Regional Airports

Lord Brady of Altrincham Excerpts

Tuesday 15th July 2014 Westminster Hall

[Mike Kane]

Yes. Let us hope that Stornoway does not enter into competition with the beautiful island of Barra, where the landing strip is on the sea shore.

Since 2008, the UK’s connectivity has declined by 4.9%, whereas Germany’s has increased by 4.3% and France’s by 3.4%. My own airport, Manchester, has a positive story to tell about connectivity. After I have told that story, I will discuss other regional airports.

[Mr Graham Brady (Altrincham and Sale West) (Con)]

Does the hon. Gentleman, who is my constituency neighbour, agree that all these airports that bring benefits to and improve the international connectivity of the British economy would benefit enormously if we did not persist in having what I think is the second highest rate of duty on air transport? It is a tax on trade and a tax on family holidays—should we not be lowering it?

[Mike Kane]

That is a good point. If the hon. Gentleman will forgive me, I will come to the connectivity fund and expand on the points about airport passenger duty in a few minutes.

Manchester is the international gateway to the north. It has 60 airlines serving more than 200 destinations, which is more than Heathrow. I repeat for Hansard: that is more than Heathrow. Last year, Manchester added more new routes than any other UK airport, serving the 24 million people who live within two hours’ drive. It is the only airport outside the south-east with a strong long-haul portfolio. As well as serving destinations such as Singapore, Pakistan and the US direct, it also offers strong onward connectivity via the middle east: three times daily to Dubai, twice daily to Abu Dhabi and 10 times a week to Doha. More recent connections include Hong Kong, Jeddah and Toronto, and the new Charlotte service has increased transatlantic services at the airport to more than 60 a week. Most of the world can be reached from Manchester either non-stop or with one stop.

However, 5 million passengers a year from Manchester’s catchment area leak to the London airports to catch flights. The challenge for the future is ensuring that passengers have the option to fly from their local airport, taking the pressure off the congested south-eastern airports. However, I hope to welcome High Speed 2 to the airport station at some stage in the near future. It will reduce journey times from Manchester airport to Euston from two hours and 24 minutes to 59 minutes.

As I said earlier, Stansted is the UK’s fourth busiest airport, serving more European destinations than any other airport in the world. Both Ryanair and easyJet have committed to growing their Stansted portfolios; Ryanair’s will grow from nearly 500 flights a week to more than 700 in winter 2014. Edinburgh is Scotland’s capital airport, with over 40 airlines serving more than 100 destinations. More than 9 million passengers a year pass through the airport.

For smaller point-to-point airports, although direct flights are preferable, indirect flights offer an important alternative where they do not exist, either via UK hubbing or through hubs in continental Europe or the middle east. At East Midlands airport, the priority for the future is to access more European hubs in order to widen connectivity; it currently serves Amsterdam, Brussels and Paris. In the longer term, the airport is keen to have direct routes to emerging economies that are key to the region, such as India. Direct access to markets supports business and trade between the region and those markets. It is not just about how connected the UK is to the outside world today; it is about its connectivity in the future and how it compares with other EU and global airports, such as those in the gulf.

Access to global connectivity is not simply an issue of access to Heathrow. Passengers value the choice, competition and service offered by alternative carriers connecting through alternative hubs, such as in the middle east. Manchester airport does not have the luxury of a UK hub operator and relies on overseas carriers to provide long-haul connectivity. Without those carriers, Manchester would just be a spoke into Heathrow. Ultimately, it is the airlines that determine which routes are flown, and therefore overall connectivity, depending on long-term route profitability. However, political and regulatory factors can play a major role in influencing the attractiveness of starting and sustaining routes.

The UK still enjoys a strong position in transatlantic aviation and flights to traditional partners such as India, but is linked to relatively fewer locations in Brazil, Russia and mainland China. Both Germany and France have much better connectivity to China in particular. In a 2012 survey by CBI and KPMG, almost half of respondents expressed dissatisfaction with the UK’s air links to emerging markets. Of companies that deemed flights to China to be crucial, only 46% were satisfied with their current availability.

Regional airport connectivity is not just about the number of destinations served; it is also about the frequency of services, the economic value that they drive, the accessibility of destinations right across the UK, whether flights take place at convenient times, and their capacity. The Government have demonstrated their support for the growth of connectivity from regional airports by announcing the regional air connectivity fund. This will provide public support for new intra-EU routes from airports with fewer than 3 million passengers per year, or 3 million to 5 million in exceptional circumstances. The hon. Member for Na h-Eileanan an Iar (Mr MacNeil) commented on the fund a few moments ago.

Funding will be available for five years and will come to an end in March 2019. Airlines will have to prove that they can make money from the route without public assistance after two years. However, in reality, competition rules will make it difficult for many routes to qualify. Those that do will be at the smallest airports and will be short-haul routes only, not the game-changing routes we need such as Manchester to Beijing.

It is important to acknowledge the steps the Government took in this year’s Budget, when the Chancellor cut air passenger duty on long-haul routes to destinations including China, India, Brazil and many other emerging markets. However, the Government could go further by offering a temporary air passenger duty exemption for new long-haul routes, as recommended by the Select Committee on Transport and mentioned by the hon. Member for Altrincham and Sale West (Mr Brady). It would help to make best use of existing capacity and encourage more routes to emerging economies.

A temporary APD holiday would have the advantage of being a proven commercial strategy and one that airports use: that is, a lead-in discount. It would cost the Treasury nothing, as the Treasury receives no income from routes that do not yet exist. Forgoing revenue on new routes until they were established would cost nothing and could result in an income stream later on.