting identification of where the stations are going to be when it comes towards Manchester and, indeed, Leeds. We see it in a very similar way to Mr Blackett in terms of a transformation of the way people are connected around the country and the ability to use fast point-to-point services alongside the current West Coast Main Line, which will provide intermediary stops. It will fundamentally transform things and give options. The point about integration is absolutely fundamental. We do not want to be competing with the other modes of transport in perhaps the way that rail and bus have done in local areas. It needs to be part of a bigger, mapped integrated transport system for the country.
Q478 Chair: Mr Gilbert, how will High Speed 2 affect Liverpool?
Paul Gilbert: We are very much in favour of high speed. We would love it to come to Liverpool also, of course. It is likely to bypass Liverpool. We have applied and we would like to see a spur coming to Liverpool.
Liverpool itself is very much a multi-modal region now. We have the Manchester ship canal, and we are dredging out part of the port of Liverpool to take the huge Panamax container ships that come through the Panama canal. We have a multi-modal gateway run by the Stobart Group. There is a whole system of intermediary areas there. We also have the John Lennon airport. Our dream and our view is to bring the containers into the port of Liverpool. Through the multi-modal we can put them on to the trains. I appreciate that containers will not go on HS2, but the people who are linking into that will.
It is all part of an integrated system that we see as being key to the growth of Liverpool. Liverpool has been growing wonderfully over the last few years. It is growing faster than most of the UK, but, because of the history, people are still under-employed and underpaid. We still have challenges there, but HS2 would be a key part of opening up the whole of the region to that multi-modal system.
Q479 Lucy Powell: We have already heard about HS2 in terms of that being an alternative. We have heard from some of the airlines and the airports as well about the main competitor to Heathrow being the likes of Dubai and other hub airports. For our Scottish and Manchester colleagues, where it is perhaps more applicable, could you tell us about the impact of the opening-up of the Dubai routes as a hub airport to your local economies? Do you see that as filling some of the capacity? Obviously, both Emirates and Etihad airlines are coming into those markets quite aggressively. Could you tell us something about that?
Emma Antrobus: Yes, certainly. The Dubai route from Manchester has tripled since it was first launched. We have the A380 aircraft, which is a tourist attraction in its own right. On the back of that, it starts to build the confidence of the other airlines. United Airlines launched their Washington service from Manchester last year. It starts to build because a lot of it is about confidence and that sense that, if major airlines are running long-haul services, whether they hub them through Dubai or otherwise, the business yield is there.
Currently, the two-hour drive time around Manchester allows access to 22 million people. Heathrow, with the same meter, gives access to 24 million people. In terms of Manchester it could compete. There is history and lots of other things as to why that has not happened, but there is certainly a sense that it is changing. Perhaps it is not as fast as the Chamber of Commerce and business would like, but business people are very pragmatic. They think, "If I need to go to India or China, I will hub through Dubai and perhaps stop off for a couple of days of sunshine on the way." It makes it very difficult to quantify what the direct demand can be.
Garry Clark: From a Scottish perspective, the route from Glasgow to Dubai opened up in 2004. To date, the estimate of its economic impact in terms of just the Glasgow region is something in the region of £164 million. It has recently doubled in terms of the strength of those services. Edinburgh airport, as well, is looking at options of connecting to a middle east hub, perhaps through another airline. I know that it is finding it increasingly difficult because, essentially, it is competing in a very competitive global marketplace and the airlines are worried about the impact of APD on potential passenger numbers.
Paul Gilbert: I am a user of Manchester airport. I live in Cheshire, so I am between Manchester and Liverpool airports and have the wonderful advantage of being able to use both. There are various aspects to business: one is confidence and one is convenience. The routes to Qatar, Dubai and Abu Dhabi from Manchester airport have given superb convenience to add to the confidence to get out there. I have a lot of contracts in the middle east. I am out there every two or three months, and these are the routes I am using. What has partly driven that is the convenience of being able to fly from an airport 23 miles from my home rather than having to route down to somewhere else. As a user, it is excellent.
Emma Antrobus: In relation to APD, Manchester know that they lost out on a direct route to Kuala Lumpur, and APD was cited as one of the key factors of that. That service-I think it was AirAsia X-now goes via Paris, so it has been lost to the country and not just to Manchester. There are elements of that. Something like 74% of the global growth is going to be in what are classed as developing countries, of which Malaysia is one. Those are opportunities that we miss out on and it is a shame.
Q480 Graham Stringer: To follow up on Mr Kwarteng’s suspicion, one of the reasons that intercontinental airlines don’t necessarily fly to regional airports is because you need an international treaty: you need a bilateral agreement to do it. In terms of commerce, do the regional airports and Scottish airports think that it would be useful for the Government to declare a completely open skies policy for regional airports so that, if an airline wanted to fly from China, India or Brazil directly into the regions, they would not have to go through international negotiations and they would not lose any negotiating rights to get into Heathrow?
Jerry Blackett: Yes. We think that should be on the table as a policy lever for Government to use, probably with some care. The straitjacket that the current arrangements have put us into leads you to think that some softening of that unilateral arrangement would be a sensible lever to look at.
Paul Gilbert: One would assume that that would need to be international. Quite often, the UK leads the way with opening the world and nobody follows us, which leaves us at such a disadvantage. With open skies, I would like to see that we don’t just open our skies but it becomes an international arrangement where everybody benefits. Support would certainly be there for that.
Garry Clark: Anything that would give regional airports an advantage ought to be explored. From a Scottish perspective, we do recognise that we have a fairly small marketplace in terms of potential passengers, with a population of just 5.2 million, although 4.4 million of those are within 90 minutes’ travelling distance of Edinburgh and Glasgow airport, for example. That is why, in addition to direct international air services, we also need to maintain a focus on linking into hub capacity, particularly Heathrow.
Q481 Graham Stringer: I am strongly in favour of doing as much as is humanly and legally possible to help regional airports. Is there anybody on the panel who does not believe that we need extra hub capacity in the south-east?
Paul Gilbert: I would support that entirely. We need the hub capacity. We would probably generally support having that major hub, but it still leaves a lot of capability and capacity in the regional airports to support that hub.
Emma Antrobus: It is clear that Heathrow is an international brand, and we would damage that at our peril. It is clear that decisions need to be made very fast because of the time scale involved in planning and building whatever additional capacity is decided upon for the south-east. Clearly, an airport that is at 99% or 95% capacity has nowhere else to go, and that is not a good thing as we try and open up growing markets. We would not be against expansion of Heathrow as a hub airport, but the recognition is that there is capacity at Manchester, Birmingham and many other airports. Despite the fact that aviation is entirely commercial, we would encourage the Government to do what they can to utilise that capacity within the regions as well as grow aviation per se.
Jerry Blackett: I am just a bit more troubled by the use of the word "hub" in the singular. I have done a little reading around these policy areas. When I look at what Germany seems to have produced, I don’t know whether they are hubs or point-to-point airports. In relation to sticking with what we have now versus what we could have to meet the economic potential of the country, Germany seems to be a very interesting example where direct flights are distributed far more among a number of airports.
Q482 Kwasi Kwarteng: But, unquestionably, Frankfurt is still the hub.
Jerry Blackett: It is, but I think it does something like 40% of all the direct flights.
Q483 Chair: What would you like to see, Mr Blackett?
Jerry Blackett: I would like to see the definition of a hub re-examined.
Q484 Chair: Do you want Heathrow to remain the hub and possibly to expand?
Jerry Blackett: I am not sure I know the answer, if I may say so. Even if you expand Heathrow, that is only going to provide 7% of the UK’s aviation capacity long term. It is this sort of fixation on what we are going to do about Heathrow that troubles me.
Q485 Kwasi Kwarteng: There is a slight variation of opinion here. The hub concept is quite a simple concept, though lots of people are still confused about it. It seems to me that a number of people on the panel embrace that concept of a hub. We can either go down the hub route or the point-to-point route. Mr Blackett, that seems to me where you were heading. I just wanted to explore that and ask generally whether Mr Clark has a view. You said earlier that you supported the hub concept.
Garry Clark: Yes. From a Scottish perspective it has to be a mix, but clearly we are not going to be able to serve every market in the world from Scotland. We need hub capacity in order to access those markets and to allow those markets to access Scotland.
Q486 Kwasi Kwarteng: If I were to put the question very generally, to what extent are the regional airports signed up to this hub concept, as they all are clearly not?
Paul Gilbert: Liverpool is a smaller airport, so we readily acknowledge, as the Scottish gentleman at the end does, that we are not going to rule the world, but we would like very much to be part of the regional economy. To answer your question, we would support a hub or hubs. A hub seems to make more sense generally.
Q487 Kwasi Kwarteng: We have a split in terms of the size of the regional airports and how open you are to this hub concept.
Jerry Blackett: Clearly, but whether it is one hub or more than one hub is probably the argument I am trying to make, not very well.
Q488 Kwasi Kwarteng: You mentioned Frankfurt. I didn’t go there on the last Transport Committee visit but I have spoken to people there in the past. They very deliberately decided to make Frankfurt the hub. There was a huge debate about their third runway in the 1980s, where they had to get German army people to lift people off the runway, and they built a fourth runway four years ago. Clearly, given that it has four runways, they would be very put out if you did not say that they were-
Jerry Blackett: But it is only 40% of the direct long-haul flights of Germany-that is my point-whereas Heathrow is 65% of the direct flights.
Q489 Kwasi Kwarteng: Into the country.
Jerry Blackett: Yes, I guess that is so.
Kwasi Kwarteng: That was what interested me. Frankfurt very much see themselves as a European hub. You were suggesting otherwise, which was interesting. You would have to look into the figures.
Jerry Blackett: I accept your point.
Q490 Chair: Does it matter to the UK if there is hubbing outside the UK? If Heathrow cannot be used as the hub and British firms and travellers use hubs outside the UK, does that matter to our economy?
Garry Clark: I think it does. Talking about multiple hubs, Scottish air passengers use multiple hubs on a daily basis. They use Amsterdam, Frankfurt and Paris to an extent, or, further afield, Dubai or Newark, for example. They use these hubs on a daily basis, but I think, particularly as we are looking in the Scottish context at growing our tourist industry, which is worth £11 billion a year to our economy, it is far easier to bring tourists into Scotland if they are coming into Heathrow than it is if they are visiting Germany, Holland or France. From a UK perspective, having a hub within the UK is extremely important. It is certainly what our members want to see.
Q491 Chair: Does anyone else have any views on this?
Paul Gilbert: I have a mercenary business perspective on that. A huge amount of money is spent in airports. An airport itself probably makes more money from retail and parking than it does from flights. If the hub is outside the UK, then the money on food, refreshments and gifts for everyone at home is all being spent outside the UK and not retained here. We are just throwing a huge retail outlet away. That is why I would favour the hub being within the UK: it is purely mercenary.
Q492 Chair: Mr Gilbert, in Liverpool’s case, the link with a hub at London was lost a very long time ago. The London link was lost more recently.
Paul Gilbert: It was, unfortunately.
Chair: The hub link with Schiphol has gone as well. Has that had an impact on the local economy?
Paul Gilbert: It will have been an inconvenience to the economy. We do have a good train link to London, for instance. The London link, in actual fact, went to London City airport and not to Heathrow. The whole airline was having challenges there. With the KLM link, even though it was a good flight, they felt that they could make more money out of the aeroplanes they were using in Liverpool-
Q493 Chair: What has the impact of this been on the economy?
Paul Gilbert: It will have had a negative impact on the economy. I don’t know the specific values. People can still travel with reasonable ease to London via the train. For the international economy, it will have had a significant impact in that we will have to travel to other airports to be able to travel to the rest of the world.
Q494 Chair: Has this affected companies in the local area?
Paul Gilbert: It will have affected them significantly on the convenience side. People will still travel, but maybe they won’t travel as much as they would have. I cannot give you a percentage or a value, I am afraid; I don’t have it. Anecdotally, there will have been a significant challenge in that there is now a major convenience problem in being able to get to parts of the world that would have been served certainly through the KLM link. The London link we can replace with the train.
Q495 Chair: Can any of you give us an example of improvements on surface access to your airport that would improve your airport and give it more capacity and more potential for business? Is there anything specific?
Jerry Blackett: Birmingham is pretty well connected already, but the motorway feeders are already very gummed up. Active traffic management has been put in, so I can see more motorway capacity being needed around the airport. The High Speed 2 linkages will be game-changing for the airport. That is the long-term surface access improvement. Year on year, you are continually having to improve access to the airport, but Birmingham airport is not one of the big problems at the moment-it is fairly well served.
Q496 Chair: Ms Antrobus, is there anything specific you would like?
Emma Antrobus: From Manchester’s point of view, it already has a rail link. The Northern Hub announcement allows for a fourth platform at the railway station at the airport, and I believe the Metrolink tram will be going there within the next couple of years. Again, the issue is the motorway. It has its own spur off the M56, but that is already beyond the capacity that it was built for. Junction improvements have been made, but I think that is still one of the potential issues for surface access. Indeed, there is an announcement for the link road from Stockport that is going to be built through the Greater Manchester Fund and the City Deal that is currently under consultation, which should improve access from parts of the conurbation that so far have not had particularly good access. It is the motorway network that really has the potential to create problems. Generally, the airport is very well linked, and that is partly due to the ownership of the airport being part of the 10 authorities of Greater Manchester.
Q497 Chair: Does anybody else want to give an example?
Paul Gilbert: Liverpool airport does not have direct access to a motorway, as do Manchester and Birmingham, but we have good access to the road system. The airport is integrated into the city transport system. There is a good rail link. We have the systems in place, but we do not have that direct fast motorway access. That is a couple of miles away.
Garry Clark: Surface access for Scotland is, obviously, mainly a matter for the Scottish Government. The fact that the only airport you can access by rail from both Glasgow and Edinburgh is Manchester airport tells you how effective the Scottish Government have been in addressing that.
Jerry Blackett: I would also just mention that the West Coast Main Line is really beginning to creak now. There is talk of weekend suspensions between Watford and Euston while they do some more works. I know my colleagues from the airport would want me to make the point that the rail feed along the West Coast Main Line from London to Birmingham is beginning to look very creaky. If you don’t believe in high speed rail for the speed issues, the fact that the West Coast Main Line is filling up is the other reason why you need to build a high speed rail line, but we are beginning to see some short-term pressures. It would help if we could get the journey time below an hour. At the moment it is just over an hour. Psychologically, if it was 59 minutes from Euston to Birmingham, it would say something about the ease of access. That would be another comment.
Q498 Chair: Is there any one thing that you think the Government should be doing to improve connectivity and aviation outside the south-east that you have not already said? Is there anything that anyone has missed? Is there something that could be done now, not in the future?
Jerry Blackett: Promote regional airports now as part of the Government’s overseas promotion of the country and use the spare capacity that is there now. We have terrific businesses battling to rebalance the economy, to take industry overseas. Here we are today and Land Rover has just announced another 800 jobs in Solihull. Hurray, that is fantastic, but the investor in Land Rover-Tata Motors-cannot fly direct to its investment. It has to come via a second route. If nothing else, the support that the industrial base deserves is the message that I want to leave you with very strongly. That demand is there, and somehow we have to get the airlines to appreciate that there is good business to be done supporting our businesses. The economy can grow and we are showing it can grow, but we need that aviation connectivity.
Q499 Chair: Does anyone else want to add anything that you have not already said?
Garry Clark: Basically, just to respond positively to the demand that does exist at Heathrow and allow that demand to be met, and, as far as air passenger duty is concerned, look at a regional solution. If it is good enough for Northern Ireland, it is good enough for the rest of us.
Emma Antrobus: I would like to say that business just wants something done as quickly as possible. There has been a lot of talk and a lot of White Papers. We come back to the same issue around the capacity at Heathrow time and time again. We need action. I understand that the politics will be problematic, but from a business perspective they just need to get on and do it. If they have to hub through Dubai, Newark or wherever, they will just go and do it. The convenience and the cost of their time either gets absorbed or passed on, which makes the country less competitive going forward.
Paul Gilbert: The nearest one I would have is the APD. Salaries are not as high in the regions as they are in the south-east. We feel that the APD is pitched at the south-east and not at the country. That comes back to the differentiation of APD across different regions.
Chair: Thank you very much to all of you for coming and answering our questions.
Examination of Witnesses
Witnesses: Christopher Snelling, Head of Urban Policy, Freight Transport Association, Andrew Walters, Chairman, London Biggin Hill Airport, and Brandon O’Reilly, Chief Executive Officer, TAG Farnborough Airport, gave evidence.
Q500 Chair: Good afternoon, gentlemen, and welcome to the Transport Select Committee. Could we have your names and organisations, please?
Christopher Snelling: I am Christopher Snelling from the Freight Transport Association.
Andrew Walters: I am Andrew Walters from Biggin Hill airport.
Brandon O’Reilly: I am Brandon O’Reilly from Farnborough airport.
Q501 Chair: Could I start first with the Freight Transport Association? Would you say that sufficient attention has been given to the needs of freight in the debate about airport capacity?
Christopher Snelling: We always say that it is very easy for freight to slip under the radar as, politically, it does not have quite the same priority because freight does not vote. We have been pleased to see an increasing recognition in Government and parliamentary conversations in recent years about the importance of freight and the ability to import and export physical goods as part of this. It has increased visibility, but it is something that always needs to be consciously borne in mind because it can disappear unless we all make an effort to try and remember it as an aspect of this debate. But, yes, I don’t have too much problem.
Q502 Chair: What about the needs of the business aviation industry? Do you think enough of that has been debated?
Andrew Walters: No, we do not. We think it is rather like publishing a London transport plan that takes in buses and the tube but omits to say anything about taxis and coaches. We think there is a bit of a shortcoming there. Despite the difficulty of our own economy, there are 33,000 business jets crisscrossing the world every day, carrying the most economically important people around the world to do business. We think it is a bit of a mistake to overlook this rather important sector.
Brandon O’Reilly: I would agree with Mr Walters and go back to what Mr Snelling said, in that business aviation is not as well known or as well documented as the airline business. It is obviously smaller from the perspective of the number of aircraft and the number of employees, but it punches way above its weight. One of the reasons we want to make our feelings felt today is to ensure that business aviation gets its voice heard.
Q503 Graham Stringer: I would like to ask the Freight Transport Association about their view that Heathrow should be the hub. The fact that freight does not vote is not the only difference from passengers, is it? What is important for freight quite often is that it can land at night-time and then be distributed around the country. I would be interested if you could develop your arguments in favour of Heathrow a bit more extensively.
Christopher Snelling: The use of night flights is a very important use for a part of the air freight industry, principally express parcels. For overnight delivery, they need to be collected at the end of a business day and arrive at the beginning of a business day somewhere else. For that part of the industry it is very important. Typically, those goods are flown in freight-only aircraft and are particularly heavy users of East Midlands, Stansted, Luton and other places. They are not particularly users of Heathrow. Therefore, night flights are useful at Heathrow in so far as it allows some of the connections on mixed use flights, meaning passenger and freight, to the far east, but it is not the central issue that it is for us at some other airports. The fact that you are never going to get free access to night flights at Heathrow does not really affect the status of Heathrow as the most important airport for freight in the country. It is simply because it does more freight than all other airports combined and it is close to the big economic centre of the UK in London.
Q504 Graham Stringer: You made the distinction yourself between freight in freight-only aircraft and a lot of freight that is carried in the bellies of air passenger aircraft. I accept that, but I am not quite clear what you are saying. Could the freight-only airlines quite happily hub somewhere else, such as East Midlands?
Christopher Snelling: They do not typically use Heathrow now. When we talk in sessions like this about the hub model, we are talking about the mixed-use hub model. For freight, there are freight-oriented hubs that individual companies will operate. FedEx will operate their own hub from an airport-that is quite a different thing-but it always has to be remembered that the freight-only aircraft freight is a minority of what is done: 60% to 70% moves in the holds of passenger planes. That mostly goes in and out of Heathrow and is dependent on all of Heathrow’s links.
Q505 Graham Stringer: I understand your point better now. The other thing that interests me is this. I support Heathrow as a hub, and developing rather than protecting it in this country. We have lost out on the two major integrated hubs to Brussels and Charles de Gaulle, haven’t we? That is where most just-in-time freight comes into Europe. Do you see any way we can get any of that trade back into the United Kingdom or has that business gone for ever?
Christopher Snelling: Nothing is for ever. If you could develop a significantly larger hub airport close to London, then all sorts of opportunities come back in to attract that traffic. There are obviously different business models for the integrators and their kind of freight workings. More directly concerning for us is the access on the passenger planes through Heathrow as the hub for the scale of work that they can do and the range of destinations they can reach. While that is the less visible part of freight, because it is in the hold of passenger planes, that is where the crucial issue is for us about hub status in the UK.
Q506 Kwasi Kwarteng: Clearly, your various organisations have quite clear views about Heathrow in this whole south-east hub debate. What other solutions are you countenancing as a body if, for whatever reason, we cannot go down the Heathrow route? How fixed on Heathrow are you? How committed to it are you? Are you looking at other alternatives or have you just simply put all your eggs in the Heathrow basket, so to speak?
Christopher Snelling: We cannot see any other viable option. It does not seem viable to us that either the private sector or the Government are going to spend the money necessary to build a new four-runway fully-connected airport in the UK. It just does not seem likely. I stress that we would have absolutely no problem if someone did. If we could wave a magic wand and could create one tomorrow in the Thames estuary, that would be brilliant. If it existed it might be able to achieve hub status, but it is only a might unless you close Heathrow, which again is another expense. Then you have all the issues of relocating all the industry and business that is centred around the M4 corridor and moving it over to the other side of London. It just seems to us that, while it is not a bad idea in principle, it is just completely impractical and is not going to happen. It will probably end up being a distraction from utilising the actual solution that is in front of us.
Andrew Walters: From the business aviation point of view, there are quite a lot of general aviation flights going in and out of Heathrow and Gatwick even today that could be displaced to the smaller airports around London to free up slots to some of these destinations that people are keen to develop.
I have a proposition I would quite like to read to you about how New York has tackled this same problem. They have a congestion problem in their main airports. They have the advantage that they happen to own quite a lot of their airports, whereas of course here we have distributed the ownership. They have the advantage of coming up with a policy, which I can just read. It says that "the FAA has encouraged the development of high capacity general aviation airports", which is what Farnborough and Biggin Hill are, "in…major metropolitan areas", providing "attractive alternatives to using congested hub airports". They use "hub" in a different context from us. To them, a hub is just a busy airport. They go on to say that "Reliever airports also provide general aviation access to the surrounding area. To qualify as a reliever, they must have 100 or more based aircraft or 25,000"-
Q507 Chair: Mr Walters, is this something that you want to have here?
Andrew Walters: I think it would work perfectly in London.
Q508 Chair: It would be helpful if you could submit the information you have there to us. The point you are making to us is that you think this is something you would like to be followed here.
Andrew Walters: I would.
Chair: If you could let us have that, that would be helpful.
Andrew Walters: Certainly.
Q509 Chair: How would the development of a Thames estuary airport affect Biggin Hill?
Andrew Walters: The answer is that Biggin Hill would still be as close as it is, 13 miles from where we sit now. It would still be very convenient for the business aviation customers that are using it and close to its catchment area. The answer is that it would not change it at all. The second point is that it won’t be there for 15 to 20 years, so we have quite a challenge in the meantime to look after this important sector.
Q510 Chair: Mr O’Reilly, in relation to Farnborough, how would the development of a third runway at Heathrow or other airport development west of London affect Farnborough?
Brandon O’Reilly: Economically, I do not think it will affect Farnborough at all. Farnborough will continue to operate as a point-to-point business aviation on-demand airport. The aspect I would like to bring up if a new runway is created at Heathrow would be the airspace issues, which I know the CAA, NATS and others are looking at through the LAMP project at the moment. Farnborough being very close to Heathrow, the management of the airspace is as important as the capacity on the ground. I think there would need to be some new airspace management procedures put in place.
Q511 Chair: Is there any evidence that shortage of airport capacity for general or business aviation is damaging the economy? Is there a problem there?
Andrew Walters: Today, the business aviation sector is being served satisfactorily, particularly outside London. Within London, almost 50% of the business aviation traffic is currently going into airports that are predominantly scheduled airline airports. Therefore, I suspect that, very quickly, we are going to see some difficulty.
Q512 Chair: Why do you think that is happening?
Andrew Walters: Because the scheduled airline airports will get busier, and, arguably, the biggest business aviation airport at the moment is Luton, which has announced a substantial master plan growth that will definitely squeeze out some of the business aviation traffic. London City is another one where it has seen its business aviation traffic decline quite markedly since it started in the sector in 2001 because the scheduled traffic has squeezed it out. The future of RAF Northolt is in some doubt. That has 8% or 9% of the current market. Nearly 50% is going to come under pressure, and it is, therefore, really important that we make a decision soon about what we are going to do with it.
Q513 Chair: Is that why you want business airports designated in London? You made the point in your submission.
Andrew Walters: Yes, it is.
Brandon O’Reilly: As the reliever airport, it is to take this capacity constraint that will exist going forward. As the major commercial airports become more constrained-Heathrow, Gatwick and Luton are very good examples-those business aviation flights will necessarily be squeezed out and will need to go somewhere. If capacity exists today for the medium term at airports such as Biggin Hill, Farnborough, and indeed others such as Oxford, Southend and so on, there is an opportunity for Government policy to reflect that.
Q514 Kwasi Kwarteng: Can I clarify what you are saying? I think I understand it but I just want to be absolutely clear. What you are suggesting is that, as there is more capacity constraint on commercial flights, there will be a knock-on effect on designated business freight airports, and that will put pressure on capacity in those airports. Is that the argument?
Brandon O’Reilly: What we are saying is that there is a significant difference between freight-I think you just said business freight; it is business aviation, just to be clear about that.
Kwasi Kwarteng: I am sorry; business aviation.
Brandon O’Reilly: Business aviation does not sit well with commercial aviation at commercial airports. It is a different market and it has different requirements for the customer. The two operations do not sit well together. What would make sense as we go forward and those commercial airports naturally grow with the expansion of airlines-hub, point to point and low cost-is that the point-to-point business aviation on-demand services, which obviously operate on demand and not to a schedule, will naturally be squeezed out. It will be much more beneficial for that airport-Heathrow is a very good example-to have an Emirates A380 interlining with x number of services going all over Europe and the UK rather than a Learjet operating with five passengers on board.
Q515 Kwasi Kwarteng: The process is what I want to understand. Forgive me for sometimes getting the vocabulary slightly wrong. It is a knock-on effect, essentially, is what you are saying.
Brandon O’Reilly: It is, yes, exactly. It is squeezing them out, and therefore this market sector needs to go somewhere else. The point is that there is a home for it today. In the medium term we have plenty of capacity at the two airports represented here, but, of course, we are representing the whole of business aviation airports. There is plenty of capacity in the south-east of England for those flights to go to. The point is that, going forward beyond 2019, 2020 and longer term, we would like to see Government policy reflect the provision of that capacity.
Q516 Kwasi Kwarteng: Wouldn’t the answer to that just be to build another airport like yours, which was dedicated?
Brandon O’Reilly: That would obviously be one solution. The other solution is that most of us have plans through to 2019 or 2020 and have said indicatively beyond that that we have not reached our capacity. Our current consented capacity is 50,000 air traffic movements. The airport could handle, and we have documented it publicly, 100,000. We do not have planning consent to allow that but it currently exists. The point is that this capacity, either consented or as yet unconsented, exists.
Q517 Graham Stringer: Can you explain some basic things about rights that I feel I should know? What rights does commercial traffic have to land at Heathrow? Passenger airlines have grandfather slots and their rights are sorted out beforehand. What rights does a private jet have to land at Heathrow? Is it similar?
Brandon O’Reilly: At Heathrow, it requires what they call an opportunity slot. If there is a slot that becomes available because an airline cannot use it or there is a particular part of the day when it is unavailable to use, they can apply to land at that particular time.
Graham Stringer: On a day-by-day basis.
Brandon O’Reilly: Yes, exactly.
Q518 Graham Stringer: So they just get effectively squeezed out when those slots are taken up.
Brandon O’Reilly: Yes. If you look back 30 or 40 years ago at Heathrow, it was a very large business aviation airport as well. The Hunting hangars on the south side of the airfield had tens of thousands of business aviation flights. Last year there were 1,700 business aviation flights at Heathrow. It naturally happens there already and will continue to happen at Heathrow and other airports.
Q519 Karen Lumley: What is the cost implication of landing and taking off at Heathrow as opposed to one of your airports?
Brandon O’Reilly: I suspect it is much more expensive to land an aeroplane at Heathrow.
Q520 Karen Lumley: Do you have any idea of how much?
Brandon O’Reilly: I suspect it is three, four or five times as expensive. The total cost of landing, having your aircraft handled and the cost of fuel and so on would be significantly more expensive, whereas at our airport the infrastructure is far less.
Q521 Chair: Is surface access to Biggin Hill and Farnborough adequate?
Andrew Walters: Surface access from Biggin Hill takes 45 minutes into the City and the west end. It is good, but it could be better. Unfortunately, we do not have many highways running from the middle of London down into south-east London, but we have a very good train service from nearby Bromley South and Orpington. For those customers who want to use that, it is 15 minutes into the main termini.
Q522 Chair: Are you saying it is reasonable?
Andrew Walters: It is reasonable but could be better.
Brandon O’Reilly: Farnborough is good. We have access to the M3-it is right on our doorstep. We have a very good train link from Farnborough main station. Business aviation is low volume as far as customers are concerned. Even the addition of significant extra flights has limited impact on roads and rail.
Q523 Chair: Mr Snelling, how could freight use rail more to get to airports? Are there any improvements that could be made? Could any of that be linked to developing new airports or expanding them?
Christopher Snelling: We can talk about moving freight by rail into airports. For one thing, the problem we face in the air freight debate is about getting goods into and out of China into Britain. We do not have as much problem for these kinds of goods once they are in Britain. We can get from London to Scotland by truck perfectly efficiently for these kinds of goods. Again, it is the same for air freight. They tend to be low-volume and high-value goods. Sometimes it is said, "Is HS2 an alternative to Heathrow expansion?" We would say that for this kind of air freight it is completely irrelevant. It is just not a factor. These kinds of goods are of such low volume and high value that they cannot move by ship. They have to be flown. Once they have arrived in the UK or at the other end, they will invariably want to move on the road in relatively small consignments. If you are using air freight, there must be a reason for it because it is so much more expensive than sea freight. That will typically be because they are very time-sensitive or they are very high-value goods and low volume. Those are characteristics that are not generally very well suited to rail freight. They are quite different sections of the freight market.
Q524 Chair: What is the impact on the rail freight industry of not having direct access or services to places like China and Indonesia?
Christopher Snelling: On the rail freight industry?
Chair: Yes, not having direct services.
Christopher Snelling: For the freight industry as a whole?
Christopher Snelling: The way to frame it is that it is not about the impact on the freight industry; it is about the impact on British business. We represent through the British Shippers Council the users of freight services. It is Britain’s exporters who want to have the direct access. The fact is that it is a disadvantage in the international market. If you are up against competitors who are located closer to bigger and better hubs, with a greater range of services, it is a disadvantage for you. It is always very difficult to point to individual companies who have failed or relocated on the basis of this, because there are always a number of factors in whether a business in a particular location succeeds. But, in conversation with our members, it is clear that access to a high-quality hub, the principal characteristics of which would be as wide a range of destinations as possible and a good reliable service, is one of the factors that help them compete in the international marketplace. It is the growing markets that we are all looking to have good connections to.
Q525 Chair: How far does business aviation fill the gap left by insufficient scheduled services to emerging economies?
Brandon O’Reilly: If you look at the number of direct services between the major London commercial airports or just the number of direct city pairs and compare that to those that are offered from Biggin Hill, Farnborough and others, it is three or four times the size, because business aviation direct links are limitless. It is wherever you want to go because it is a bespoke service. I think it does fill the gap for certain parts of the market sector between services that are either offered via Dubai, Doha or others.
Someone mentioned earlier about there being no direct service to Denpasar or to anywhere in Indonesia. From our airports, those services are not provided on a scheduled basis, but, if someone wants to operate them from Farnborough, they do. People operate from Farnborough to Denpasar, Farnborough to Macau and Farnborough to Xian. These are services that are probably not provided by commercial airlines. The business aviation industry has the ability to have limitless direct service. The types of aeroplanes that operate these services now are as long haul as the major commercial airlines. Direct to the far east is a common occurrence from our airports. Direct to the west coast of the United States is a common occurrence as well.
Q526 Chair: Can you quantify any of that so that we can get a proper understanding of how significant that work is?
Brandon O’Reilly: I can give you the number of city pairs.
Q527 Chair: If you could send us any information on that, then we can understand how significant it is in bridging that gap.
Brandon O’Reilly: Yes; we will do that.
Andrew Walters: Just to quantify it, there were about 160,000 business aviation flights in and out of the UK last year. Of those, 100,000 were in and out of London. If we can look across to Paris, they had 160,000 of those flights in and out of Paris, and over 220,000 in and out of New York. We are behind the curve at the moment, but we expect that sort of demand to grow as London develops its role as a world city.
Q528 Chair: Is this demand growing? Is this an area of growth?
Andrew Walters: Even last year, despite the economic difficulty we have, the total number of business jets around the world increased by between 2% and 3% to 33,000.
Brandon O’Reilly: There is evidence that there are flights to more and more emerging markets that are being taken on an on-demand basis.
Andrew Walters: The big sales areas at the moment are south America and south-east Asia.
Q529 Chair: Mr Snelling, you say that it is absolutely essential for freight that there are night flights. You know there are problems about that with people living near airports or on flight paths. Is there any way that the need for night flights can be reduced, or is it something that is just inevitable?
Christopher Snelling: I would say again that it is not all air freight. It is a subset of air freight, particularly the express industry, that requires overnight flights. It is not necessary for a lot of the freight market; so the two are not synonymous. For that very important segment of the market, in order to provide that level of business service of collecting something at the end of the business day and having it arrive at its destination at the beginning of the next business day, it has to travel at night.
Q530 Chair: If there were more restrictions on night flights at Heathrow, and in exchange for that there was more capacity, either at Heathrow or somewhere else, would that be a reasonable deal for you? Would that work?
Christopher Snelling: It would potentially have some attraction. Night flights are not as crucial for us at Heathrow as they are at other airports like East Midlands and Stansted. The worrying impact you would have is on the ability for mixed-use flights to connect properly with the far east. My understanding of the timings that they need to work to, based on the passenger demand, is that that may involve arriving or departing in the UK during the night-time period. If you compromise the ability for an expanded airport to connect effectively with the far east, then you are obviously reducing a significant part of its economic potential. But, yes, in principle, while we want flexibility wherever we can get it, if we are looking at a way to get substantial capacity increases, that might work. As I say, it would not be a trade-off with all airports and all night flights, because the situation in every airport for why you have night flights and how many people they affect is very different.
Q531 Chair: Are there any locally imposed environmental restrictions at Biggin Hill or Farnborough?
Brandon O’Reilly: There are. They are locally imposed as part of our planning permission-as part of the 106 agreements with the local authority. For us, the economic benefits against the environmental harm have been weighed in the balance. They mainly refer to noise and emissions. They do not constrain us.
Q532 Chair: Mr Walters, what is the situation?
Andrew Walters: It is much the same. It is the same sort of environmental concerns applied locally. We are hoping that Government will set down standards nationally, because aircraft are moving from airport to airport and, therefore, it is helpful for them to have the same rules at each airport. Generally, it is something that we have to deal with our local authorities about.
Q533 Chair: It does not stop you operating effectively. You work within that.
Andrew Walters: It would be fair to say that this is an evolving industry and actually quite a fast evolving industry. It puts an onus on all of us, which is one of the reasons why we think that Government should have a very clear strategy for this sector. Airspace providers, local authorities and highways authorities need to understand where it is that the Government are trying to take this sector. That is why it is so important that it should be written into the policy.
Chair: Thank you very much for coming and answering our questions.