Durham Tees Valley Airport

Alex Cunningham Excerpts

Wednesday 22nd November 2017 Westminster Hall

[Phil Wilson (Sedgefield) (Lab)]

I beg to move,

That this House has considered the future of Durham Tees Valley airport.

I applied for this debate to give support to Durham Tees Valley airport and the Peel Group, which plans to grow the airport. In the last decade or so, Durham Tees Valley has faced major difficulties, as have many other regional airports across the country. It has had to face the fact that the aviation industry has radically changed.

Durham Tees Valley airport started life in 1941 as an RAF base originally called Goosepool. In 1964, it became Teesside International airport, and it was renamed Durham Tees Valley airport in 2004. In 2003, the Peel Group purchased a 75% share in the airport, with the six local authorities sharing a 25% stake; today, it owns 89%. The Peel Group is a private sector investment group with a strong presence throughout the north of England.

In 2006, passenger numbers peaked at 910,000, with BMI flying a regular service to Heathrow. In 2007, the global recession hit the airport, as it did everywhere else. A year later, Flyglobespan, an airline using the airport, went into administration, which caused passenger numbers to fall by thousands. In 2009, BMI withdrew its Heathrow service, and passenger numbers fell from 645,000 to 288,000 in just 12 months. Durham Tees Valley was not the only regional airport to lose such a connection, as airlines sought to concentrate their remaining slots at Heathrow on more lucrative international routes. Passenger numbers today are between 130,000 and 140,000—almost a tenth of what they were a decade ago.

KLM’s flights to Schiphol three times a day and Eastern Airways’ flights to Aberdeen now account for the bulk of passenger numbers. The airport is currently making a loss of between £2 million and £3 million a year.

[Alex Cunningham (Stockton North) (Lab)]

My hon. Friend mentions the airport’s losses. The Tees Valley Mayor’s pledge to buy the airport has captured voters’ imagination. He told me he can do that without involving taxpayers’ money. Does my hon. Friend agree that it is now time for the Tees Valley Mayor to publish his business plan to buy the airport, complete with numbers and sources of funding, or just be honest about it and admit that he cannot deliver that promise?

[Phil Wilson]

The Tees Valley Mayor has a few questions to answer on this issue. I will come to that matter later in my speech, but I am pleased that my hon. Friend raised it.

Despite the losses and the low passenger numbers, there is still a strategic role for regional airports. There is a strong correlation between regional GDP, employment in air-intensive industries and aviation connectivity. Regional airports provide a major gateway for visitors to the region.

--- Later in debate ---

[Phil Wilson]

The air ambulance service, which is based at the airport, provides a great service for the area. Where I live, I can sometimes see it flying over to get to an incident. It is a great charity, and I want to see it grow and prosper there.

Regional airports support the business community, whose key needs from regional air services are an increase in destinations and the frequency of flights to major travel hubs such as Schiphol, access to major markets, and links to London and the south-east, especially Heathrow. A third runway at Heathrow airport is key for regional airports such as Durham Tees Valley, which has been listed as one of the regional airports that will have access to it.

Durham Tees Valley airport plays a much wider strategic role in the region. It has been consistently recognised as a key asset for the region in regional strategic plans and national reports such as Lord Heseltine’s independent report, “Tees Valley: opportunity unlimited”. The report also highlighted the importance for the Tees Valley economy of having international connectivity with its global trading partners, and highlighted the opportunities that the airport brings for logistics, freight and wider aviation-related services.

Durham Tees Valley can drive a major employment cluster of both aviation and non-aviation businesses in and around the airport. Regional airports typically have the space, capacity and environment to host such businesses in a way that larger passenger-focused airports cannot. Durham Tees Valley’s 800-acre site, known as Aero Centre Tees Valley, is a prime example of that. To unlock those investments, the airport needs the support of local and national leaders and public sector partners to create the right conditions for investment in public infrastructure. I would love to hear from the Minister what more the Government can do to help.

[Alex Cunningham]

As part of that connectivity, the airport needs a proper rail service. The railway line actually skips the airport, and there is no proper service serving it. Does my hon. Friend agree that the Minister can turn his attention to that as we look at rail infrastructure across the piece?

[Phil Wilson]

Again, my hon. Friend pre-empts something I am going to say in my speech. I will mention the rail link, because it is very important.

The airport can attract investment while taking into consideration trends in the UK regional airport sector. In the eight years between 2007 and 2015, the north-east of England was badly impacted by the global financial crisis, which affected the region’s economy and subsequently its demand for air travel. The north-east of England was the worst hit of all UK regions. Air traffic in 2015 was almost 1.7 million passengers per annum lower than in 2007 —a 26% reduction. The airport lost 592,000 passengers, representing about 80% of its traffic, and Newcastle airport lost about 20% of its traffic. The same trend was seen across the UK, particularly at smaller regional airports, as capacity was reduced or redeployed to major airports. However, no region was affected as much as the north-east.

This is not just about the north-east and Durham Tees Valley. This issue affects other regional airports throughout the country, but to a lesser extent. Passenger numbers have fallen dramatically in several regional airports. Prestwick airport lost more than 1.1 million passengers between 2009 and 2016—a 63% loss. Cardiff airport lost more than 280,000 passengers, and Bournemouth lost more than 200,000 passengers. The notable exception is Leeds Bradford, which saw significant growth over the period, achieved by heavy incentivisation, which resulted in ongoing losses. The last set of accounts, published in March 2016, showed a loss of £3.8 million.

In addition to suffering reductions in the passenger and freight tonnage numbers, a number of regional airports have encountered more fundamental problems over the period. In 2007, loss-making Plymouth closed. In 2013, the Scottish Government took loss-making Prestwick into public ownership. Since then, £40 million of public money has been invested in the past four years, but that has done nothing to stop the reduction in passenger traffic and continuing losses of about £9 million. Loss-making Cardiff was also taken into public ownership by the Welsh Assembly that year. Between 2009 and 2016 passenger numbers at the airport fell by 280,000, or 18%. In 2014, loss-making Manston closed, as did loss-making Blackpool as a full-service airport. For me, therefore—this is a key point—regional airports must seek a diversification strategy to ensure financial sustainability and to continue their wider role as economic catalysts, supported by public sector investment and infrastructure. That is the approach that the Peel Group is taking.

Besides KLM, Eastern Airways and Loganair, other users of the airport include Cobham Aviation Services, which has a training and testing contract with the Ministry of Defence; the Serco International Fire Training Centre, which is one of the leading aviation fire training centres in the world and has a 20-acre dedicated training site with simulators and the largest confined-space rigs in the UK; TNT, which operates a logistics operation out of a dedicated hangar; Thales, which is on site to operate delivery contracts related to air traffic provision for the armed forces; and Sycamore Aviation, which provides aircraft end-of-life services. Larger ad hoc passenger flights occur sometimes in the form of military charter flights, carrying troops based at nearby garrisons. A number of general aviation flying schools operate from Durham Tees Valley, using two or four-seat light aircraft. The number of business aviation flights is growing steadily, operating aircraft types that range from single-engine private to large transatlantic business jets. More than 80% of the operating costs of an airport are fixed, meaning that regardless of the passenger numbers the airport operation has a significant cost base.

The Airports Council International reports that in Europe 73% of airports handling fewer than 1 million passengers and 59% of those handling fewer than 3 million passengers are loss making. Recognition of challenging times and the need to prevent Durham Tees Valley from becoming yet another casualty led to the development of the airport master-plan by Peel. Published in 2014, it is designed to chart a path for the airport to 2020 and beyond.

Securing the future of aviation services is dependent on accepting the realism and rationale set out in the master-plan. In the plan, Peel understands that DTVA needs to concentrate on those aviation services in which it has strength, including building on those services that are important to the business community, such as flights to Schiphol and Aberdeen. A well-established general aviation centre provides scope for growth and, since the launch of the new master-plan, new companies have been attracted.

In 2015 Peel launched the Aero Centre Tees Valley, which is the umbrella brand showcasing the development opportunities available throughout the airport site. The Aero Centre offers a wide range of land and property opportunities and markets opportunities for aircraft hangarage of 290,000 square feet and general employment space of 3.5 million square feet. The Aero Centre is connected by rail and by the UK’s largest exporting port and its fastest moving commuter road network, which is on our doorstep.

Central to the strategy for aviation operations is the need to look at all possible means of generating other income streams by exploiting the potential of one of DTVA’s main strengths, which is its extensive land holdings. Airports that have succumbed to closure have not had that option and, without it, closure would almost certainly have become a necessity for Durham Tees Valley. To help finance the master-plan, provision was made for housing development on land north of the airport. The sale of the land for more than 300 houses will generate millions of pounds for Peel, 100% of which will be reinvested in the future of the airport.

[Alex Cunningham]

Will my hon. Friend give way?

[Phil Wilson]

I would love to get on, because I want to hear from the Minister.

The focus is on the north side of the airport, but the south side has great potential too. Peel believes that its master-plan has the potential, over time, to generate about 6,000 jobs. I believe that Peel has a plan, and it has shown commitment to the airport, which is proved by the investment of £38 million over the past 14 years or so. Peel has shouldered the airport’s losses while investing in capital infrastructure. The fact that it is prepared to invest 100% of the money raised from the land sale for housing proves its commitment for the long term. It is being realistic when it says that the focus of its air passenger strategy is those routes that provide for the business community, because that is where the strength is now, but at the same time it is doing what it can in a difficult market to attract leisure flights to the airport.

I believe that, for all the frustration the local community feels about the airport, there is a route out of the problems that it has faced. The master-plan is robust, and the airport supports 600 jobs, contributes £37 million gross value added to the Teesside and Durham economy and is a catalyst for economic prosperity.

Some have said that DTVA has been allowed to decline. As I have shown in my speech, however, it is not alone in the problems it has faced. Some say that fresh thinking is needed, but I believe that Peel’s master-plan is evidence of that. Some say that a practical and pragmatic approach is needed, but Peel is showing that too. I do not agree with those who say that the answer to all of the airport’s problems is to take it back into public ownership but, apparently, that is the view of the newly elected Conservative Mayor for Tees Valley.

First, the airport is not for sale. Secondly, Peel has invested and covered the airport’s losses of £38 million since 2003. The airport loses between £2 million and £3 million a year so, if a private sector company is willing to carry that financial burden while remaining committed to securing a sustainable future for the airport, why transfer the burden to the taxpayers of Tees Valley and Durham? I have no idea how much the airport would cost to buy, but I imagine that Peel would want some compensation for the millions of pounds it has already invested in the site. As the local MP, I have worked with Peel for the past 10 years, and they have not been easy times for the airport or regional aviation in general.

I am sick of the airport being used as a political football. It is time for grown-up politics. I want to see the airport work with the public sector, but I think we should support the owner in its plan and not seek to undermine it. I would say to the Mayor for Tees Valley: draw a line under any idea of nationalising the airport—as I have said, public ownership is not a panacea—and instead work with the Peel Group, become an ambassador for the airport and help us to secure its future. What I have learned in this job, if we really want to do something big for the local area, is not to grandstand, not to promise what cannot be delivered, and not to take the people of Tees Valley and Durham for granted.

I will work with anyone, including the Mayor, to secure the future of Durham Tees Valley airport, but the idea of public ownership is fanciful and I think that the Mayor knows it. He should work with me to help the airport succeed, because I believe that Durham Tees Valley is “flying for the future” and I want the people of Durham and Tees Valley to be a part of that.

--- Later in debate ---

[Mr Hayes]

Yes, I know; that was not lost on me. As I said, my own interest in Tees Valley began when I was in an earlier ministerial role and met some of the employers that the hon. Gentleman speaks about, in order to discuss their needs; I think I was the Minister responsible for skills at the time. I am well aware of the contribution that that part of our country makes to the economy as a whole, as well as to the locality. I understand the dynamism present there and the connections to other places and other countries—the international aspect that he reprised in his speech. Of course, central to all that are good communications and good infrastructure, the ability of both people and goods to travel to and from that place.

The hon. Gentleman is right to say that in that context the decline in services at Durham Tees Valley airport in recent years is a matter of regret. There is no doubt about that, as he said. I have the opportunity, therefore, to respond on the Government’s behalf to the wider points that the hon. Gentleman made about regional airports, because he mentioned that the issue is not wholly about Durham Tees Valley airport but about regional airports and their relationship to our aviation strategy. I want to say a few words about that at the outset and come back to the specifics that he mentioned.

[Alex Cunningham]

Will the Minister give way?

[Mr Hayes]

I will; I am about to begin my exciting account of our views on regional airports, but perhaps the hon. Gentleman will contribute to that.

[Alex Cunningham]

I am most certainly looking forward to that. Does the Minister agree that Heathrow, with all its ambitions for the third runway, could actually help regional airports, particularly Durham Tees Valley, by saying now that it will ensure that we have slots from Durham Tees Valley into Heathrow?

[Mr Hayes]

Yes; connectivity matters and I will speak about that in a moment. The hon. Gentleman made his point forcefully and put it on the record, which I am sure he wanted to do.

My view is clear: airports across the UK, including those in north-east England, make a vital contribution to the growth of regional local economies, as well as providing convenient means by which passengers can travel to other locations in the United Kingdom and other airports, as the hon. Gentleman suggests. They encourage investment, potential for trade and, as he and others have said, valuable local jobs, a base for the development of skills—many skills related to aviation are provided in those local airports—and they provide a means by which we can balance our economy. They can allow the growth of localities that are distant from south-east England but are none the less vital to our economic wellbeing, so they play many roles.

We have 40 commercial airports across the country, which ensure that 80% of the UK’s population are within 90 minutes of at least two airports. The UK has direct flights to over 370 destinations in more than 100 countries across the world. Those connections—this is the point that the hon. Gentleman made emphatically—provide huge benefits for the cities and regions of the airports that they serve. The hon. Gentleman will know, because he is interested in the subject, that the Government continue to recognise that importance. A priority for the aviation strategy that we are developing will be to ensure that the aviation sector continues to provide and improve connectivity across the regions and nations of the UK.

The hon. Gentleman will also know that this summer we published a call for evidence on the development of that strategy. We sought views on those very issues and we want to develop a strategy that takes full account of the role of airports across the country. Of course, it is true that there are major international airports in our kingdom, but they are not all that matters. The other airports matter, too—for all the reasons that the hon. Member for Sedgefield gave, and that I have amplified. We received a large number of responses to the call for evidence, which we are currently analysing, and we will consult further on the issues raised—including how to encourage connectivity—for exactly the reasons that have been argued. It is very important that an aviation strategy thinks strategically about the effect of connectivity not only to local economies but to our economy more broadly.

In those terms, I welcome this debate as a further contribution to that consideration. I invite hon. Members in Westminster Hall and others, more widely across the House, to contribute to that consultative process. It is really important that we base what we do on the understanding by different Members across the House of the effect of connectivity—particularly access to airports—in their localities and their regions. I recognise and value that.

Tees Valley airport, as the hon. Gentleman said, has enjoyed a level of investment, notwithstanding the challenges that it faces. Only this month, as he knows, a £250,000 terminal improvement programme was completed. That followed the announcement of the new services by Loganair, which will run weekly flights between Durham Tees Valley and Aberdeen, as well as non-stop flights six days a week linking Durham Tees Valley with Norwich. I am pleased to note that the airport’s public initiative, flying for the future, which highlights the airport’s key role in the Tees Valley area, shares some of the ambitions that the hon. Gentleman set out.

There is an interesting history of the particularity of the arrangements prevailing in respect of the governance of Tees Valley airport—Durham Tees Valley airport: I do not want to undersell Durham, as Durham is etched on my heart, as the hon. Gentleman probably knows. The airport was sold by the local authorities, for £500,000 I think, back in 2003 if my memory serves me right. The five local authorities concerned are still represented on the board, are they not? I suppose that they must be as distressed by the loss being made annually as anyone else, given that they are board members and share some responsibility for the airport’s governance—although they are minority shareholders, in the way that he described.

At the end of the day, what is currently happening at Durham Tees Valley airport clearly is not working. The airport is making a loss and it is not fulfilling some of the potential that the hon. Gentleman wishes for it—as does the whole Chamber, I guess. The Mayor has been in discussions with the current owners, Peel Airports. In the end, it is a commercial matter. Being mindful of the debate, I took the trouble to ring the Mayor yesterday to take his view on the issue and to ask what he felt was the Government’s role in it. He made it very clear, as I anticipated that he might, that it is not a matter for the Government, but very much a local matter, and it has to be settled locally. The Government have no competence in it. Of course, it is right to assume that they take an active interest in it, because it relates to the development of the strategy that I have described. As we care about regional airports, we would be bound to have an interest in it, but it is not for us to give power to local people to make decisions and then for me to impose what I think on local people. That would be quite wrong and no one in Westminster Hall today would want me to do that.

[Alex Cunningham]

Perhaps the Minister has answered my question before I have posed it. The local authority owns about 12% of the airport, but in the Minister’s discussions with the Mayor, did he offer the Mayor any advice on his grand plan to buy the airport, at the cost of tens of millions of pounds? Assuming—judging by his speech a few seconds ago—that the Minister did not offer him advice, what advice would he offer him now?

[Mr Hayes]

I am not sure that it would be appropriate for me to advise the Mayor on a local commercial matter. He did not seek my advice and I think that it would have been impertinent of me to offer it. I recognise that the Mayor has already made an outstanding contribution to the life, health and wellbeing of local people in Tees Valley, and I have every confidence that he will continue to do so. Indeed, we have already said that the airport matters—that is the essence of this debate. It is great that both local Members of Parliament, regardless of political party, and the Mayor are united, not only in their determination to do right by local people, but in their clear view that the airport is critical to local wellbeing.