Aviation Industry

Mary Macleod Excerpts

Tuesday 15th November 2011 Westminster Hall

[Mr Donohoe]

I will return to that point, because I have included in my speech the effect of that and the question of the whole package.

[Mary Macleod (Brentford and Isleworth) (Con)]

The hon. Gentleman talked about the need for additional capacity. Does he agree that London—he is talking about the south-east—remains the best connected city in the world, with more than 130 million passengers, which is more than many other great cities?

[Mr Donohoe]

I will come on to that as well; I have a speech that I would like to continue with. Last month, another runway was opened in Frankfurt, which will impact more and more on the position of the UK aviation industry.

The lack of hub capacity could cost the economy right now some £1.2 billion a year in lost trade. The CBI and other organisations, such as the Institute of Directors, say that that must be tackled if the UK is to maintain its global competitiveness, and I support them.

The coalition reversed the previous Government’s plans to build a third runway at Heathrow and, as I understand it, oppose the building of new runways at Stansted or Gatwick, which runs at 78% capacity. The coalition has said that it will produce a new aviation framework by 2013, but we need to bring that forward. It is clear that unless we do so, we will lose business.

As a reminder, the UK is the sixth biggest economy in the world. The world is becoming increasingly interconnected, and its centre of economic gravity is moving further east, but the UK does not have a cohesive aviation policy. The coalition has allowed us to fall far behind. Frankfurt opened its fourth runway just last month. France’s Charles de Gaulle already has four runways, and Schiphol, which is becoming more and more of a direct competition, now has six. We therefore have to think about where we are going in the future. Is it important for us to continue having a hub airport in the first place? One wonders whether that should be the way forward.

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[Mr Donohoe]

I could not have put it better. My hon. Friend will be speaking in this debate and will no doubt reinforce that point. It is clear that that is the situation.

[Mary Macleod]

Will the hon. Gentleman give way?

[Mr Donohoe]

I want to make some progress because I know that there are a number of hon. Members who wish to speak. To give way again will impact on that wish, so I will, if I may, move on.

The London Mayor believes that London will become a destination on the end of a branch line unless a new international airport in the Thames Estuary is built. Quite a lot of work would have to be done for me and many in the industry to be convinced of the practicality of such an airport. It is fine putting concrete on the ground, but difficulties emerge when it comes to airspace. The situation in the south-east is among the most complex in the world. Such consideration is vital in assessing the needs of an estuary airport, as there are major structural airspace implications. Of course, we could carry out such work; we have never argued that we could not. However, the scale of the airspace structural change necessary to accommodate the proposal would be enormous and should never be underestimated.

In NATS’ expert view, a four-runway estuary airport could not operate in tandem with Heathrow if Heathrow were to remain the same size as it is today. Such an airport would need to be a replacement for Heathrow. There would be significant implications for other airports in the region, most notably for City airport, which I use weekly, Southend, Stansted and Biggin Hill. It is not simply a matter of shifting current traffic patterns to the east. The eastern boundary of UK airspace is an important factor. Belgian and Dutch airspace and the proximity of airports such as Schiphol and Brussels mean that climb and descent profiles would be affected, so international co-operation would be required.

With westerly winds in the UK prevailing for 70% of the time, westerly operations may increase departures over central London itself. Refining existing flight paths provides more certainty for people already living below them and would be better than blighting new areas, which is what could happen if Boris’s idea goes forward.

Airspace is a critical pillar of national transport infrastructure, yet it is too often the forgotten factor in the consideration of aviation expansion, particularly airport development. The UK has 11% of Europe’s airspace and 25% of its traffic. We are Europe’s transatlantic gateway, which is a strategically important industry underpinning economic growth.

Airports do not work without the airspace to feed them. The Civil Aviation Authority has set out a blueprint for future airspace strategy, and NATS and BAA are co-chairing a cross-industry group over the next 12 months to work out an implementation plan. A major review of airspace has already been started. It has to assume that the current infrastructure will be in place. This is a once-in-a-generation opportunity, so the Government’s policy framework needs to be able to stand the test of time. Fundamentally, if this opportunity is not to be lost, we need cross-party support, which the shadow Secretary of State has argued for for some time.

We face the possibility of being stacked in the air—it happened to me only yesterday. I believe that that is an inefficient way to operate, but some say that it is an extremely efficient means of maximising limited runway space. None the less, it is not very good for the passenger who is trying to get into London. NATS supports the provision of additional runway capacity in the south-east because that is where the demand is. That sounds like common sense.

Taxation is another important area. When I applied for this debate, I felt that somebody from the Treasury should be here with the Transport Minister. The industry is charged some £7.9 billion in tax. Tax is paid by aviation firms, and employees contribute around £6 billion. There is also the evil air passenger duty, which was introduced by a Labour Government. When it started, we had to pay £5 for short-haul flights and £10 for long-haul flights. Now, if a family of four want to go to Australia, they have to pay more than £700 in duty. I know families who now travel from Glasgow to Frankfurt, Charles de Gaulle or Schiphol. They then take their bags off the plane and get on to another plane to reach their destination just so that they can save themselves that exorbitant tax. We are one of very few countries in Europe to apply such a tax, and the Treasury needs to look at the matter. Without a doubt, we are haemorrhaging passengers who travel, connect and interconnect through Heathrow.

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[Jack Lopresti (Filton and Bradley Stoke) (Con)]

It is a pleasure to serve under your chairmanship, Mr Gale. I congratulate the hon. Member for Central Ayrshire (Mr Donohoe) on securing today’s debate and, of course, on the new addition to his family.

As we have heard, the UK aviation and aerospace industries are vital to the UK’s economic success. Moreover, based on the criteria set out by the Government to rebalance the economy, they have a vital role to play in delivering growth through manufacturing and exports. That will be the broad thrust of my remarks.

Our country’s aviation endeavours are quite rightly a huge source of pride to many people. Aviation is a sector in which the UK is undoubtedly a world leader. In aviation, British engineering and manufacturing set the standard and still pull in big international orders.

Filton is in my constituency, and is where I live. Most people would agree that it is at the very heart of the UK aviation industry on the manufacturing side. We are fortunate to have an outstanding cluster of aviation and aerospace companies on our doorstep. Airbus, GKN, Rolls-Royce, Boeing and BAE Systems, to name a few of those companies, all have a significant presence in the constituency of Filton and Bradley Stoke and employ thousands of people.

This debate is about the future of the UK aviation industry, but I want to start by recognising the aviation heritage in my local area and how we reached the world-leading standards of today, because only by appreciating and understanding our past will we be able to maximise opportunities, develop a vision for the future and, crucially, inspire the next generation of engineers, scientists and other people who will work in the aviation industry.

Aircraft have been built and flown at Filton since their inception, and we are proud that our aviation roots are well over a century in the making—last year, we commemorated and celebrated 100 years of aviation in Filton. The pioneer and entrepreneur Sir George White, the humbly born son of a Bristol painter and decorator, was the founder of our local industry and, it could be said, the founder and father of British aviation. In 1910, Sir George founded the Bristol Aeroplane Company, and we should all honour and celebrate his legacy, because what he achieved was truly remarkable. He was a pioneer of aviation, a great philanthropist and a completely self-made man. This great Bristolian was the embodiment of social mobility and enterprise, and his example and legacy should be used to inspire the next generation of aviation and aerospace engineers and scientists. Without his vision, we would not have the home of British aviation in Filton, or the thriving UK aviation industry that we have today.

Sadly, BAE Systems has decided to close the airfield in Filton at the end of next year, but that provides us with many opportunities, with room to expand the existing aviation and aerospace industries locally, and plans are close to fruition for an aviation heritage centre, which will house the last complete aircraft built at Filton, Concorde 216, which was the last Concorde ever to fly. The plans importantly include a science, technology, engineering and mathematics learning centre, which will help to inspire children to go to college and university locally.

Perhaps unsurprisingly, there is a concern in the UK aviation industry that the Department for Transport is anti-aviation. I do not subscribe to that view, and I know that the industry appreciates that the concern is more down to airport expansion issues than to anything else, but the fact remains that it is important for our aviation industry’s airline customers that there is an efficient air transportation system in the UK.

Passenger numbers are set to continue to grow, which will help to fuel further growth in the aviation industry. Department for Transport figures show UK terminal passenger numbers increasing to 520 million per annum by 2050, from roughly 210 million in 2010 according to the Civil Aviation Authority. That increase is modest in comparison with that which will be seen globally, not least as a result of the rise of the BRIC economies—those of Brazil, Russia, India and China—and other emerging markets. Airbus’s most recent global market forecast, published in September 2011 and covering 2011-30, foresees the need for more than 26,900 passenger airliners with seating capacities of at least 100, along with more than 900 new factory-built freighter aircraft. In the same time frame, the world’s passenger aircraft inventory will more than double from today’s 15,000 to 31,500 plus.

We should continue to push for further technological improvements and ensure maximum social and economic value for each tonne of CO₂ emitted, but the future growth of the aviation industry presents a major opportunity for the UK economy, and it would be unwise to start playing productive sectors of the economy off against each other as we seek solutions to climate change. In a highly competitive global market, adverse regulations that limit a particular sector’s ability to grow domestically are more likely to increase the possibility of a competitor based elsewhere in the world gaining commercial advantage, than effectively to reduce greenhouse gas emissions. I encourage the Government to work through bodies such as the International Civil Aviation Organisation to promote solid and economically sound solutions.

That said, the overwhelming feeling I have picked up from the local aviation companies that I speak to regularly is that the Government are doing a lot of good work to ensure that the UK maintains its position as the world’s second largest aerospace industry, which is an incredible national achievement given the economic conditions and the global competition.

[Mary Macleod]

Does my hon. Friend agree that this debate should be largely about not how we expand airports such as Heathrow—I do not subscribe to the need to expand them—but about transport across the whole UK, and about looking for creative solutions? The Eurostar is a perfect example, because most of us who travel to Paris or Brussels take it.

[Jack Lopresti]

My hon. Friend makes a good point. She has worked very hard in campaigning against the expansion of Heathrow airport. I agree that there has to be a more regional dimension to our transport challenges.

I have been asked by the companies that I talk to regularly to pass on their thanks and compliments to the Minister of State, Department for Business, Innovation and Skills, my hon. Friend the Member for Hertford and Stortford (Mr Prisk), on his commitment to the aerospace growth partnership, which he co-chairs. The AGP is an industry and Government partnership aimed at addressing the future needs of the UK aerospace industry, and it will prepare a strategy that embraces technology, manufacturing and supply chain. Such initiatives give the sector confidence in economically uncertain times. By nurturing such relationships and demonstrating the UK Government’s commitment to the sector, we are ensuring that Britain is one of the best places in the world for aviation companies to do business.

The Government sent another strong signal to my local industry by confirming in the strategic defence and security review announcement last year a major order for 22 of the fantastic A400M aircraft, whose wings are manufactured at the Airbus site in Filton. Not only is it a fantastic bit of kit that will provide a much-needed enhanced lift capability for our armed forces, but it will provide us with many export orders. The SDSR also gave us the good news that 14 specially converted Airbus A330 strategic transport and tanker aircraft will replace the ageing TriStar fleets, which will benefit our armed forces and the local and national aviation industry.

The aviation industry holds one of the keys to the economic growth that the UK desperately needs, and the Government are working hard to support the sector and its highly skilled employees. It is the UK’s highly skilled aviation and aerospace work force who contribute so much to the industry’s success, and I ask the Government to continue to do all that they can to support the industry’s employees, especially in these tough economic times. I was very pleased to hear about the Government-backed talent retention solution from the Business Secretary’s skills and jobs retention group. The TRS is designed to help engineers facing redundancy link up with companies with vacancies for highly skilled engineering and aerospace staff, and it is backed by top companies such as BAE Systems, Airbus, Rolls-Royce and GKN.

The aviation industry is an engine of growth for the UK, and we must do all we can to ensure that it is nurtured and protected. From progress on biofuel and research and development programmes to sustainable aviation projects, the UK is a world leader in aviation. As the industry confronts the challenges of operating in an ever-growing and increasingly competitive global marketplace, we must do all we can to help aviation and aerospace companies make the most of the fantastic opportunities that present themselves.

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[Paul Maynard (Blackpool North and Cleveleys) (Con)]

I congratulate the hon. Member for Central Ayrshire (Mr Donohoe) on securing the debate. I shall try to be quick, because I know other hon. Members want to speak, so this will be high speed, if not on high rail, which will make a nice change.

I welcome the progress that the Government are making on aviation policy. They are taking steps in the right direction. It is not fast enough for me or many in the industry, but perhaps we need to learn patience. Good, evidence-based policy is not one of Jamie’s five-minute meals. It needs good-quality evidence, and if we do not form policy based on evidence, rather than on prejudice, it is plain stupid. I am not here to boost Blackpool airport, although it is a wonderful airport to fly into and see the wonders of the Fylde coast. I do not even want to waffle on about air passenger duty. I do not want to tempt the Minister down a route that she probably does not want to go down, given that she is not a Treasury Minister. I do not even want to bang on about a third runway at Heathrow, because I think that is a stable door that was shut long ago, unfortunately.

We must discuss a more fundamental question: what does UK plc need from our aviation industry? What do we actually need? Hidden, buried away like a nugget of gold within the scoping document, are two fundamental questions that the Government must consider. What are the benefits of maintaining a hub airport in the UK? And how important are transit and transfer passengers to the UK economy? Those things may seem self-evident. How could anyone dispute them? Yet a fortnight ago I met a commercial director for a regional airport, who said, “There is no such thing as a hub airport. There is no Government definition of one, so they don’t exist. So we don’t need a hub airport any more.” That struck me as the most illogical and ludicrous thing one could possibly argue, but none the less he tried. I would prefer to focus on not Boris island but Boryspil airport, which, for those who do not know, is the main airport for the city of Kiev, the capital of Ukraine. That is a classic example of an emerging market destination, which is economically crucial, and to which services from the UK are not sufficiently good. Yet all the aviation policy that we seem to be able to focus on is some future airport in the Thames estuary. We need to focus on the needs of the UK economy—of UK plc—here and now.

I welcome the work that I know the Minister is doing to make Heathrow and the other south-east airports function better, so that we get bang for our buck and extract the maximum from the capacity that we already have. I want London to be surrounded by a string of pearls in the form of excellent, functioning airports. One of them, however, cannot be a pearl but must be a diamond—the hub airport. To understand why, we must understand the definition of a hub airport, and why it matters to the economy. Transfer passengers do not exist merely for the benefit of Starbucks. The Frontier Economics foundation recently issued a report showing that there are at least 13 flights to emerging market destinations in which more than half the passengers are transfer passengers, who did not start their journeys at Heathrow. The more that we squeeze the short-haul flights that the hon. Member for Blackley and Broughton (Graham Stringer) referred to, the harder it will be to sustain flights to emerging market economies, because we will not have the transfer passengers, which is a grave concern.

I confess that a few months ago I wondered whether the UK really needed a hub airport. The Japanese Transport Minister once famously said that Incheon in South Korea was now Japan’s hub. I know that for many of my constituents Schiphol or Charles de Gaulle is essentially their hub airport. I began to think, “Can the UK survive without a hub airport? Can’t we just fly to Paris or Amsterdam?” However, the Frontier Economics report makes the fundamental case why we cannot do that. It is explicit about the amount of trade that we are losing as a consequence of having poorer connectivity with the emerging market economies. It is a question of not only the number of people flying through Heathrow, but where they are going. The hon. Member for Blackley and Broughton rightly made the point that Heathrow’s number of destinations is gradually dropping. In the past five years, it has decreased from, I think, 227 to 180. Over the same five years, the number of destinations reached from the main competitor hubs in Europe has increased.

There is clearly a case to be made that Heathrow is entering a period of consolidation. It may be getting more passengers, but they are going to fewer places, and, in the cycle, that is usually the beginning of the end of an airport’s hub status. That is what happened to New York about 20 years ago, when the destinations started to drop off and it lost its hub status. While I fully expect that in the coming 20 years Heathrow will remain England’s major international gateway, I have concerns whether it will retain its hub status. Hon. Members may ask whether that matters. New York no longer has a hub airport, but it remains a world city. I question whether we—UK plc—can afford to sacrifice the economic benefits that come from a vibrant, well-connected hub airport, which I think is fundamental.

[Mary Macleod]

Does my hon. Friend realise that London has 92 flights a week to China, whereas Paris has 73 and Frankfurt 69? We have good connectivity with China, one of the most important growing economies. Surely the issue is about working with businesses in China and elsewhere to find out their requirements. Has he had any correspondence with businesses there to find out whether they require additional flights to Heathrow and London?

[Paul Maynard]

I thank my hon. Friend for that useful intervention. Of course the main reason, historically, for our having far more flights to China is our historic tie to Hong Kong. The destinations that we serve are Beijing and Shanghai, and there are more than 3,000 seats a week going to Hong Kong. I think that Frankfurt serves five destinations and Paris four. We dominate on the Hong Kong routes, but we underperform in relation to all the other top 10 Chinese cities. Of course, economic growth in China is happening not in Hong Kong but in cities that most of us have probably never heard of—the likes of Chengdu and Dongguan, which no one is yet serving. Far more than focusing just on the number of people who are flying and the routes they are flying on, we must think about connectivity. Are we serving the places where the economic growth is?

I make a plea to the Government. I welcome what they are doing to make the airports around London and the south-east more suited to improvements in the passenger experience, but I ask that we should not overlook the benefits that can be provided by an active, well-maintained and well-funded hub airport, which works well and connects to the places that UK plc needs to be connected to for growth. That needs to be a fundamental part of our aviation strategy.

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[Mr Rob Wilson (Reading East) (Con)]

I congratulate the hon. Member for Central Ayrshire (Mr Donohoe) on securing this debate and on the birth of his new family member, Rosie.

I want specifically to discuss my strong support for much-needed improved ground access to Heathrow. In my view, there is a specific and strong case for improving railway connectivity to London Heathrow via a western extension of services. The case is not based solely on improved accessibility for passengers, because it is also driven by a strong national economic imperative.

This is a debate about the future of the industry. Often, when talking about the future, we try to be optimistic. Optimism is definitely required when discussing aviation, due to the financial challenges facing the nation. Given the financial crisis and the need for economic growth to stimulate recovery, we must be mindful of the contribution made by the industry. Simply put, we all acknowledge that a strong aviation industry is good for the British economy.

In that light, I am keen to secure the multiple benefits of improved rail access to Heathrow airport for my constituency of Reading East. However, it is worth noting that the benefits of access reach far wider than individual constituencies. I have been working closely with key figures in government and the railway and aviation industries to make extended western access to Heathrow a reality. As we debate the future of this important industry, I am pleased to report that the project is making progress, which is important.

Estimates from the Treasury put the aviation industry’s contribution to the UK economy at £18 billion, which cannot be ignored in the current economic climate. The aviation sector employs 250,000 people directly and an estimated 200,000 more in the supply chain. Again, that contribution should not be taken lightly. Heathrow airport has 65.7 million terminal passengers each year, and Department for Transport forecasts estimate that that figure will have risen to 85 million by 2030.

Looking to the future, as air travel grows, so will the industry’s contribution to the wider economy. We cannot afford to ignore it or fail to make the right investment to exploit it. After all, there are plenty of other airports across Europe willing to challenge Heathrow’s position. We must defend Heathrow’s pre-eminence on the European and worldwide stage. There is, of course, a balance to be struck between aviation expansion and its negative impacts, such as the environmental considerations that hon. Members have discussed.

[Mary Macleod]

Does my hon. Friend agree that we must also take account of local residents? What we really want is to make Heathrow better, not bigger, and to ensure that the noise impact on local residents is minimised.

[Mr Wilson]

Of course. I think that the hon. Member for Hayes and Harlington (John McDonnell) would totally agree. The Government have said that expansion should not come at any price. As we know, they have cancelled the planned third runway at Heathrow. There is, by and large, cross-party consensus on the issue. However, that is not to say that we cannot make improvements to the system that we already have, as my hon. Friend has said, and Heathrow is a prime example. Improved western railway access to Heathrow would help to maximise the benefits that the airport provides.

For my constituency, that means strengthening Reading’s standing as the commercial centre of the Thames valley. Direct railway access to Heathrow would entrench and extend Reading’s position as a place to do business. Leading technology companies such as Microsoft and Oracle have established headquarters in Reading East, along with many other companies too numerous to name with a global outlook and an international reach.

The lack of direct rail access has rightly been described by the president of the Reading chamber of commerce as bringing “huge frustrations”. Big businesses based in Reading pay an estimated £10 million a year in taxi fares to send executives and business people to and from Heathrow, which is not particularly business-friendly. Money is not the only cost to businesses resulting from inadequate connectivity to the airport. The absence of a link also costs them precious time that could be spent with clients and customers. Lengthy journeys on the M4 to Heathrow, with their inherent risk of traffic jams and other delays, are not acceptable for international businesses.

The easier transport to an airport is, the more people and businesses will use it, in which case the economic benefit will then flow into the wider economy. I have been working with key figures at BAA, Network Rail and First Great Western and officials from the Department for Transport. All have come together to breathe new life into the project. As a result, £119,000 in funds was recently allocated to Network Rail, and design consultants have been appointed. A feasibility study is under way and is due to be completed in December. I look forward to the report’s publication.

As I have outlined, the exciting benefits for Reading East are clear, but the project also has the potential to open up direct rail access to parts of the country that are poorly served. For the first time, Heathrow would become directly accessible to Wales, Herefordshire, Devon, Dorset, Cornwall and many other areas by means other than car or coach. I have no doubt that hon. Members representing constituencies in those areas would also benefit, and that they look forward to the report’s publication. Additionally, I hope that they will attend a parliamentary reception that I am hosting on Thursday 24 November to give the project further traction. I am delighted that my right hon. Friend the Transport Secretary will speak at the event.

I am passionate and serious when I say that this project is part of the future of the aviation industry. The implications of this important expansion in accessibility are vast, as millions of people would find themselves with a new route to Europe’s busiest airport. As the world shrinks and our outlook becomes ever more global, why should some parts of Britain be disjointed in their access to our premier airport?

I am optimistic about the future, despite the gloomy economic outlook. Aviation will play an important role in delivering growth for the UK economy. We cannot afford to endanger that future prosperity by not constantly seeking improvements to the industry—in this case, through better connectivity to Heathrow airport.