UK Chancellor's Autumn Statement-Gloom for the airlines.

They probably never could have hoped for much from George Osborne today but it turned out worse than that.

First of all there was no mention at all of Air Passenger Duty (APD) which can only mean that it will not only remain at the current suffocating level but increase early in 2012, now by twice the rate of inflation. Band A, its lowest rate for journeys up to 2,000 miles from London is currently £12 for Economy passengers and £24 for all higher classes, including any premium economy. Within the UK of course there is a double hit since it applies in both directions whereas to points outside the UK it is only imposed on the outward flight. Band D, the highest level which covers places over 6,000 miles from London,- eg New Zealand,- is £85 for basic Economy and a massive £170 for all other classes. The problem is that the government income from this source is now so high as to be significant (Over £1bn) so it is very difficult for them to ditch it. The danger is that the golden goose will become sickly and stop producing.

Secondly, although there was a commitment to look at southern England airport capacity ,there was an absolutely specific statement that Heathrow's third runway isn't even up for consideration as a possibility. Not many wide ranging, open minded, strategic studies of national economic importance start off with the outright rejection of the most cost effective and soonest available option. This was a chilling moment. Many would like to see the building of Britain's Thames Estuary Chep Lap Kok or Incheon in Asian double quick time, even at a cost of £50 bn. It wouldnt though be like that. Time to completion would look more like 20 years at best and the cost with accompanying infrastructure would be more like £100bn. The drawings so far, while interesting, have not reached beyond a four runway airport whereas for the long term at least 6 would be advisable plus a massive amount of land for terminals. Most heavy engineering would probably be done elsewhere as metal aircraft structures and sea water don't get along well.

It looks therefore that London airport growth for the next 20 years will depend on squeezing more movements and more passengers through the existing Heathrow site. Gatwick can play its part, but Heathrow is where everybody wants to be. Terminal capacity can be expanded considerably but more movements will depend on more flexible use of the runways. More night movements would help but are very unlikely to be granted.

The two resident British airlines, BA and Virgin Atlantic, will therefore see the day in Westminster as a bad one. Foreign airlines who do well at London will feel the same about the APD though the continentals should be able to work their way around that by separate ticketing for the cross-channel sectors. The Gulf fraternity will see improved prospects for their links to provincial cities on the one hand or the possible routing of large chunks of business via Amsterdam, Brussells or Paris, also with separate ticketing or by using Eurostar . Almost any way one looks at the situation, it is the British airlines and UK Plc which will take the biggest hits.

Footnote: Could the enthusiasm for a Thames estuary airport in the media and amongst politicians be something to do with how few of them live in north Kent or south Essex? They, along with noisy "celebreties", seem much more prolific in central London and out to the west under the Heathrow flight paths. Funny that.