Transport Committee
Wednesday 9th September 2026
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09:18
Alex Mayer
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Alex Mayer
Order. Order! Welcome to this morning's evidence session. This is the third session of our scrutiny of the government's draft Heathrow expansion National Policy statement. We've got two panels today focusing on the strategic view, the strategic case for Heathrow expansion. From the aviation point of view, please, could I ask our first panel of witnesses to introduce themselves?
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09:19
Speaker 4
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Speaker 4
I would agree that an awful lot has changed since 2018 in terms of demand profiles, in terms of economic and geopolitical conditions, environmental policy. I think one of the key issues that has changed since 2018 is the decline in business travel and the relative rise in leisure travel, which I think is something that needs additional exploration and consideration.
09:19
Alex Mayer
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Alex Mayer
And to all of you, some of our written evidence has has argued that there's a vacuum in the government's overall overall aviation strategy. And and in fact, overall policy. And that the a lot of the draft strategy is based on 2013. Do you agree? And is this a problem for the Heathrow expansion National policy statement. I'll go to Sophie and then work that way and back to Lucy.
09:20
Speaker 3
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Speaker 3
Yeah, I think I think there's still more gaps to be clarified. You're absolutely right. I think key focus areas for us are around affordability. And I think, you know, there are there are improvements in the draft NPS that talk about, and I quote, no higher than necessary. And charges need to be financially sustainable, but it feels a bit woolly. And I think actually what we're really looking for is it needs to be backed by objective benchmarks. And that's what seems to be lacking.
And whether those charges would would actually enable growth that that the policy is intending to intending to achieve.
And whether those charges would would actually enable growth that that the policy is intending to intending to achieve.
09:20
Speaker 2
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Speaker 2
Yeah, sure. I think our main concern around the sort of gaps in it is around the economic modelling and the lack of the capturing of the freight benefits in in the policy, looking at things like the role of airports for and particularly Heathrow for trade, for boosting UK productivity and the role of freight in and supply chain resilience. We think that needs to be addressed going forward.
09:21
Speaker 1
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Speaker 1
Yeah. Thank you. Our our view around the gaps that may exist. First, we don't believe that the policy statement does enough to show the importance of our only national hub. He throws a hub and hub. Airports have much better and very different economics for the nation than do point to point airports. Hub airports are precious. They're rare. Countries go to great lengths to establish these hubs, and the the pressure to build the hub is really, really powerful.
The second is we don't believe, like Easyjet, that the statement goes far enough, or the policy statement does far enough to address affordability and make affordability a fundamental and overriding condition for the national policy statement. Now, whatever that airport needs to invest to expand it, the airline community needs to put forth £75 billion in new, cleaner, more fuel efficient, quieter aircraft for this to work. And that element of affordability needs to be done voluntarily and needs to be maintained, because if it's not, then we risk losing that national hub.
And that is exactly what, as a community and at IAG we're working against, we want this expansion to succeed and we want it to be affordable.
The second is we don't believe, like Easyjet, that the statement goes far enough, or the policy statement does far enough to address affordability and make affordability a fundamental and overriding condition for the national policy statement. Now, whatever that airport needs to invest to expand it, the airline community needs to put forth £75 billion in new, cleaner, more fuel efficient, quieter aircraft for this to work. And that element of affordability needs to be done voluntarily and needs to be maintained, because if it's not, then we risk losing that national hub.
And that is exactly what, as a community and at IAG we're working against, we want this expansion to succeed and we want it to be affordable.
09:22
Speaker 1
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Speaker 1
Mr. chair, yes, since 2013, unfortunately, Heathrow has become the most expensive airport in the world and has held that record for that period. And it's double the price of any of the local hubs and most international hubs globally. So from our perspective, affordability is the most important factor that's not included. In 2018, we had the test, but we also had the secretary of state make the position that charges would significantly change from where they were at that point, and Heathrow Airport actually supported that position.
Now we have a situation where charges could go upward of £65 per passenger from where we are today at 20.
Now we have a situation where charges could go upward of £65 per passenger from where we are today at 20.
09:37
09:38
Speaker 5
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Speaker 5
answer that. The the economics of Heathrow as a hub are very, very powerful to the extent that that hub can grow, that will provide the best return for the UK. Building a hub is a gigantic and enormous investment to pull off the Middle East. Has has over the last 20 years tried to build large hubs in Doha and in Abu Dhabi, have invested billions and billions in the airlines. The capacity of the airlines, the aircraft itself to make it work, as well as the ground infrastructure needed to handle the aircraft that they're putting together.
Adding a second hub would be far more expensive, and we would need to probably support another state owned carrier in order to prevent the capacity, because the losses that it will suffer as it starts up and the amount of investment it needs to do to get to scale, because a hub requires a hub, airline would be significantly significant. And you can look at through audited financial statements and public disclosures from what has been spent in the Middle East as a benchmark for that.
But it would be in the tens of billions. The best investment for the UK is to make Heathrow work, make it affordable and expand it, and that will have benefits that flow to all of the nations, all of the regions of the UK.
Adding a second hub would be far more expensive, and we would need to probably support another state owned carrier in order to prevent the capacity, because the losses that it will suffer as it starts up and the amount of investment it needs to do to get to scale, because a hub requires a hub, airline would be significantly significant. And you can look at through audited financial statements and public disclosures from what has been spent in the Middle East as a benchmark for that.
But it would be in the tens of billions. The best investment for the UK is to make Heathrow work, make it affordable and expand it, and that will have benefits that flow to all of the nations, all of the regions of the UK.
09:39
Speaker 1
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Speaker 1
And just coming back on that resilience point, Heathrow, you'll have seen yesterday got to a point of being full. It didn't take very long for it to be full, and that's a reflection of the fact that, yes, it's fully utilised. That's, in the end why we need a third runway at the appropriate price to assure that we do actually have greater resilience, because relative to other hubs, now we're in a really.
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09:40
Speaker 3
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Speaker 3
No I don't. Well, certainly from easyJet's perspective, our views haven't changed. I think there is still demand, particularly for London. I mean, I've got some Oxford economics data as well that suggests that growth over the next five years is expected. Passenger demand is going to grow by 5% every year. So the demand is there. We need to make sure we've got infrastructure that meets that demand and that can supply that. And we are seeing that London airports are full.
So that is a challenge in the broader sense. I think what's interesting is the Dft's own appraisal suggests that capacity growth needs to come from 30 million from short haul passengers and 12 million from long haul passengers. And really, we need to make sure there is the infrastructure for short haul passengers and airlines as well. I think what's interesting is building on the previous questioning around hubs, I mean, the criticality of hubs. And obviously we're not a hub airline as such, but we operate into 48 of the 50 busiest airports in Europe.
So we're very used to operating into hub airports. The exception is Heathrow and Dublin are the only two we don't operate into. So it's not binary that that low cost carriers can operate successfully in those airports. I think what's interesting though, is if an airline is based at an airport that generates jobs. So your point , chair, about connecting over Europe, that doesn't generate the jobs. If an airline is starting and finishing at Heathrow, it's generating local jobs.
We operate. We employ 12000 people in the UK, pilots, crew, engineers and so on. So it will be the same for all other airlines . If we can generate connecting traffic from the UK and make sure that connection happens in the UK, that means you need based aircraft in those airports and that generates jobs. So I do think that is one of the benefits of Heathrow expansion or London expansion overall is generating employment and creating a stronger economy from it.
You know, taking on the point around the fact that, you know, connecting passenger may not spend that much in the terminal, but that connecting passenger does generate jobs. And that's the criticality that we shouldn't forget in this, in this piece. But going back to your original question, our position hasn't changed. I sat on this panel in 2018 and reiterated the same points. It needs to be about affordability. It needs to be about not being gold plated, and it needs to meet the demand of passengers that is growing in the UK.
And the external economic modelling suggests that demand is still growing, and we need to make sure that we're fit as an industry with the right infrastructure to be able to do that across the UK, not not just Heathrow, but, you know, 14 out of our 20 growth aircraft in the last two years have gone into have gone into regional UK. We haven't been able to grow in London. It's full.
So that is a challenge in the broader sense. I think what's interesting is the Dft's own appraisal suggests that capacity growth needs to come from 30 million from short haul passengers and 12 million from long haul passengers. And really, we need to make sure there is the infrastructure for short haul passengers and airlines as well. I think what's interesting is building on the previous questioning around hubs, I mean, the criticality of hubs. And obviously we're not a hub airline as such, but we operate into 48 of the 50 busiest airports in Europe.
So we're very used to operating into hub airports. The exception is Heathrow and Dublin are the only two we don't operate into. So it's not binary that that low cost carriers can operate successfully in those airports. I think what's interesting though, is if an airline is based at an airport that generates jobs. So your point , chair, about connecting over Europe, that doesn't generate the jobs. If an airline is starting and finishing at Heathrow, it's generating local jobs.
We operate. We employ 12000 people in the UK, pilots, crew, engineers and so on. So it will be the same for all other airlines . If we can generate connecting traffic from the UK and make sure that connection happens in the UK, that means you need based aircraft in those airports and that generates jobs. So I do think that is one of the benefits of Heathrow expansion or London expansion overall is generating employment and creating a stronger economy from it.
You know, taking on the point around the fact that, you know, connecting passenger may not spend that much in the terminal, but that connecting passenger does generate jobs. And that's the criticality that we shouldn't forget in this, in this piece. But going back to your original question, our position hasn't changed. I sat on this panel in 2018 and reiterated the same points. It needs to be about affordability. It needs to be about not being gold plated, and it needs to meet the demand of passengers that is growing in the UK.
And the external economic modelling suggests that demand is still growing, and we need to make sure that we're fit as an industry with the right infrastructure to be able to do that across the UK, not not just Heathrow, but, you know, 14 out of our 20 growth aircraft in the last two years have gone into have gone into regional UK. We haven't been able to grow in London. It's full.
09:42
Speaker 5
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Speaker 5
If I can add to what Sofia said, Airlines UK published some work that Steve had done which. Which suggested that four times more jobs are brought by an aircraft that's based here than one that's based overseas. And to the extent that that's a larger widebody aircraft, which is what Heathrow will have more of over time, that's more and perhaps up to nine times more jobs. So we would be losing out on a significant amount of good employment, good careers, and good economic activity, because we can connect passengers here if we don't make that investment.
To the second point for your question, IAG's views haven't changed either, right? The demand for expanding Heathrow is as big now as it was before. The economics for expanding the hub are really important. And the really key critical issue, the fundamental overriding principle, is that we need to find a way as a nation to deliver this affordably. If it's affordable, it's going to work for everybody.
To the second point for your question, IAG's views haven't changed either, right? The demand for expanding Heathrow is as big now as it was before. The economics for expanding the hub are really important. And the really key critical issue, the fundamental overriding principle, is that we need to find a way as a nation to deliver this affordably. If it's affordable, it's going to work for everybody.
09:43
Speaker 2
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Speaker 2
Can I can I add something? Yeah, from from a demand perspective, I think a logistics UK and the conversations that we've had with our members, we've really seen interest in infrastructure and improving infrastructure go up the agenda. A few years ago it was a, you know, private sector doing its thing, being as efficient as possible and mainly concerned about ensuring regulation , supported efficiency and safety. And we're increasingly hearing views not just about airports, but also road and rail and other aspects of infrastructure that they're hitting a ceiling on what they can deliver for the economy, and they need infrastructure investment across the UK, including to to grow Heathrow because it's full to deliver more for the UK economy.
And we're also hearing from the government focus on Reindustrialisation. So I think people are, you know, characterised UK trade as you know, we we buy goods and we sell services. The Reindustrialisation agenda implies that we're going to be selling more goods to which would be creating good jobs across the country. And that means selling those goods around the world. And a way to do that is through air.
And we're also hearing from the government focus on Reindustrialisation. So I think people are, you know, characterised UK trade as you know, we we buy goods and we sell services. The Reindustrialisation agenda implies that we're going to be selling more goods to which would be creating good jobs across the country. And that means selling those goods around the world. And a way to do that is through air.
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09:45
Speaker 3
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Speaker 3
Yeah. I mean, if I start from from our perspective, from easyJet's perspective, we are a pan-European airline. So we have 365 aircraft, 196 of them are based in the UK. The rest are based in Europe. We will continue to grow in Europe because we have choices about where we can where we can place capacity. So that's the reality. And actually a number of the UK regional airports are now becoming full as well. So our options are becoming more limited.
We're open the Newcastle base this year, so that's a good opportunity for us. And we opened Southend Airport last year because we want to grow in London, but there's no London capacity available. So those are opportunities we will be making and that we're trying to build. But really the reality is our decisions will be growing in Europe faster than we grow in the UK if there isn't a capacity.
We're open the Newcastle base this year, so that's a good opportunity for us. And we opened Southend Airport last year because we want to grow in London, but there's no London capacity available. So those are opportunities we will be making and that we're trying to build. But really the reality is our decisions will be growing in Europe faster than we grow in the UK if there isn't a capacity.
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09:46
Speaker 6
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Speaker 6
Sophie, you're not making the point I was making earlier in that you're you're looking at other airports because London's full. And I think what people want elsewhere in the country does want those direct flights to Europe and elsewhere. They don't want to go to London, you know, swap out Luton or wherever to get another Easyjet flight to Europe. They would rather have it direct. So although you're not happy with it, is that not delivering real benefits for those people that live in Newcastle, Edinburgh and all the rest of it, they do not want to go via London, do they?
09:46
Speaker 3
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Speaker 3
Yeah, and completely agree with you. Newcastle's when we used to operate in two and then and then we ceased operations and we've just restarted again this year. I think the challenge with somewhere like Newcastle is there was limited demand for the opportunity that we've got there. Somewhere like Edinburgh is is full first wave, so we can't base more aircraft there. The same for Manchester, the same for Bristol, the same for Birmingham. These are airports that are at capacity.
So the challenges of finding profitable, commercially viable flying in other parts of the UK are limited. And so that's one of the challenges we face. And you know, we have got the whole of Europe we can look at as well. So that's the trade offs that we make when we're making those assessments.
So the challenges of finding profitable, commercially viable flying in other parts of the UK are limited. And so that's one of the challenges we face. And you know, we have got the whole of Europe we can look at as well. So that's the trade offs that we make when we're making those assessments.
09:47
Speaker 5
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Speaker 5
If I can add to what Sophie was saying from IAG's point of view, this is not an either or question. Investment in Heathrow doesn't need to change investment in Edinburgh and other airports, airports, if they can develop affordably, if they can add the ability to handle more flights at particular times of day affordably, airlines will find a way to put capacity where the demand actually wants to be. And the second, if Heathrow can't expand, it makes it very difficult for British Airways to expand.
And the economics of British Airways are very good. It's a very good employer. It has a very, very good network that's been built out over 100 years. It's a tremendous asset for the country, and to the extent that we're not able to expand that business, that's a lost opportunity for all of the United Kingdom and for London. And then we will push more of our investment into Europe, where we own three other airlines, all of which we're trying to make as good as possible.
And the economics of British Airways are very good. It's a very good employer. It has a very, very good network that's been built out over 100 years. It's a tremendous asset for the country, and to the extent that we're not able to expand that business, that's a lost opportunity for all of the United Kingdom and for London. And then we will push more of our investment into Europe, where we own three other airlines, all of which we're trying to make as good as possible.
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09:48
Speaker 3
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Speaker 3
No, I mean, I would disagree as well. I don't think it's either or. As Jonathan said, I think we've got 267 aircraft on order. We need places to put them. We will be growing in the UK regions and growing in London if there's the opportunity and if it makes commercial sense. So I don't think it's either or. And certainly at the moment our track record recently is growing in UK regions where there is capacity and where it makes sense.
I would also point out that airport charges in UK regions are much more affordable than they are in London, which does pay part of our investment there.
I would also point out that airport charges in UK regions are much more affordable than they are in London, which does pay part of our investment there.
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09:49
Speaker 1
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Speaker 1
I affairs, I don't recognise that necessarily because all hubs have to be competitive with each other. People will use software to identify, you know, what's the best route to take for for the price in terms of resilience? I would raise that as a concern if we don't have expansion, because as I say, we're operating at full capacity and it takes quite a long period of time to recover from situations like yesterday. We've got a lot of aircraft that were dispersed across Europe.
They're going to find it very difficult to get back into the UK today, because there aren't that many slots, ad hoc slots available at Heathrow for them to get back in. Jonathan.
They're going to find it very difficult to get back into the UK today, because there aren't that many slots, ad hoc slots available at Heathrow for them to get back in. Jonathan.
09:50
Speaker 5
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Speaker 5
We fundamentally disagree with the way that modeling is carried out. The competitive forces in aviation are extreme and severe, and we compete every single day. Those forces have an impact on price, and price out of Heathrow is roughly comparable to prices out of any hub in the world, based on the distance that's being flown for the products that's being served. The DFT for a long time has suggested that by now we would have significantly higher prices because Heathrow has been full for 20 years.
The way the modeling is done is one thing, pushing that onto the airline community, which is significantly competing every single day doesn't come through in higher prices.
The way the modeling is done is one thing, pushing that onto the airline community, which is significantly competing every single day doesn't come through in higher prices.
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09:51
Speaker 1
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Speaker 1
Yes. I mean, he threw themselves are suggesting there's going to be an additional 30 routes coming into Heathrow that will open up new markets, new trade potential and allow for other airlines to potentially service the UK market and connect with other airlines through alliances and relationships. Through that, through that airport.
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09:51
Speaker 1
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Speaker 1
Yes, it could be both. But the fundamental that underpins all of that will still be affordability. It still needs to make economic sense for those airlines that are not based here to be able to fly into the UK and have connecting flights and and operations through Heathrow, and they will look at the other hubs from that perspective.
09:52
Alex Mayer
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Alex Mayer
Just picking up on cost. We had a session on carbon and the climate change impact yesterday, and our witnesses talked about the, the, the what should be the carbon cost of extension expansion and aviation in future. Was that cost also modelled into both your analysis and the government's analysis, as well as the cost of construction?
09:52
Speaker 5
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Speaker 5
At IAG, we're committed to net zero. We have a roadmap that will work towards a net zero. It has three core pillars and sustainable aviation fuel is a good portion of that . With the right policy framework and with this global approach towards driving to net zero, we believe that carbon will will work to that direction and the price, and. That
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Speaker 5
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Speaker 5
This this is a global problem . At the start. We need to establish a global industry as as IAG and we are working with the UK government and governments around the world to establish that. And as these mandates come in, we're working to try and make sure that global industry is established. Delaying Heathrow's expansion while we wait on the industry's establishment is only going to hurt the UK. This is a problem that needs to be solved globally.
09:53
Speaker 1
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Speaker 1
And obviously from that perspective, Iota has this sustainability as a primary focus, and clearly they are mandating kind of net zero targets for 2050 and SAF will be 65% of that in terms of realization. So there's yes, there's a lot to be done to actually allow governments to catch up with with what's needed.
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09:54
Olly Glover
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Olly Glover
Thank you. Chair, I would just like to start with Doctor Budd for this question, please. We've touched on this a little bit already, but one of the key cases for expansion of Heathrow is about business travel and the revenues that result from that. But business travel has been declining as a proportion of all journeys at UK airports since 2017, and is forecast to continue declining until 2050. So have the benefits of business travel of Heathrow expansion been overstated, in your view?
09:54
Speaker 4
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Speaker 4
As I said in my opening statement, I think one of the biggest one of the one of the biggest changes since 2018 has been the decline in business travel. According to the Dft's 2026 aviation forecast, the proportion of travellers flying purely for business purposes fell from 19% in 2019 to 13% in 2024. Now, while there are an important variation, so London City Heathrow are above that national average, the trend does seem to be declining. And at the same time, we're seeing a rise in the proportion of leisure travellers.
And we talked about affordability earlier. And certainly there is some evidence that, yes, some passenger segments are price sensitive. But equally there is increasing evidence that some passengers, particularly on the longer haul leisure routes, are trading up to the premium economy, the business class products. So the issue of affordability is quite nuanced and not perhaps as straightforward as one might think.
And we talked about affordability earlier. And certainly there is some evidence that, yes, some passenger segments are price sensitive. But equally there is increasing evidence that some passengers, particularly on the longer haul leisure routes, are trading up to the premium economy, the business class products. So the issue of affordability is quite nuanced and not perhaps as straightforward as one might think.
09:55
Speaker 5
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Speaker 5
If I could add, there was a step change in business travel as a result of the pandemic, but business travel itself now in total is growing. Maybe the proportion overall, it is not growing as fast as the leisure travel segment, but to suggest that business travel in 2050 will be less in absolute terms than today is a mistake. In our point of view, we think the United Kingdom needs to be able to service as much of that business travel as possible, and it needs to be done at times of day when business travelers need to travel.
09:55
Speaker 4
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Speaker 4
If I can respond to that, certainly we have seen a number of corporations fundamentally change their business travel policy in light of the pandemic, but also in light of concerns about climate chaos also as well. We're seeing individual consumers making more considered choices about how, when and where they choose to travel. So I think all of these behavioural dynamics also need to come into play here in terms of the consideration about what the future demand profile for business travel particularly, is going to look like.
We're already quite familiar now with using alternative technologies, video calls, etc., and I think there is scope there for new technologies as well as in the aviation side, but also in the IT and communications space to change the landscape of future business travel needs.
We're already quite familiar now with using alternative technologies, video calls, etc., and I think there is scope there for new technologies as well as in the aviation side, but also in the IT and communications space to change the landscape of future business travel needs.
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Speaker 3
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Speaker 3
Yeah. I think if I, if I may start, I think a lot of it is around people travelling more frequently actually, but also from a business travel perspective, the profile of business travel has changed, but people are now looking for value. And certainly what's interesting on business travel is short haul hasn't been as impacted. Short haul into Europe, into the major hubs, hasn't been as impacted as long haul. We're seeing I think we're around 19% business passengers pre-pandemic, and we're about 16% now.
But that's actually building back. And it's actually what's interesting is it's very closely correlated with the frequencies and schedule that you operate. So if we operate two a day into a major city, more likely to have a business passenger profile than if we offer operate three a week, for example. So we're actually looking at investing in building back some of our city proposition to be able to serve that. But what's also changed is people's behaviour in terms of where they're working.
So a lot of people moved out of London during the pandemic and have moved into Edinburgh, moved into Scotland and are now commuting in. And so we now have I think the profile of a business traveller has changed slightly. So it's less the big corporates travelling completely support what you're saying. It's more around the SMEs who are still travelling, but also the the commuters. So people are now commuting. So that is building back. So I think the combination of that plus leisure travel, which is which has continues to grow and demand for leisure travel continues to grow.
Interestingly, the profile of what people are spending their money on post-pandemic is more around experiential spend. So it is more around experiences rather than material products. And we're seeing that trend continuing. And therefore the demand for leisure travel continues to grow as well.
But that's actually building back. And it's actually what's interesting is it's very closely correlated with the frequencies and schedule that you operate. So if we operate two a day into a major city, more likely to have a business passenger profile than if we offer operate three a week, for example. So we're actually looking at investing in building back some of our city proposition to be able to serve that. But what's also changed is people's behaviour in terms of where they're working.
So a lot of people moved out of London during the pandemic and have moved into Edinburgh, moved into Scotland and are now commuting in. And so we now have I think the profile of a business traveller has changed slightly. So it's less the big corporates travelling completely support what you're saying. It's more around the SMEs who are still travelling, but also the the commuters. So people are now commuting. So that is building back. So I think the combination of that plus leisure travel, which is which has continues to grow and demand for leisure travel continues to grow.
Interestingly, the profile of what people are spending their money on post-pandemic is more around experiential spend. So it is more around experiences rather than material products. And we're seeing that trend continuing. And therefore the demand for leisure travel continues to grow as well.
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09:59
Speaker 3
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Speaker 3
The remaining though the remaining two thirds is city and domestics and city travel is 5050 from both directions. That's what we typically see on a route. But as I say, really the schedule that you operate and build determines the type of passengers you get. So if we do three a week, it's very much going to be a leisure city break. If you do double daily, you're more likely to see your business passengers going on to it.
So we do see there's still demand there. And that's where we're investing. Some of our capacity is building back that it kind of goes hand in hand with the schedule that you operate. That's
So we do see there's still demand there. And that's where we're investing. Some of our capacity is building back that it kind of goes hand in hand with the schedule that you operate. That's
09:59
09:59
Speaker 5
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Speaker 5
So as at a hub, it is slightly different than than what the point to point networks have. And Sophie's exactly right. The the more consistent the schedule is and the more you have double daily, the more business travelers you get the overall growth. And the way we look at the estimations of this over time, it's closely tied to the overall growth of the relative economies. And so at IAG, one of our most important markets is the transatlantic market.
And to the extent the the United States has been growing faster than Britain, that point of sale passengers originating from there and through our partnership with them.
And to the extent the the United States has been growing faster than Britain, that point of sale passengers originating from there and through our partnership with them.
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10:01
Speaker 5
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Speaker 5
I believe it comes back to how well the UK economy can do, relatively speaking, to the growth rates of the rest of the world. If the United Kingdom is growing much more slowly than you would expect, that you would have more inbound travel, perhaps more of that's leisure. The United Kingdom can economically go forwards. We'll get more business travel to proportion of that. It really comes down. A lot of our flights are business based.
It comes down to the ability of business to work.
It comes down to the ability of business to work.
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10:01
Jacob Collier
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Jacob Collier
Yes. Thank you. The draft maps doesn't include detailed forecasts of freight, and they're assumed at the 2019 levels. Do you think that that I'm looking at yourself Ben. Do you think that that's a reasonable assumption. And what do you think the additional economic impact is of more freight at Heathrow?
10:02
Speaker 2
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Speaker 2
We don't think it's a reasonable assumption, and we're concerned that it does underplay the role. Freight. I think from our perspective, the overriding reason to expand Heathrow's economic and to support the growth of the UK economy and freight is a is a really key part of that. We see in in various parts of. DFT modelling a struggle to capture the full benefits of freight in how they and how they approach things. So it's not this is not a unique to to this issue question.
It happens across road and rail and other investment too, but we think it underplays the opportunity to move more goods more efficiently by by air cargo, which then also therefore underplays the productivity benefit across the UK and supply chain and resilience benefits. It is it is potentially harder to capture those to capture those benefits statistically than looking at passenger revenues, because the the cargo element is just is the air cargo element is one part of a of a longer journey.
But we do think that it could do a better, better job of that. And we're confident if it did capture that, it would even more increase the case for Heathrow expansion.
It happens across road and rail and other investment too, but we think it underplays the opportunity to move more goods more efficiently by by air cargo, which then also therefore underplays the productivity benefit across the UK and supply chain and resilience benefits. It is it is potentially harder to capture those to capture those benefits statistically than looking at passenger revenues, because the the cargo element is just is the air cargo element is one part of a of a longer journey.
But we do think that it could do a better, better job of that. And we're confident if it did capture that, it would even more increase the case for Heathrow expansion.
10:03
10:03
Speaker 2
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Speaker 2
Yes. There's a there's the cargo handling estate element of it as well. And I think, you know, our members, he he for for transparency Heathrow as a member of logistics UK and lots of other of our members use use Heathrow and they work closely with Heathrow to try and make that cargo handling estate as as efficient as as possible. It's a relatively constrained, congested part of part of the country. So we want to see continued investment in that.
It's probably not a case of massively expanding that part of the estate, but about investing in technology and looking at where regulations can help make it work as smoothly as possible. But they're much broader than that. What you'd call surface access for passengers, the road and rail networks and connectivity with Heathrow all part form part of part of the picture. And we want to see, not necessarily from from the airport, but policy more broadly and improved understanding and focus on how we can make our road and rail networks, including where they connect to major hubs like Heathrow, work as smoothly as possible.
And that means maybe moving away from a potentially piecemeal project by project view of infrastructure investment, public infrastructure, investment in the country, and more towards understanding how the logistics system works. As a network. We produce some research on that in 2024, where we published a map of where we think the core logistics networks are in the country, road and rail, and how they connect to our key ports and airports, including Heathrow, and we want to see that have a greater influence on investment plans from the government going forward, to understand where we need to improve our efficiency as a country.
It's probably not a case of massively expanding that part of the estate, but about investing in technology and looking at where regulations can help make it work as smoothly as possible. But they're much broader than that. What you'd call surface access for passengers, the road and rail networks and connectivity with Heathrow all part form part of part of the picture. And we want to see, not necessarily from from the airport, but policy more broadly and improved understanding and focus on how we can make our road and rail networks, including where they connect to major hubs like Heathrow, work as smoothly as possible.
And that means maybe moving away from a potentially piecemeal project by project view of infrastructure investment, public infrastructure, investment in the country, and more towards understanding how the logistics system works. As a network. We produce some research on that in 2024, where we published a map of where we think the core logistics networks are in the country, road and rail, and how they connect to our key ports and airports, including Heathrow, and we want to see that have a greater influence on investment plans from the government going forward, to understand where we need to improve our efficiency as a country.
10:05
Jacob Collier
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Jacob Collier
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Speaker 2
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Speaker 2
I think if you I think there are adequate if you if you zoom in at that level and, you know, the greater concern, I think, from our members will be on that. Like lots of people around the disruption to the road network during it. I think that is more of a case of like, you know, things should be expanded. So that's about communication between Heathrow National Highways and, and, and the logistics sector. And we've seen a good test case of that with major junction upgrade and the first closure of the M25.
And I think ever to deliver to deliver upgrade relatively near Heathrow recently. So there's a test case for it. But I think we need to look more broadly than that at general, you know, M25, M4 capacity, freight network capacity across that across that part of the country to make sure that we can move freight as smoothly as possible. And if you zoom out on that level, I don't think that's fair to say that, you know, that's Heathrow responsibility.
That is a that's a responsibility from the Department for transport, working with the logistics logistics sector and others to establish where, over time, we need to keep investing in our infrastructure to make it work smoothly.
And I think ever to deliver to deliver upgrade relatively near Heathrow recently. So there's a test case for it. But I think we need to look more broadly than that at general, you know, M25, M4 capacity, freight network capacity across that across that part of the country to make sure that we can move freight as smoothly as possible. And if you zoom out on that level, I don't think that's fair to say that, you know, that's Heathrow responsibility.
That is a that's a responsibility from the Department for transport, working with the logistics logistics sector and others to establish where, over time, we need to keep investing in our infrastructure to make it work smoothly.
10:06
Speaker 4
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Speaker 4
If I may just add a couple of points on the air freight side, the wide bodied aircraft that are going in and out of Heathrow have the capacity to transport belly haul cargo that the narrow body fleets that typically operate the point to point services do not. Now. This has enabled Heathrow to develop quite a substantial cargo operation, despite having very, very few, if any, dedicated cargo aircraft. However, just as we've seen with the passenger side, where we've got specialization between the point to point short haul and the full service network hub model, we've also seen specialization in the freight sector.
So while Heathrow has operating restrictions which prevent freight flights and any other flights operating at certain hours of the night, other airports such as East Midlands and Stansted, do not have those operating restrictions. That has enabled them to grow a very significant 24 hour cargo operation. So you've got dedicated freighter aircraft coming in in the early hours of the morning, and I think it's quite important to consider that niche specialization of the integrator coming in on dedicated freight aircraft as opposed to the belly hold cargo, which is coming in through Heathrow.
And I think that's an important point to consider, certainly in terms of will the operating restrictions at Heathrow remain? What will they look like? What would the impacts of that be on logistics and forwarders in the country?
So while Heathrow has operating restrictions which prevent freight flights and any other flights operating at certain hours of the night, other airports such as East Midlands and Stansted, do not have those operating restrictions. That has enabled them to grow a very significant 24 hour cargo operation. So you've got dedicated freighter aircraft coming in in the early hours of the morning, and I think it's quite important to consider that niche specialization of the integrator coming in on dedicated freight aircraft as opposed to the belly hold cargo, which is coming in through Heathrow.
And I think that's an important point to consider, certainly in terms of will the operating restrictions at Heathrow remain? What will they look like? What would the impacts of that be on logistics and forwarders in the country?
10:08
Alex Mayer
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Alex Mayer
Another area, but I think one of the few conditions of terminal five that we were able to have speaking locally is the night flight restrictions. But Ben, just going back to the road network, do your members operating at Heathrow raise issues around about the road network around Heathrow at the moment? Because certainly that's often raised and we've got the local authorities coming next week and frequent congestion. M25 was out last week.
Yeah, yeah. And a lot of very old for your members coming in and out of the cargo terminal. A lot of very narrow roads, Victorian brick bridges and so on, which we worry about. Is that an issue now and do you think there's enough in the in the draft policy policy statement about future road infrastructure?
Yeah, yeah. And a lot of very old for your members coming in and out of the cargo terminal. A lot of very narrow roads, Victorian brick bridges and so on, which we worry about. Is that an issue now and do you think there's enough in the in the draft policy policy statement about future road infrastructure?
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Speaker 2
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Speaker 2
There's probably isn't enough in the policy statement. I'd say it's an issue that we have around many major hubs in this country. We've got often we've got big hubs just off the strategic road network. So there's differential level of investment in the strategic road network, road network and elsewhere. Particularly affects the ports to the east of the country in the on the east of the country as well. And that's why we've produced this map to try and say it isn't just about the strategic road network and the local network.
It's about understanding where freight flows go and understanding where , therefore we need to put that investment. But it does come up. It's, you know, it's congested part of the of the country, the whole, you know, the South east is a very is a very busy place. And our members want to see it work as, as efficiently as possible. But they also, you know, they're not arguing for building a hub elsewhere. They want this hub to work as well as possible.
But and then almost anywhere we talk about in the country, on the road network, we're seeing road speeds slow across the strategic road network, which is harming UK productivity. So we need to see that addressed. Which
It's about understanding where freight flows go and understanding where , therefore we need to put that investment. But it does come up. It's, you know, it's congested part of the of the country, the whole, you know, the South east is a very is a very busy place. And our members want to see it work as, as efficiently as possible. But they also, you know, they're not arguing for building a hub elsewhere. They want this hub to work as well as possible.
But and then almost anywhere we talk about in the country, on the road network, we're seeing road speeds slow across the strategic road network, which is harming UK productivity. So we need to see that addressed. Which
10:10
Olly Glover
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Olly Glover
Thank you. Chair. Is Mr. Garrett in your written evidence? Logistics UK called for the final Heathrow expansion Network policy statement to place greater emphasis on the use of rail freight during construction. Now, in your view, would the capacity of the rail freight corridor that already exists Heathrow need to be enhanced in order to make that possible?
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Speaker 2
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Speaker 2
Likely, yeah. So rail freight plays a really strong role in our overall logistics system. It's about 8%, nearly 10% by ton kilometers across the country. And in certain segments, it plays a particularly strong role construction and the the ability to move very heavy things is a sort of forte of , of rail freight. And to get more to get more into that area, as we've seen in other major infrastructure projects elsewhere, you know, it would require some additional work to make it make it happen.
We haven't done a study on what additional work would be required, but it's not necessarily, you know, building whole sections of new track. It could be additional sidings, freight terminal capacity, things that could be done without disrupting passenger network. But, you know, I think if we want to get more on rail freight in general, we're going to have to expand our rail freight network.
We haven't done a study on what additional work would be required, but it's not necessarily, you know, building whole sections of new track. It could be additional sidings, freight terminal capacity, things that could be done without disrupting passenger network. But, you know, I think if we want to get more on rail freight in general, we're going to have to expand our rail freight network.
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Olly Glover
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Olly Glover
I would agree with your analysis. And of course, the Great Western main line, slow lines or well in Western region language, they call them relief. But that's one for another day that it's more busy, much more busy now because of Crossrail Elizabeth line. So I think you're right about that. And what about if we if at some point this century or millennium we ever get the Western or southern rail access, how do you feel that might impact freight potential?
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Speaker 2
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Speaker 2
Well, I mean, I guess, you know, we're really you know, we're pro, as you might have heard, pro building infrastructure. So we want to see those those projects go ahead. You know, we heard from the Transport Secretary yesterday the new interim target for rail freight growth a 40% by 2040 ahead of the 2050 target, delivering that rail freight growth not just around Heathrow but across the country, will inevitably require investing in infrastructure for freight that could be quite different from passenger infrastructure.
I think so often what happens in the rail freight planning space is a passenger project is proposed and then we as a community, the freight community can see it happening and think, well, can we have this on top, please? Can we have to make it work as well as possible? We'd really like to see a more freight centric way of doing things, given, you know, it can play a much bigger role than the government wants to play, and the industry wants to play a bigger role in the movement of freight.
But we haven't come up with a particular piece of engineering around there. But more capacity the better. Yeah, sure. If
I think so often what happens in the rail freight planning space is a passenger project is proposed and then we as a community, the freight community can see it happening and think, well, can we have this on top, please? Can we have to make it work as well as possible? We'd really like to see a more freight centric way of doing things, given, you know, it can play a much bigger role than the government wants to play, and the industry wants to play a bigger role in the movement of freight.
But we haven't come up with a particular piece of engineering around there. But more capacity the better. Yeah, sure. If
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Speaker 5
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Speaker 5
I if I may add to that one of the big deviations of this national policy statement versus the 2018 national policy statement was that it's asking the airline community and the passengers to pay for all of the ground transport improvements, rather than a user pays approach, which is more done in 2018. That has a massive impact on the ability to afford this expansion. To the extent that there's benefits shared in users that are going to be shared over the overall infrastructure itself.
We believe as an airline community, as IAG, that that should be on a user pays benefit consistent with how it was done in 2018. Rather than asking airlines and airline passengers to pay for all of that.
We believe as an airline community, as IAG, that that should be on a user pays benefit consistent with how it was done in 2018. Rather than asking airlines and airline passengers to pay for all of that.
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Alex Mayer
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Alex Mayer
Just while we're on the subject of rail, I was only recently aware, as probably for Nigel, I was only recently aware of the the the line that's bringing oil into the airport and that it potentially is impacted with construction of a third runway and terminal. What what are your members saying to you about this?
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Speaker 1
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Speaker 1
So clearly that line is a key critical provider of fuel. It also provides some level of resilience relative to the fuel lines that also come into Heathrow. But from our perspective, this is why risk is such such a big issue with regard to the 3500 meter runway from day one, we probably prefer to have a or we would prefer to have a phased approach and consider a shorter runway. And then from there look at expanding to a longer runway.
And combined with that, we'd also suggest that the Hemps mustn't lock in one scheme. It should stay open to a phased approach, and it should be open to alternative promoters than just Heathrow Airport. So we've got Heathrow West as an available promoter that provides competitive tension with regard to pricing.
And combined with that, we'd also suggest that the Hemps mustn't lock in one scheme. It should stay open to a phased approach, and it should be open to alternative promoters than just Heathrow Airport. So we've got Heathrow West as an available promoter that provides competitive tension with regard to pricing.
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Speaker 1
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Speaker 1
The substation would have to move, and there's, I think, three lakes and a river that lakes would probably have to be filled in. Now, if we're suggesting that all of those could be done within a five year period, and we'll be able to runway of 3500m, I have concerns as to whether that's achievable. When we've got two tunnels that have taken 13 years, instead of three years to deliver and have been four times the price.
So my confidence in taking that risk of moving them 25 in the initial period is, is battered by the fact that Heathrow has not had great success in delivering tunnels, as an example, and I don't think we need to go there from day one. We need to have something that can be delivered and operated, and a shorter runway would achieve that. And from there we obviously get utilisation and opportunity to expand at another point.
So my confidence in taking that risk of moving them 25 in the initial period is, is battered by the fact that Heathrow has not had great success in delivering tunnels, as an example, and I don't think we need to go there from day one. We need to have something that can be delivered and operated, and a shorter runway would achieve that. And from there we obviously get utilisation and opportunity to expand at another point.
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Speaker 6
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Speaker 6
I'll try and keep this brief because I think we're up against the clock. The. So domestic connectivity is I think part of the argument for is about increasing, you know, flights into London and also connecting to these onward destinations. So so is there enough to be is there enough in what's what's being proposed to ensure that we do have domestic connectivity? Or should the government be much more forceful in ring fencing capacity? Or should we just leave up to Heathrow to decide what the balance is, what balance is right for the airport?
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Speaker 5
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Speaker 5
So perhaps I can go first. We operate more than 95% of the domestic connectivity out of Heathrow, and more than 50% of the domestic connectivity in London. In general, the most important issue to establish that is going to be affordability. And I know I'm banging on about affordability, but to the extent we can get that expansion built affordably, the site built affordably, the airlines, including British Airways, will have the capacity, the financial capacity and the desire to add more flights and more destinations to the UK regions and the UK cities.
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Speaker 5
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Speaker 5
From our point of view, the government need not ring fence it because the desire will be sufficient if the economics to build it affordably are there, right? We need that extra runway and terminal capacity in order to add that in. It's been crowded out a little bit over the last few years. We can add those flights back in if the airport is delivered affordably, the
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Speaker 1
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Speaker 1
So it's important that we get this right in terms of cost. Maybe I can reframe that. Our domestic network is very important to us. It is not a marginal part of our business. We we maintain that domestic network because it's in the best interest of overall business. We want great. connectivity to everywhere we serve, consistent service spread through the day that connects to our overall route network that serves the local passenger very well.
We have a significant number of flights to Edinburgh, of which I'm a frequent user, also to Glasgow, but. But it also serves the connecting passengers as they as they move through the day. Just building on that because actually, I was just going to say, you know. Easyjet is an example of where we should be achieving connectivity at the right price, economically viable way, because then they'll be able to connect with all the Chinese airlines and all the other airlines that go through.
Heathrow directly. Their passengers can come from. Newcastle or Edinburgh or Glasgow, through Heathrow onto a Chinese airline out to Shanghai. That wouldn't be. available on point to point, because you're never going to get to a situation where. Edinburgh's got all of that choice available to it. Yes, it will have a. concentration of some routes into the Middle East and North America, but the. breadth of opportunity that comes with .
Heathrow
We have a significant number of flights to Edinburgh, of which I'm a frequent user, also to Glasgow, but. But it also serves the connecting passengers as they as they move through the day. Just building on that because actually, I was just going to say, you know. Easyjet is an example of where we should be achieving connectivity at the right price, economically viable way, because then they'll be able to connect with all the Chinese airlines and all the other airlines that go through.
Heathrow directly. Their passengers can come from. Newcastle or Edinburgh or Glasgow, through Heathrow onto a Chinese airline out to Shanghai. That wouldn't be. available on point to point, because you're never going to get to a situation where. Edinburgh's got all of that choice available to it. Yes, it will have a. concentration of some routes into the Middle East and North America, but the. breadth of opportunity that comes with .
Heathrow
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Speaker 3
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Speaker 3
People aren't going to choose to fly where you've got a. £65 airport charge before you add anything else on top of it. So it does come down to affordability. I think the other thing government can do, and I completely agree with what Jonathan says, I don't think government should determine exactly how much is for domestic domestic capacity. One of the big game changers for us was the halving of APD. And obviously I would have to mention that on a on a transport Select committee, but the halving of APD made a material difference to our domestic investment.
We increased our domestic capacity by. 30% when APD was halved. And in fact, actually today we've just launched Manchester, Southampton and we're going to start flying from December. So we will continue to invest in domestic capacity where it's affordable. But the other point I would like to add is around.
We increased our domestic capacity by. 30% when APD was halved. And in fact, actually today we've just launched Manchester, Southampton and we're going to start flying from December. So we will continue to invest in domestic capacity where it's affordable. But the other point I would like to add is around.
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Speaker 3
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Speaker 3
And being able to deliver operationally. And that's got to be about having efficient terminal. capacity that facilitates that short turnaround. That is typical with a low cost model. So we have experience of doing that in other airports like Lisbon and and Amsterdam Schiphol and Paris Orly, where you can do that.
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Speaker 3
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Speaker 3
Being able to. facilitate that 35 minute turnaround time means you can keep the prices low for passengers because you have maximum utilisation of the aircraft. So so when we talk about affordability, we shouldn't just think about the cost of construction. We need to think about the type of construction. And we're not asking for a specific terminal. And actually you don't need a different terminal to operate. You just need.
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Speaker 3
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Speaker 3
So the ability on, particularly for us being able to board both front and rear steps, which we do, which we were able to introduce at Lisbon, where we just initially just had the Airbridges. We now have rear step boarding as well, reduced the turn time by seven minutes. So, and Heathrow doesn't need to design anything specific, but just needs to enable that type of boarding to be able to have that efficiency. Efficiency equals affordability, which then means we can pass the costs on.
And if you can keep the costs low, then the attractiveness of doing domestics and shorter sectors becomes a commercial realism for airlines. So it all needs to be part of that package in terms of the. considerations going forward. But let's not forget the impact of . Things
And if you can keep the costs low, then the attractiveness of doing domestics and shorter sectors becomes a commercial realism for airlines. So it all needs to be part of that package in terms of the. considerations going forward. But let's not forget the impact of . Things
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Speaker 2
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Speaker 2
like APD that can have on domestics and open up capacity. Their vision for Easyjet connecting into these long haul flights, you know, perhaps from Edinburgh, of course, the I mean, that also means, though, that there'll be much more people probably moving between terminals and much more people collecting their Easyjet luggage to go on to their whatever their long haul. I mean, that adds a lot of complexity. Heathrow's operation as well, because nobody likes doing that, do they? Picking up their luggage and .
Then
Then
10:23
Speaker 3
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Speaker 3
rechecking it in. No, it does add a lot of a lot of headroom doesn't it? Yeah. I mean it's really interesting you say that. So yes, today we connect with 16 other. carriers through that kind of manual process. But we have a live project at the moment that that's called managed connections, which is essentially looking to do through bags so that we take that point of friction out from customers. So we're hoping to launch a trial with that in October, actually in Geneva, because that's better set up for us.
But that will enable Easyjet to Easyjet connections with through bags, which then we can open up. So then we can, as Nigel said, we can then connect into other long haul carriers across the network. So that is a real we see that as a real opportunity. We are one . Of the
But that will enable Easyjet to Easyjet connections with through bags, which then we can open up. So then we can, as Nigel said, we can then connect into other long haul carriers across the network. So that is a real we see that as a real opportunity. We are one . Of the
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Speaker 1
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Speaker 1
budget? Come on, Nigel, can I. Yeah, I think it can. It depends on what you define as the budget because the budget at the moment, in terms of the key scheme provider at Heathrow Airport is suggesting 49 billion. And that's a starting point. That's without surface access and various other costs that will be built in. So from our.
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Speaker 1
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Speaker 1
One isn't required from the. outset and two probably wouldn't be. deliverable within the time frame if we had a phased approach and delivered a shorter runway initially, that would then take the opportunity of delivering more. capacity that could be delivered on time and could be delivered to a more effective price, particularly when you . Consider
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Speaker 7
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Speaker 7
Through the regulation to the CAA over time, and then through the CAA's regulatory change process that they're undergoing because they recognise there's a problem with the regulatory framework around the economics of Heathrow, bring competition to bear and better capital governance over time. If we design from the start that we need to deliver this on time affordably and make it work, we have a much better chance of . Achieving
10:27
Speaker 5
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Speaker 5
it than if we're trying to fix it halfway through. So the airlines will have a more specific response to that. The reason I answer to the the longer runway piece is because that's so crucial to the wide body long haul flights that support air cargo from from the logistics sector perspective, you know, obviously we would want to see it. delivered as on time and on budget. We're generally, you know, believers in the market and would hope that Heathrow and others around the project would want to see it work for its for its customers.
And we'd be looking forward to working. closely with them as an . Industry
And we'd be looking forward to working. closely with them as an . Industry
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Speaker 3
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Speaker 3
and just and helping to scrutinise that while, while it's happening. I think, if I may just add, I think the key point for me and for Easyjet and for the industry is around not forgetting the importance of airspace reform and London airspace reform, because we can't continue to grow infrastructure on the ground without fixing what's happening in the skies. I mean, this is something government have committed to under UK adds, but we're not seeing you know, again, I talked about it in.
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Speaker 6
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Speaker 6
So we need to look at what's happening in the sky, as well as what's happening in the ground. And just to add to that point, I would agree entirely. The discourse around expansion is being framed very much in terms of additional ATMs. Now, of course, the ability to deliver that depends not only on the. infrastructure and assets, the design and. configuration of what's on the ground, but also, as you rightly say, what's in the air as well.
And of course, given that the airspace architecture and the ATC procedures have a very direct and significant impact on emissions, noise and.
And of course, given that the airspace architecture and the ATC procedures have a very direct and significant impact on emissions, noise and.
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Speaker 2
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Speaker 2
Consideration about airspace design and. modernization in the document. Just very briefly, chair, I'll cover question 14. The the tragedy here is, of course, is that airspace. modernization will hopefully reduce noise for some people will reduce emissions. But the whole project has been delayed because that team, they're looking at Heathrow. So in Edinburgh the consultation has already been underway. But now we're .
Faced in
Faced in
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Speaker 7
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Speaker 7
proposals that have been put forward by the promoters. Yeah. In what we wrote to you with with our submission in advance, this committee, we did call it a fifth test. We've modified our view and we're asking for what we're calling now, a fundamental overriding. principle that could be inserted into section four of the document. We provide a draft language to the . Department for
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Speaker 3
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Speaker 3
what would be more meaningful for the logistics sector overall. Yeah, I think the short answer, building on what I said at the very opening in terms of some of the the willingness of the wording in in paragraph four, in particular, in the in the draft statement is, you know, our view as it should be independently assured and it needs to be.
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Speaker 7
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Speaker 7
How that those potential charges should work? So we are working with with both promoters and the way that we're engaging with them, they they're trying to work through how they're phasing would work and how that would work into a charging profile. What we would need, though, is for whatever the promoters put. forwards with evidence on how they want to spend things, how the. competition itself can be run, because the wording around.
competition in the national policy statement makes it very difficult to effectively compete. But how that competition itself can be run can bring forwards a way to make.
competition in the national policy statement makes it very difficult to effectively compete. But how that competition itself can be run can bring forwards a way to make.
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Speaker 7
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Speaker 7
And so that the promoters themselves are taking on some risk in that process. In order for us overall to deliver this on time, on. budget and make it work for everybody. Because remember, the airline community for this work also has to put. £75 billion of its own investment forwards. And we need the conditions right to do that. The building on the airport just doesn't bring the capacity. Airlines have to bring the aircraft and run the schedules, and it's just.
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Speaker 7
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Speaker 7
If I can, if I can add to that, I'm sorry, Sophie, do you want to go ahead? The economic work that we've performed and we had a consulting firm, Oliver Wyman, conduct some independent analysis around this validates the. 6 to £7 or. 5 to £6 increase in charges starts to break what we would call short haul economics. And it's very difficult for the short haul capacity to remain in Heathrow at that point.
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Speaker 7
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Speaker 7
investment means it needs to be a place where all airlines want to compete. And if charges rise too much and the short haul element of that airport doesn't work anymore, it means the whole airport doesn't work. And what we need to do is work. together to drive an affordable programme that doesn't have charges rising above the. 5 to £6 increase that we're talking about here in real terms, so that everybody wants to compete there.
So the full. 75 billion of investment comes in without that, without an Easyjet or other airlines wanting to come in charges really balloon at that point, capacity comes down and we risk losing this precious .
So the full. 75 billion of investment comes in without that, without an Easyjet or other airlines wanting to come in charges really balloon at that point, capacity comes down and we risk losing this precious .
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Speaker 3
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Speaker 3
National hub. That's exactly what we're trying to avoid here. I was just going to give a real example of Amsterdam Schiphol. So their charges plus the tax in the in the country there have gone up significantly since Covid, to the point where it isn't financially viable for us to operate the short haul flights that we were doing before. So we were doing 12 flights a day between London and Amsterdam. We are now having to pivot that capacity and do, instead of doing the multi short sectors that you might do 6 to 8 flights a day on an aircraft.
We're doing maybe two flights into Egypt now, because there's no way we can absorb those sorts of really high airport. charges on short sectors because passengers aren't prepared to pay it. So we've had to in the last 12 months, really change our network, reduce our capacity, reduce that short sector. connectivity to do long leisure flying because there's no way we can make money. And it's
We're doing maybe two flights into Egypt now, because there's no way we can absorb those sorts of really high airport. charges on short sectors because passengers aren't prepared to pay it. So we've had to in the last 12 months, really change our network, reduce our capacity, reduce that short sector. connectivity to do long leisure flying because there's no way we can make money. And it's
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Speaker 7
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Speaker 7
remain affordable? I can if I can start maybe you'd like to add. So in the models that they've brought forward, they're really calling for two different paths here. One is to actually make more use of competition, because the CIA has recognised the regulations not working in a two runway world. The best of those models is full scale competition to invest the.
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Speaker 7
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Speaker 7
And we need a. competition that the capital comes in to build the best infrastructure for the lowest price, because good. infrastructure at low prices is better for everybody. That's model seven B, and that's what we're pushing for the CAA to adopt. Okay. Significantly and connected to that is better capital governance. The way the process works today with Heathrow, which is a design of the regulatory model, is that every five years there's a there's a big argument about how much money to spend for the next five years in capital.
And what we'd like is a longer term view of planning around this precious national hub asset. So we've got a long term view of capital spend. And as a community, we can work really well with the promoters of the operators of the airport to plan out the capital spend and deliver a better quality airport that can work at lower prices over the long . Term,
And what we'd like is a longer term view of planning around this precious national hub asset. So we've got a long term view of capital spend. And as a community, we can work really well with the promoters of the operators of the airport to plan out the capital spend and deliver a better quality airport that can work at lower prices over the long . Term,
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Speaker 7
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Speaker 7
And are taking a lot of the risk in the future? Chair, you're exactly right. Under the. regulatory the regulated pricing scheme that's there, the early charges that the airport is spending on this is being added to the overall cost base or the capital base of the airline of the airport, excuse me. And that gets passed through in terms of charges to customers from the. 2018 work that was done, there was about.
£490 million that was added into the capital base as part of the CAA's H seven decision. The decision early decision this summer was that. £320 million could be allowed into the capital base with this planning process. Now that that presents two problems. The regulatory model is what it is. And Heathrow spending to. In order to develop this is it's important that we get this right. I don't know if those Quantums are are necessarily.
£490 million that was added into the capital base as part of the CAA's H seven decision. The decision early decision this summer was that. £320 million could be allowed into the capital base with this planning process. Now that that presents two problems. The regulatory model is what it is. And Heathrow spending to. In order to develop this is it's important that we get this right. I don't know if those Quantums are are necessarily.
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Speaker 1
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Speaker 1
Heathrow that would then still potentially go on to the. All come to the. Would all then go on to the Rab. We've also got, during the next regulatory period of five years. 5.8 billion is the current. position CAA is putting forward. Heathrow wanted 10 billion or 9.5 billion. So all of that is potentially going on . The Rab, which. currently is about.
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Speaker 1
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Speaker 1
costly . From the outset. You're being asked to fund something which you don't. Well, and this is and this is one of the issues, the fact that we need to be involved in the thinking, the discussion, etc.. We've had lots of discussions with Heathrow, but they have. decided that they will follow the. 3500 kind of route, even though we're suggesting actually you don't need to go there from day one.
Heathrow West has listened to us and has reflected that in their proposals. We need Heathrow to to do similar really and bring the cost down, bring the risk down and deliver something on time. It still doesn't get away from the fact that we still have this risk of early.
Heathrow West has listened to us and has reflected that in their proposals. We need Heathrow to to do similar really and bring the cost down, bring the risk down and deliver something on time. It still doesn't get away from the fact that we still have this risk of early.
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Speaker 4
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Speaker 4
As an airline community, we don't agree with that. That wouldn't be in any other industry that spend since the government's statement has has to be spent, you know, by someone if for whatever reason, runway three doesn't go ahead. Have you have airlines still have airlines currently at Heathrow had to .
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Speaker 4
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Speaker 4
that. And and an Easyjet doesn't. Yes. Yeah. Yeah. Okay. Fat thank you for that. And thank you for all of you for your evidence, your contributions today. And as I did say, if there's anything you want to add, please do email us. That brings our first panel today to an end. And I'm going to suspend the session for a few minutes while our .
Witnesses are for
Witnesses are for
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Laurence Turner
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Laurence Turner
So please could you introduce yourselves starting with Christopher? Hello, I'm Christopher Snelling, I'm director of policy at airports UK, the trade body representing UK airports. We represent over 50 airports across the whole UK. So from Heathrow, including Edinburgh as well, and all the other airports you would . Expect
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Speaker 14
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Speaker 14
consequences? I'll start with Gordon. Yes, we do agree. We think there's not really a coherent message about how we want to get the best benefits from aviation, and that covers all aspects of aviation. Obviously, I'll focus on some specifics around the Edinburgh model and in fact, the Heathrow. expansion in the way that it's being approached not only doesn't have any answers for other airports, but threatens to consume all of the resource, energy and money available .
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Laurence Turner
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Laurence Turner
Thank you. Christopher. There is planning policy in place for the expansion of other airports. We've obviously got. expansions in other airports have gone through recently. We have the making best use of policy in place. I think that's due for a review and we'd want that process to go ahead. I think it's a valid point Gordon makes about that. We shouldn't allow any one policy project to swallow up the resource.
So the department does need to continue to. resource planning and development policy for other airports around the UK as well, but that should be perfectly doable. It's just a question . Of
So the department does need to continue to. resource planning and development policy for other airports around the UK as well, but that should be perfectly doable. It's just a question . Of
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Laurence Turner
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Laurence Turner
airport capacity as a whole system? So I'll start with you. For me, I would say it is a Heathrow expansion statement. So it does what it is supposed to do, which is to look at the question of Heathrow expansion. There are separate questions for us. outside of the NPS about ensuring that we have the system in place in order to deliver airport expansion across the UK properly.
It's still too.
It's still too.
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Laurence Turner
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Laurence Turner
Costly and uncertain. process everywhere. We need to work to continue to improve that. We continue to be in dialogue with the department about how to do that. I think for the for our members in general would say that it isn't something that should be sought to be addressed through the NPS, because that is supposed to be about Heathrow, and it should be. So a lot of that work will carry on outside of that.
But it is. To go back to the previous point, it is important that work continues and is not .
But it is. To go back to the previous point, it is important that work continues and is not .
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Speaker 14
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Speaker 14
Heathrow as well. Mr. Dewar very similar. I mean, we are very supportive of the hub operation that Heathrow, and we've heard from the previous witnesses about the what British Airways and others do through the hub. And I think that is important. It's the largest single route we have from Edinburgh to Heathrow, and obviously that gives connectivity opportunities to a very broad network beyond that. But for us, it's more about the sort of diversion of effort and energy.
We've already been extremely successful over recent years in developing our network, both short haul and long haul. We think that is evidence that many other airports around the UK could deliver improved connectivity. And of course, we do include other London airports in that where capacity exists and could be delivered, additional capacity could be delivered cheaper and more reliably. And the real issue is one that we don't believe that the the Heathrow proposals are affordable or deliverable.
Based on what you've heard from other witnesses about the ability of a passenger, ultimately to pick up the price, but also just the track record of Heathrow delivery and the reliance upon so many other agencies to deliver surface.
We've already been extremely successful over recent years in developing our network, both short haul and long haul. We think that is evidence that many other airports around the UK could deliver improved connectivity. And of course, we do include other London airports in that where capacity exists and could be delivered, additional capacity could be delivered cheaper and more reliably. And the real issue is one that we don't believe that the the Heathrow proposals are affordable or deliverable.
Based on what you've heard from other witnesses about the ability of a passenger, ultimately to pick up the price, but also just the track record of Heathrow delivery and the reliance upon so many other agencies to deliver surface.
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Speaker 14
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Speaker 14
Supposedly at the cost of the airport, but unclear as to how that would be harnessed. But the other aspect is that it just distracts from everything else. We've heard a very good questioning around the importance of airspace change from the panel, and some of the good responses from previous witnesses. We are already picking up delays on a well established and well progressed airspace change programme in Scotland. That includes Glasgow as well, simply because that's the agency that is responsible for designing.
Certainly the high level airspace change has been asked to look at Heathrow and they've decided to prioritise that. That is just one small example of the. implication of when everything gets. distracted by what we think is an undeliverable project that's been rumbling in . One
Certainly the high level airspace change has been asked to look at Heathrow and they've decided to prioritise that. That is just one small example of the. implication of when everything gets. distracted by what we think is an undeliverable project that's been rumbling in . One
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Laurence Turner
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Laurence Turner
With the knowledge that we have of how it works, there is no prospect of building a hub airport in the north of Britain. There is no prospect of having two hubs in Britain, because that's not how the economics of hubs work. As a hub, Heathrow is in competition with Schiphol, Charles de Gaulle, Frankfurt and now. Istanbul and the Middle East as on that hub model. As we heard from the previous session, for that aspect of their.
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Laurence Turner
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Laurence Turner
That competition is with airports in other countries, not that aspect with airports in this country. Now, that is not to say that in the kind of Venn diagram of these things, there aren't some. overlaps where there are some services where Heathrow is in competition with Edinburgh or with Gatwick, and indeed sometimes for short haul with other airports as well. But for the specific hub airport model, that is something that essentially we have Heathrow and that will be the hub that we have, and it will be a .
Question of how
Question of how
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Speaker 14
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Speaker 14
good that hub is. Yeah, I mean, for me, being being successful is about listening to your customer base. And our customer base is, of course, first and foremost, the airlines as well as the passengers. And I don't don't see any appetite for an airline to be created or an existing airline to create a new hub there. I mean, if somebody wants to do it, then fantastic. I don't see any problem with it.
We're hub agnostic. We want to deliver first and foremost, direct connectivity wherever we can, and secondly, to give the maximum opportunity to connect to every other hub or hub that we can connect to as much as possible, because that gives the widest possible opportunity to our passenger base and obviously gives the widest exposure from us to other airlines that offer something . Different to the consumer
We're hub agnostic. We want to deliver first and foremost, direct connectivity wherever we can, and secondly, to give the maximum opportunity to connect to every other hub or hub that we can connect to as much as possible, because that gives the widest possible opportunity to our passenger base and obviously gives the widest exposure from us to other airlines that offer something . Different to the consumer
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Laurence Turner
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Laurence Turner
and freight connectivity? Christopher, we'll start with you. Yeah. I think it's important in all that debate to when you think about change in the industry, is not to make the mistake of thinking it's a black and white thing. The proportion of direct traffic. versus hub traffic may change. The proportion of business travel versus leisure may change, but it will change within a range. The reality will still exist.
We will still have hubs. They will serve a particular kind of market that will still be very important, and Britain will still be in the position again of having a hub in London, which will be the quality that it is, and to a certain extent, that will be in competition with foreign countries.
We will still have hubs. They will serve a particular kind of market that will still be very important, and Britain will still be in the position again of having a hub in London, which will be the quality that it is, and to a certain extent, that will be in competition with foreign countries.
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Laurence Turner
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Laurence Turner
30 years, or is it difficult to say at the moment? And we're not experts in the sort of commercial projection for airports, because obviously we're a voice connecting airports with public policy and government? I think, you know, we've all heard the debate about it will change. But my point is it will change in a proportion. None of that changes the underlying picture, that hubs will remain a feature of the aviation system, and they will remain a very important feature.
And it would be a feature that if Britain did not have . A
And it would be a feature that if Britain did not have . A
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Speaker 14
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Speaker 14
Gordon, was there anything you wanted to add on that? No, I think just taking the example of Edinburgh, we've gone from from. 2012 to today, we've gone from one long haul direct connection, which was New York back then to 18 today, and that makes a massive difference to the convenience, the lowering, carbon lowering cost for passengers to get to destinations. But even at that huge expansion, that's clearly only a very small. proportion of major cities around the world that we know there is demand to get to and from.
And in fact, it's from, because over 50% of our long haul traffic is actually inbound, which is really, really important for the economy of Scotland and the UK. But, but it's just a reflection that you can never be connected to everything. So I think it's about maximising connection. And hub operations are always going to be a key part of that, where they bring together lots of thinner routes and create a critical mass that allows them to serve that.
And inevitably, particularly on long haul, you'll be flying into 2 or 3 major cities in a country like China, for example, if you're a regional airport like Scotland, although we don't like to be called regional as a capital city. But I'll take that label for the moment. But we accept that whichever if you go into some of the other smaller cities in China, that's going to be via somebody's hub, whether it's a . Chinese hub,
And in fact, it's from, because over 50% of our long haul traffic is actually inbound, which is really, really important for the economy of Scotland and the UK. But, but it's just a reflection that you can never be connected to everything. So I think it's about maximising connection. And hub operations are always going to be a key part of that, where they bring together lots of thinner routes and create a critical mass that allows them to serve that.
And inevitably, particularly on long haul, you'll be flying into 2 or 3 major cities in a country like China, for example, if you're a regional airport like Scotland, although we don't like to be called regional as a capital city. But I'll take that label for the moment. But we accept that whichever if you go into some of the other smaller cities in China, that's going to be via somebody's hub, whether it's a . Chinese hub,
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Speaker 2
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Speaker 2
I mean, Christopher, thanks. I think you're right. And, you know, hubs are going to exist and we're going to have to continue to have airports like Edinburgh, which have point to point connections, which people want, but they don't exist independently. The the they can help each other. I guess there are certain extent, but there is a real risk that I do not know how many of Gordon's 18 flights he has, simply because those flights could not run from London.
And so they've come to Edinburgh instead. Is there something the government can do to. Whilst ensuring Heathrow thrives as a hub, our regional airports can still have the point to point connections. You know, I don't want them to fiddle the market too much,
And so they've come to Edinburgh instead. Is there something the government can do to. Whilst ensuring Heathrow thrives as a hub, our regional airports can still have the point to point connections. You know, I don't want them to fiddle the market too much,
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Laurence Turner
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Laurence Turner
But we need to protect our regional airports so they can thrive as well. I mean, I think it's worth saying if you if the flights we would gain through Heathrow expansion, if you didn't have those in this country. It is a competitive market in the UK, which is how it works, a good thriving airport market. A portion of those flights could potentially be could , might go to another London airport like Gatwick. They could potentially go to an Edinburgh.
But it is a. proportion of those flights. A much larger proportion would be lost to the UK and would go, as I say, to to the foreign hubs. And so overall the UK would lose out in terms of what we should do for regional. And again, this is what we should always look at, how you. maximise a. proposition and not. maximising one proposition because you want to help something else is always a fairly inefficient way of going about making something work.
The best way to make regional airports work is to make regional airports work. They need a planning. system that is, that provides.
But it is a. proportion of those flights. A much larger proportion would be lost to the UK and would go, as I say, to to the foreign hubs. And so overall the UK would lose out in terms of what we should do for regional. And again, this is what we should always look at, how you. maximise a. proposition and not. maximising one proposition because you want to help something else is always a fairly inefficient way of going about making something work.
The best way to make regional airports work is to make regional airports work. They need a planning. system that is, that provides.
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Laurence Turner
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Laurence Turner
Because that, particularly in the regional airports, that cost is absolutely vital. So whereas you'll have at Heathrow a kind of queue of airlines waiting to get in because they can make a lot of money at Heathrow. And that's quite straightforward to do if you have a slot there. A lot of our regional airports will spend an awful lot of their time and money going to airlines, trying to encourage them to get to fly out of their airport.
So they need a very commercially competitive environment. So that's where you get into issues about business rates. You get into issues about aviation.
So they need a very commercially competitive environment. So that's where you get into issues about business rates. You get into issues about aviation.
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Laurence Turner
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Laurence Turner
Regional airport growth as well. And it's worth saying we have to remember that the Heathrow expansion has, in some elements, a competition with other airports on the long haul routes, but in other. elements is a. complimentary service to regional airports because it is the. connectivity into both the hub and to. London that a lot of those regional airports want. And that's why quite a few of the airports are very supportive of the Heathrow expansion.
So that actually does support a . Lot of the
So that actually does support a . Lot of the
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Speaker 4
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Speaker 4
no, I mean, I know it's up for time. Christopher. I did ask the. witnesses last in the last session and we got an answer around freight. But have has have you or has anyone you're aware of done an analysis of the cost or the the, the cost to the UK plc of runway three not going ahead, particularly in terms of the hub.
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Laurence Turner
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Laurence Turner
you done that. analysis in numerical terms? We haven't done that analysis because again we're a national trade body for all airports. So we don't take a an interest in the commercial side of any one proposition. So that would be something for Heathrow or potentially other business groups who are more focused on that. To take a view on. I think what we would say, though, is that what we have to take on, and I think it's one of the weaknesses of the MPs, is how it doesn't take account of the full range of the economic benefits that would come from this example of airport growth.
And I think we do have to remember that there is also a even compared to what we were talking about in the first session, a wider set of issues which is missed about, in the long run for. Britain to be connected in the global economy and to be seen as a leading place to do business, it needs . Very
And I think we do have to remember that there is also a even compared to what we were talking about in the first session, a wider set of issues which is missed about, in the long run for. Britain to be connected in the global economy and to be seen as a leading place to do business, it needs . Very
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Speaker 14
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Speaker 14
Right. Let's can I just come in? Oh yes. Yes, sure. The big concern is nobody's against the principle of the hub operation, but a. £65 charge per passenger is not delivering anything that we want because it will be unviable for airlines. So the biggest threat to our connectivity to Heathrow would be the expansion of Heathrow. That results in a. £65 per passenger, because we wouldn't manage to sustain the connection that we have, and British Airways wouldn't be able to make success of that.
And I find it I find it quite astounding that, you know, you've got just about the entire customer base of Heathrow saying they don't want their proposition. I've yet I can't remember ever hearing a proposition by a company that's ignoring and . Going
And I find it I find it quite astounding that, you know, you've got just about the entire customer base of Heathrow saying they don't want their proposition. I've yet I can't remember ever hearing a proposition by a company that's ignoring and . Going
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Laurence Turner
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Laurence Turner
being the only hub airport that we've got? I don't think it's a question of the the hub model having that kind of overlap with resilience. I mean, the hub model is used across the world. That is the way aviation works. It's the way the economics of the industry works. To maximise service. Without the hub model, you would simply have quite a lot less aviation. What you do need to have is a resilient network.
And, and we have to remember that aviation is not ever just a domestic activity. It is part of a global network. So you need the resilience in terms of good quality airport. infrastructure around the country to help with problems. Now, again, if you look at Heathrow.
And, and we have to remember that aviation is not ever just a domestic activity. It is part of a global network. So you need the resilience in terms of good quality airport. infrastructure around the country to help with problems. Now, again, if you look at Heathrow.
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Laurence Turner
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Laurence Turner
It's the it has a runways that are massively high. utilization and that intrinsically comes with difficulties for resilience, which Heathrow has to manage. And part of why there is the cost base involved running Heathrow that there is because it runs to an incredibly high utilization of its runways. Other airports are constrained by their terminal.
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Laurence Turner
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Laurence Turner
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Speaker 14
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Speaker 14
Delivery is the right answer. And I think if you look at the track record, if you throw, it doesn't perform very well in any of them. I mean, effectively it's not the highest utilised runways. Gatwick is by far and away the highest utilised runway on the planet, and it's doing it at significantly lower cost overall than Heathrow manages. As an example, comparing what we do and what Heathrow does, we are doing. 650 passengers per hour per lane in security, and Heathrow is doing less than a third of that with identical equipment.
So I would suggest there's lots more we could do. On ensuring Heathrow tries to live up to some semblance of. affordability and. resilience and efficiency before we start allowing them . To
So I would suggest there's lots more we could do. On ensuring Heathrow tries to live up to some semblance of. affordability and. resilience and efficiency before we start allowing them . To
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Speaker 14
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Speaker 14
national policy statement? Gordon. I'm not sure it would necessarily reflect disruption. I mean, if the two existing runways keep operating smoothly while the construction goes on, I don't think we would see that as particularly disruptive. I do think there are better options, whether it's Luton, Stansted or Gatwick and Manchester airports declaring an airport, declaring an interest. I think we can keep. connectivity through Heathrow and and as a point to point market to London.
As we go through this, it's . More about
As we go through this, it's . More about
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Laurence Turner
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Laurence Turner
doing, if it's unaffordable at the end. I think to go back to your point about disruption, it goes back to some of the points Gordon was making earlier about the total focus on the sector of the. department and the CAA and Nats. It does need to ensure that it needs to. resource the support and the question for Heathrow expansion appropriately. But that mustn't come at the. expense of. supporting the service to all the other airports in the UK as well.
It goes back to an issue particularly possibly the most important one. As Gordon mentioned, about the delivery of airspace modernisation. There needs to be a massive continued focus on that across government to deliver it across the UK. We have. important areas in Scotland, in the north of England, as well as London and the west of England, that all need to be deployed and we need to ensure that resourcing continues to go into all of those areas to make sure we deliver across the country, but that should be .
Perfectly doable.
It goes back to an issue particularly possibly the most important one. As Gordon mentioned, about the delivery of airspace modernisation. There needs to be a massive continued focus on that across government to deliver it across the UK. We have. important areas in Scotland, in the north of England, as well as London and the west of England, that all need to be deployed and we need to ensure that resourcing continues to go into all of those areas to make sure we deliver across the country, but that should be .
Perfectly doable.
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Speaker 2
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Speaker 2
In that you want to pick up on? Hemp's. So Gordon. Well, I guess to both of you, I mean, to what extent I mean, do you think the government is in its approach, thinking enough about the impact on other airports, about the point that was raised earlier about perhaps losing flights or changing the flight profile to and from those airports? Is the . Government
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Speaker 14
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Speaker 14
is part of the hemp's process? I think, you know, I think this is a bill for Heathrow, and it should address what Heathrow needs and what the benefits are. The only significant concern I have around Heathrow, other than if the price becomes prohibitive and we lose that connection to the hub or that hub starts to deteriorate. And that's bad for everyone, including us and including Scotland. But mostly our concerns around the distraction that if this becomes all consuming as the only game in town for aviation development, we're just leaving so many other.
opportunities on the table. You know, we we believe we've got lots more room to expand direct connectivity, long haul and short haul. We believe that there is so much more we can do in the policy environment around things that APD about training and skills to ensure that we can be employed, about creating the conditions where this enormous engine. Edinburgh alone is. £2.7 billion of GVA and, you know, tens of thousands of jobs across Scotland, all driven by the growth that we've managed to sustain over the last 15 years.
And yet it's been done almost without any direct intervention or . Support
opportunities on the table. You know, we we believe we've got lots more room to expand direct connectivity, long haul and short haul. We believe that there is so much more we can do in the policy environment around things that APD about training and skills to ensure that we can be employed, about creating the conditions where this enormous engine. Edinburgh alone is. £2.7 billion of GVA and, you know, tens of thousands of jobs across Scotland, all driven by the growth that we've managed to sustain over the last 15 years.
And yet it's been done almost without any direct intervention or . Support
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Speaker 14
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Speaker 14
either Scottish or UK government, I would argue. In fact, most things have been negative in terms of cost increases, whether it's business rates or APD or so on and so forth. So I just I would just encourage people to think about in the context of the wider aviation market, how does Heathrow sit? And if it becomes too all consuming or undeliverable as we worry about or unaffordable as airlines are clearly . Worried
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Speaker 14
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Speaker 14
thought Edinburgh was full and couldn't expand. Well, never turned any light every year and it's certainly not my intention. We are growing and we have been very tight in places, but we're just embarking on one of the largest ever investment strategy that we've had in the history of the airport. So I'm very confident that while it's tight, we'll get ahead of that and we'll continue to offer fantastic . Opportunities
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Laurence Turner
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Laurence Turner
Being delivered until the Chancellor made her announcement. No, the airports do have growth plans. We see growth in the sector. All of the. forecasts are for continued growth. Aviation is a. In these very difficult economic times, it is a potential massive success story for the UK. It is a potential massive growth area. Frankly, if government allows us to expand and improve our service and if government doesn't get in the way, aviation can be a massive success for the UK.
Heathrow is one example of that. Gatwick has also recently got its permission to bring second runway into use. Luton has got an expansion. It works in other areas. It can work. This is not an either or about. Should we be allowing Heathrow or should we be developing elsewhere? Because, as I've said, from my understanding, the majority of the. benefit through the traffic we could gain at the hub airport at Heathrow, we would lose to foreign.
airports if we don't go ahead with that expansion. So it's about a total loss, and I think it is worth remembering. We're talking here about giving permission for a private developer to develop this very significant piece of infrastructure. So this isn't where we're looking at, say, a question of where should taxpayer money go. This is allowing a private company to invest in our transport infrastructure. And that's something that is always in the UK interest.
Heathrow is one example of that. Gatwick has also recently got its permission to bring second runway into use. Luton has got an expansion. It works in other areas. It can work. This is not an either or about. Should we be allowing Heathrow or should we be developing elsewhere? Because, as I've said, from my understanding, the majority of the. benefit through the traffic we could gain at the hub airport at Heathrow, we would lose to foreign.
airports if we don't go ahead with that expansion. So it's about a total loss, and I think it is worth remembering. We're talking here about giving permission for a private developer to develop this very significant piece of infrastructure. So this isn't where we're looking at, say, a question of where should taxpayer money go. This is allowing a private company to invest in our transport infrastructure. And that's something that is always in the UK interest.
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Laurence Turner
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Laurence Turner
And it's something we should always support. The best approach to this is to support the Heathrow expansion, as the Gatwick expansion was supported, as Luton was supported, and to support the regional airports through . What is it you need as well, the forecast for growth in this country that the DFT works to include Heathrow.
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Laurence Turner
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Laurence Turner
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Speaker 2
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Speaker 2
flights to Heathrow in the future. So does it mean when the regional airports look at what's proposed, you know, if nothing changes, you're talking about business rates, hell, er and urgent, etc. if nothing changes, is it an opportunity or is it something that concerns them? I mean I'm guessing . They did
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Laurence Turner
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Laurence Turner
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Laurence Turner
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Laurence Turner
necessary in order for these airports to benefit from what is happening. Well, there is there's a slightly there is a general very significant problem for airports in England and now some in Scotland as well on business rates, which affects all kinds of questions about the viability of future investments. I don't think it's really relevant necessarily . To
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Laurence Turner
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Laurence Turner
Heathrow also has that challenge. It faces that challenge. And yeah, I would I would have to leave Heathrow to comment on whether or not it affects their plans in this instance specifically. But the business rates problem that we still face with airports, bills proposed to multiply by over four times over the next few years. Unless we get Treasury support for it, we'll have a massive effect on the ability of.
airports to leverage capital investment to invest in growing. And that's a problem across . It's
airports to leverage capital investment to invest in growing. And that's a problem across . It's
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Speaker 14
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Speaker 14
Heavily by Christopher's members. Maybe not all of them. Some of them. Yeah, absolutely. I agree most most were in favour. I think what's different here is the understanding about affordability and deliverability. I would I would think that most regional airports, if they thought they could keep existing pricing Heathrow and there would be additional capacity offering opportunity for improved connectivity would still be favourable. But if they sit back and say, but would that come at.
£65 per charge per passenger and it might take ten years to deliver, 15 years to deliver? I think the enthusiasm would be significantly waning. And when, as I say, if you don't listen to the very airlines that would have to be responsible for delivering that, because building a runway doesn't create a connection. It's the airline that does it.
£65 per charge per passenger and it might take ten years to deliver, 15 years to deliver? I think the enthusiasm would be significantly waning. And when, as I say, if you don't listen to the very airlines that would have to be responsible for delivering that, because building a runway doesn't create a connection. It's the airline that does it.
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Laurence Turner
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Laurence Turner
listen to them. Interesting. Christopher. Yeah, it's worth repeating. I mean, there is still considerable support from some airports around the country for the Heathrow proposal, but I they are again, in a as airports, they are in a competitive commercial mix as well. So they will have. opinions about each other and their development plans that they quite rightly would . Express
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Speaker 2
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Speaker 2
Given your domestic. So can we can we be confident? I mean, I think we've covered a certain extent. Can we be confident that the expanded Heathrow will provide that additional connectivity to regional airports? We talked earlier about, you know, should the government be ring fencing slots at Heathrow, just just to make sure we get those connecting flights, because I think we we acknowledge that it needs those connecting flights. There might not be the most lucrative for the airport.
So should some kind of ring fence, or should the government be a bit more. interventionist in terms of how it. protects . That
So should some kind of ring fence, or should the government be a bit more. interventionist in terms of how it. protects . That
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Laurence Turner
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Laurence Turner
key benefit, I guess, of expanding Heathrow? I think on the the specific question of whether that's a system to work again, you might you would I would say you'd have to refer to Heathrow for some of the specifics on that. But as the general point I would want to make to you is that we're talking a lot about the affordability of the.
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Laurence Turner
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Laurence Turner
you've got to remember, for whichever way that the money is recouped, there is an enormous raising of capital to fund this project. Anything that puts more restrictions and. inflexibility on how that is deployed in future both adds to the it. prevents the commercial return on it. But it also adds inherently to risk. Because again, you've got to remember, our airports are, generally speaking, their investors are raising money on global markets where they have a choice where to invest.
And the UK is generally seen in some ways, as quite a risky place to invest because of the very high levels of business taxation and a very uncertain planning system. Anything that. suggests the government is going to make the decisions for you, government is going to take control. A Secretary of State for . Transport
And the UK is generally seen in some ways, as quite a risky place to invest because of the very high levels of business taxation and a very uncertain planning system. Anything that. suggests the government is going to make the decisions for you, government is going to take control. A Secretary of State for . Transport
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Speaker 2
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Speaker 2
gets to decide where the flights go, will make international. But the government. The government's objective here, though, is to grow the economy. It's not to increase the number of people who are travelling through Heathrow and only buying a cup of coffee. At best it's their objective is to grow the economy and their objective as well isn't to. maximise return for.
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Speaker 2
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Speaker 2
support them. And then it's a question of is there a reason not to. So I arrive at the airport. Was it last just last week around. We went around the perimeter of the airport. And you can see that the current airport has a big. impact as any airport on the surrounding areas, everything from a community farm through to
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Speaker 2
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Speaker 2
possible. They do have to. Does this have to be some regulation? Those are the questions that then have to be asked about how appropriate is the. development and all those conditions for carbon noise, local environmental impacts. Of course, they then have to be gone through. But if you start from a position of private investment in developing our. infrastructure is a good thing and we should enable it if possible, then you're looking at it the right way, and then it becomes a series of checks as to say, and is this in the right way? I would just repeat my point that if you get into a position where the Secretary of State for transport gets to decide where flights go from an airport, international investors are not going to .
Look on
Look on
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Speaker 3
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Speaker 3
hopefully would be viable at the expense of higher yielding long haul. So that would be the risk at the end of the third runway. But I would come back to the first . The first principles is that these things have got to be viable in themselves, and we should really be focused on making sure that whatever project gets delivered offers viable investment, both for the capital side, but equally and probably more importantly, viable investment for the airlines to actually operate in and out of Heathrow and offer the genuine economic benefits that we are looking for.
And again, I come back £65. It doesn't matter if you're reserving space for . An
And again, I come back £65. It doesn't matter if you're reserving space for . An
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Speaker 1
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Speaker 1
Inverness to Heathrow flight £65, nobody's flying it. You're right. You can offer a fantastic slot, but if that's the cost, maybe people don't want it. You did. If you don't mind. You did mention, you know, the Heathrow filling up after the third runway. I mean, we hear a lot about resilience. And one of the issues is that Heathrow currently is not resilient because it it it uses up it chooses to use up all its capacity.
And so with a third runway, do you think capacity should be reserved just for resilience? So we never get to the crazy state where we're basically running I think is well over. 95% capacity. Do you think because it is a piece of national.
And so with a third runway, do you think capacity should be reserved just for resilience? So we never get to the crazy state where we're basically running I think is well over. 95% capacity. Do you think because it is a piece of national.
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Speaker 3
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Speaker 3
reserved for resilience? I would start with the let's not run capacity in the first place. And let's let's have a strategy that keeps ahead of the demand curve. We all agree. I think the economic benefits of growing aviation, if we're obviously if we're dealing with. environmental stuff, sustainability, noise, all the things we are very acutely aware of are the downsides of aviation. If we're not clever. But if we're dealing with that, then why would we want to constrain ourselves in capacity and letting every airport deliver what it can for the benefit of its local communities and economy is the right answer.
So, you know, I don't think you should let it get to that stage, but it's not necessarily more capacity at Heathrow. And London is a complex network of multiple airports, all of whom can play a role in making sure that we get the best out of the overall system,
So, you know, I don't think you should let it get to that stage, but it's not necessarily more capacity at Heathrow. And London is a complex network of multiple airports, all of whom can play a role in making sure that we get the best out of the overall system,
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Speaker 4
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Speaker 4
should maybe we should. question their approach to resilience. Yeah, I think that there's some really comes in more. frequently when there's weather incidents. I think an airline ops manager at Heathrow said I wouldn't mind a third runway, but more to give me that resilience when we have problems . Rather
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Speaker 2
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Speaker 2
than to be able to fly a load more flights through it. There's always a balance to be struck between resilience and the commercial operation of the airport, both the airport sake. But in terms of the benefit it delivers to the locality, the region and the country. And you have to, you know, maximise the use of your asset. And so but Heathrow is achieving resilience levels. The electrical thing was a particular thing , which wasn't a Heathrow piece of equipment and wasn't related to runway capacity, obviously.
So you can run a resilient airport with a high. utilisation of runway. It comes with increased cost, which is part of the reason why Heathrow has the charge as it does, but in principle, expanding infrastructure in this way for that kind of thing is always a good way to to approach it as you're either improving the . Commercial
So you can run a resilient airport with a high. utilisation of runway. It comes with increased cost, which is part of the reason why Heathrow has the charge as it does, but in principle, expanding infrastructure in this way for that kind of thing is always a good way to to approach it as you're either improving the . Commercial
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Speaker 4
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Speaker 4
service it offers or you're improving resilience or you're doing both. Okay. Can I come back to domestic connectivity? Because the, the, the policy statement, the draft policy statement has some. words about retaining domestic domestic connectivity. Now. obviously there's certain and a very small number of routes like.
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Speaker 3
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Speaker 3
I think you you should pay attention to that. And I think it's about. creating capacity for viable services. And I think if the if if the statement was more focused on making it viable for airlines to be successful, and that's what we do, there's nothing to stop, of course, government stepping in and doing public service subsidies for specific outline. I think there's lots of that going on in Scottish islands, for example, and we are supportive of that.
And that's probably a more efficient and targeted way of using resources where something isn't viable. But if we're actually designing a system to destroy.
And that's probably a more efficient and targeted way of using resources where something isn't viable. But if we're actually designing a system to destroy.
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Jacob Collier
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Jacob Collier
shared voice from all the airlines. Yeah, it was just a question for Chris. I wonder if you've got a view on the runway length, because I believe airports UK has some freight members or associates like Fedex, DHL, UPS, and obviously we've heard with Heathrow West. proposal it wouldn't allow wide body freight aircraft. So I just wonder if you've got a view as an.
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Speaker 2
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Speaker 2
predominantly freight airports or significantly freight airports. Well, Heathrow does the majority of the airfreight in the country as heard you have substantial operations. East Midlands is probably the only one that would describe itself as. predominantly or, you know, a specialist airport in freight. But other airports do do quite a bit with the dedicated freighters in terms of the runway length. Again, because it's a project specific issue, we don't make a specific pronouncement on exactly what length the runway should be or, you know, things like that.
However, we would make the general. position that our history in this country is of not developing transport infrastructure very well and not building enough, not building it soon enough. In general, we are better off building the biggest, best piece of infrastructure we can get and then utilizing it if that is in our long term interests. The specifics in this project about exactly, you know, what should be done and what the costs are and so on is a more matter for .
Heathrow
However, we would make the general. position that our history in this country is of not developing transport infrastructure very well and not building enough, not building it soon enough. In general, we are better off building the biggest, best piece of infrastructure we can get and then utilizing it if that is in our long term interests. The specifics in this project about exactly, you know, what should be done and what the costs are and so on is a more matter for .
Heathrow
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Speaker 3
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Speaker 3
you said it was undeliverable. Why did you say that? Well, I think the proposal as it stands, which involves, you know, huge. diversions of enteric fives, knocking downs of villages, filling ins, of ponds. I mean, it's more based on the recent, I say, recent, probably 40 years of history about Heathrow not delivering against its many attempts to do a third runway in one shape or form. So and then more generally in the UK, about our pretty woeful record of doing major infrastructure projects, either on program cost or at all.
But actually, the profound thing about it is the affordability of it. And in the end, about who's going to pick up the tab. And that's before you get into all the things previous witnesses were talking about, the risk that's still not bottomed out, about what happens if there's cost overruns and shifting the M25, etc.. So I just think, you know, track record says this is an improbable, an improbable . Project deliver
But actually, the profound thing about it is the affordability of it. And in the end, about who's going to pick up the tab. And that's before you get into all the things previous witnesses were talking about, the risk that's still not bottomed out, about what happens if there's cost overruns and shifting the M25, etc.. So I just think, you know, track record says this is an improbable, an improbable . Project deliver
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Speaker 4
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Speaker 4
multiple times before in one shape or form and failed every time. Thank you. And again, apologies to Christopher. So if none of my colleagues have got any other questions, I'll close with just asking both of you if there's anything else in the. draft Heathrow expansion national policy statement you'd like to comment on, or anything raised by the . Previous
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Speaker 2
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Speaker 2
panel that you'd like to comment on? Christopher. Yeah. I think the main thing for us, the frustration or the failure, we think with the MPs, is about how its success assessing the economic. benefits of the proposal, because we think if you assessed any airport development in this way, it would. significantly underestimate the benefits involved not. incorporating freight, not properly understanding the. benefits for trade from this is a massive failure, I think, within the Department to not have been able to quantify those and include them.
And it leads to some very. misleadingly low figures about what the economic benefits of the expansion are. And airport development is vital across the country, and it can only really be delivered if we fully understand the range of benefits involved. And the government really needs to do more work to actually fully articulate . And
And it leads to some very. misleadingly low figures about what the economic benefits of the expansion are. And airport development is vital across the country, and it can only really be delivered if we fully understand the range of benefits involved. And the government really needs to do more work to actually fully articulate . And
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Speaker 1
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Speaker 1
understand the range of benefits that any of these projects would bring. The flip side to that is, is, is also that some of the impacts, I think I don't know if you've watched yesterday's session, but we had real concerns about how the noise impact was being considered. And also the the air quality impact was being considered. So I'm not going to I'm trying not to be worrying in my mouth, but surely if we're going to do that, if we're going to go for a gold standard,
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Speaker 2
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Speaker 2
one or the for the other for the the social costs as well. They only match. But I would make the additional point that in general, again, that for the. A lot of the social costs, managing those by limiting the size of the infrastructure is usually a pretty bad way to to manage those impacts. There's a lot of work that can be done, especially around.
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Speaker 4
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Speaker 4
achieve those objectives is a very inefficient way of doing it. In terms of the risks that we picked up at the end of the last session. And Heathrow is a completely different sort of funding and therefore risk based model than all of your other members who would, you know, decide whether or not to grow how, what their customer base will be, what price points and costs and all of that. Whereas with. Heathrow is, you know, is there a risk that the building goes ahead and then the airlines say, we can't afford it? You know, how would that impact the.
benefits . Of
benefits . Of
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Speaker 2
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Speaker 2
allude to? There would certainly . Again, I can't get into the commercials of the specific Heathrow project because I speak for all airports. But if you look at it as a matter of principle, it is obviously something that Heathrow will be looking at about ensuring the commercial viability of the project. You have to remember the price setting that we've been talking today about. Heathrow is a regulation that is there to protect the airlines.
Those levels only exist. Heathrow is not allowed to charge commercially what it could for its space. Those charges in the private market would be much higher. And in order to protect the airlines and to protect the consumer and the British national.
Those levels only exist. Heathrow is not allowed to charge commercially what it could for its space. Those charges in the private market would be much higher. And in order to protect the airlines and to protect the consumer and the British national.
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Speaker 3
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Speaker 3
Okay, right, Gordon? Last word. Yeah. How about that for a different point of view? An interesting outcome of the regulation is we've ended up with the most expensive airport in the world. That's not doesn't sound like the best protection for airlines, but I mean, I think and the only reason that they might be able to charge more, which is Chris proposition, is because we've created this scarcity value where.
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Speaker 3
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Speaker 3
Like other major hubs around the world, have got capacity and they they don't and couldn't charge that. So, you know, we're basically getting the worst of both worlds, a very expensive airport that costs our consumers, our freight carriers and our airlines. And we're getting less economic value because of capacity constraints. So we can't get the maximum out of it. So I do think it just comes back to the first principle of all of the economic value could be much, much greater.
But it won't. It won't come unless the airlines deliver against that capacity benefit. And the airlines are telling us, and I keep repeating myself, that they won't pay and can't pay what they're being expected to . Pay,
But it won't. It won't come unless the airlines deliver against that capacity benefit. And the airlines are telling us, and I keep repeating myself, that they won't pay and can't pay what they're being expected to . Pay,
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