Thursday, 23 June 2011

The London Airports Debate.

Speeches on Tuesday last week about London's airport capacity by Boris Johnson, Mayor of London, and Willie Walsh CEO of ICAG, owner of the BA and Iberia brands were interesting and headline grabbing. Both were advocating the building of a new airport on what would be reclaimed land somewhere ill defined along the Thames estuary to the east of London. Each though gets to the argument by a different route. The cost they say would be around £40 billion although there is no indication of how this sum is arrived at and whether or not the bill for the supporting infrastructure and rail and road links is included. Historically we should expect to see the eventual cost come in at least twice as much as the initial kite flying estimates. It is worth further examining what both Johnson and Walsh along with the UK Government and the BAA are saying,-and not saying,-on the whole issue and where they and their organisations have come from on it.

Turning first to Boris Johnson, he says "We're on the verge of making a historic mistake over the provision of airport capacity. Heathrow is perpetually struggling to fit a pint into a quart pot. It's no wonder the Heathrow experience can be so miserable." So far so good. But wait a minute. The reason why Heathrow is now bursting at the seams movementwise and can not substantially grow slot numbers is that the incoming coalition government binned Labour's go-ahead for new the third runway there. One of the noisiest opponents of the scheme was Boris acting on behalf of his and the Conservative Party's west London constituents. It was pure populist NIMBYism although dressed up as a success in the environmental war. (Let's not forget that aviation contributes just 2% of UK's emissions and that the M4/M25 contribute more to pollution around Heathrow than do aircraft.) The constituencies concerned are primarily the smarter and vociferous ones from Notting Hill westwards to around Richmond. Noise blight in Hounslow and the places right under the final rather than outer approaches , while protested about, seems to have had much less clout. Folk there tend not to be so well connected to the Westminster networks so have less leverage. Most of all affected groups have moved into the areas in which they now live well after the jet age really got going from 1960 onwards so they moved in the full knowledge of the noise issue and that the airport would continue to grow. Mr Johnson knows that the airport is bursting at the seams right now and that the new 3rd runway provided the quickest and best way to meet it. He also knows that the possibility of another airport being built is extremely remote and if it were the UK's pedestrian approach to planning, approving and building anything, would ensure that it would take at least 20 and probably nearer 30 years to open. It is obvious to all that in a development averse country every possible obstruction would be thrown in its way and the citizens of Kent and Essex are unlikely to accept a new airport on their doorstep without a massive struggle. Sundry varieties hitherto unsung wildlife would have their support groups too. The reality is that the Thames estuary idea is unlikely to fly and a new inland site is unthinkable. Either would solve London's strategic problem while not asking inner Londoners in particular to take any of the downsides. The Mayor also does not seem to have considered the issue of the loss of tens of thousands of jobs and behind that a wave of further jobs dependent on them in western London.

Next there is Wille Walsh, now no longer with the single concentrated focus on the BA brand. He is perhaps flying more than one kite. The first is final call on the government to reconsider the third runway for one last time before it is totally dead for ever. Politically this appeal couldn't have come at a worse moment. Faced with accusations of having recently done around 15 U-turns,it will not be willing to do another on what is portrayed as a vital environmental issue. They will want to play tough and square jawed on a few high profile items. Heathrow is an ideal one , albeit negative, and may be balanced out by the more positive support for the HS2 high speed rail line to the north announced by the Prime Minister yesterday. Walsh is quoted as saying "We've already lost because the growth in Dubai could have come to London" and that following the transfer of the BA and Iberia brands to ICAG "We will access growth outside the UK". In other words UK Plc is about to discover the downside of no longer having what was seen as a national airline whose success and future depended almost wholly on what it could achieve at Heathrow plus a bit of overflow at Gatwick. Foreign registered ICAG can let its investment in London stand still or decline and just make its money elsewhere. Secondly the fact is that the growth at the Gulf (and other) airports up to now has not been lost by Heathrow's overcrowding. Until very recently and even now there have been been additional and transfered (bought) slots available and airport runway capacity has not been the main constraint. BA itself has enormous potential to juggle slots between its marginal shorthaul services and its long haul ones. It has chosen not to do so. It has also chosen not to expand its long haul fleet over the last ten years despite growing markets. It has grown its dependency on trans Atlantic services and not responded to the growth of the Gulf carriers by increasing destinations or frequencies in its eastern and southern markets.It has focused primarily on hubbing to North America from Europe, the Middle East and parts of Africa rather than the rest of the world and it does that well.Elsewhere BA has been remarkably passive and unadventurous while others have feasted from its table. It has also downsized its economy cabins so that it caters less for the mass lower yielding business which has had to gravitate to other carriers, thereby fuelling the competition's growth in both aircraft size and frequencies. Completing the circle, this has increased their competitivness with BA for business traffic as well. The BA brand's passenger throughput and connectivity at London Heathrow is therefore concentrated very much on the higher end of the Atlantic market and is well below its potential in other segments including volume .The BAA and its army of concessionaires can not be delighted.

The third player is the Her Majesty's Government. Labour's transport minister Lord Adonis was the most dynamic in the role seen in recent years and truly championed air and rail travel and enthusiasticaly mastered all aspects of his brief. He was determined update the infrastructure for both and to align with growth projections so that Britain remained competitive. This would probably be the first time since the 1930s that demand and facilities were in step. He was to be further helped by recently introduced Regional Spatial Strategies which would cut the red tape and speed approvals of major national projects and rid them of countless running battles with local authorities lying on the runways or rail tracks. This leading edge , cut-through-the-proceses-and-get-it-done body was quickly scrapped by the incoming coalition and the planning powers returned to the local levels. From May 2010 the very able Philip Hammond has been the new minister. He has driven rail modernsiation and capacity increases with successful vigour but has gone the other way with aviation. Not only was the third Heathrow runway abandoned but even the prosposed small slot improvement by allowing parallel arrivals and departures on its existing two was rejected. This put the cork in the movements bottle. The second runway at Stansted was also ditched and Gatwick can not build one until 2018 at the earliest thanks to a Michael Heseltine deal with the surrounding local authorities in return for the original building of the North Terminal. Now increased passenger numbers at London's two prime airports will only come from larger aircraft. New destinations may only be added at a cost to existing ones. Heathrow therefore will inevitably decline in relative importance as an aviation hub and the growth will go elswhere in Europe and/or to the geographically very fortunately located Gulf.
The Government has so far played the aviation card badly.It promises a "new aviation policy" in spring 2013 with a consulatation paper to be launched in spring 2012. A policy is not of itself a solution. It is a declaration of intent. It simply encourages investment, building of facilities, infrastructure and the rest. It doesn't guarantee anything and all these things can take years to appear, if they ever do. This makes the abandonment of Heathrow's runway 3 look even more precipitate and ill advised. There is just about time for a last minute handbrake turn. It looks unlikely though. Boris and Willie are providing a smokescreen which is distracting attention from this very urgent last chance possibility.

The fourth and final player in the Heathrow game has been the BAA and Heathrow. Until privatised it behaved very much as any monopoly supplier in a state of holding investment down and in frequent conflict with its customer airlines in particular. The relationship with the primary resident airline, BA, was for years adversarial although it improved considerably from the opening of T4 in 1986 onwards. A base carrier and its landlord often have conflicting interests and views of their own position in the scheme of things and Heathrow was no exception. The nationalised origins of both coloured and restricted their thinking .The BAA saw itself very much as an "Authority" not a service business with customers to woo and cherish. Their view of airlines and passengers tended to be coloured very black and yellow by this starting point. There have recently been encouraging changes. The opening of T5 has given the airport a facility to match the best anywhere. The demolition of T2 and Queens Building and creation of "Heathrow East" in its place promises another transformation and should enable the bulldozers to deal appropriately with T1, and by then a new T1 ,- currently not planned,- may be required . Heathrow was gearing itself to a much better future with at last some useful additional runway space to use both for expansion and to relieve some of the pressure of operating at maximum capacity for much of the day. The loss of that runway has come as a huge setback to the BAA as well as the UK itself. Again,the talk of a new aiport is a serious distraction diverting attention away from the real issue. It's not quite too late. The decision could and should be quickly reversed and building commence. Meanwhile the alternative hubs and their resident airlines are smiling from ear to ear and ICAG's UK eyes are glazing over as their future investment focus moves elsewhere. Unfortunately for UK Plc, others- and not just airlines,- will inevitably do the same.It's a rather tragic story for all concerned in Britain. If there were anything like effective strategic short, medium and long term national planning it would not have happened.

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