Key issues Airport capacity, APD, Atol and VAT
T 100
20 40 60 80
0 Heathrow 3rd runway Source: Airports Commission Gatwick 2nd runway Heathrow: runway extension 740,000 560,000 40%-45% 260,000 £18.6bn £9.3bn £28-£29 280,000 £15-£18 220,000 £13.5bn 35%-40% £27-£28
he major issues confronting the travel industry barely change. The process of Atol reform and revision of the European Package Travel Directive (PTD) seem interminable.
Air Passenger Duty (APD) appears ineradicable (though no longer in Scotland) and the question of a new runway in the southeast largely intractable. However, the last of these must move to a partial resolution following a general election in May 2015 when the Airports Commission headed by Sir Howard Davies will report. The question will be whether the new government acts on the commission’s recommendations and when. Political pressure around a decision will
only be intensified if the next government proves weak and/or unstable – a distinct possibility as leaders of both major parties appeared in chronically weak positions towards the end of 2014 following the success of the UK Independence Party (Ukip) in two by-elections.
AIRPORTS COMMISSION VIEW OF PROPOSALS TO EXPAND LONDON’S HUB
Airports Commission The Davies Commission has been wending its way to a conclusion on how the UK can
AIRPORTS COMMISSION VIEW OF PROPOSALS TO EXPAND LONDON’S HUB 66%-100%
700,000
There appear few easy wins in sight on the issues of most concern to the sector as political concerns dominate. Ian Taylor explains
“maintain its status as an international aviation hub” since September 2012, sifting and rducing the options to three: a new third runway at Heathrow, as proposed by Heathrow; a new second runway at Gatwick, as proposed by Gatwick; and an extended runway at Heathrow, as proposed by the ‘Heathrow Hub’ group. Davies formally rejected the idea of a new airport in the Thames estuary in September despite its long evangelisation by London Mayor Boris Johnson. However, the estuary proposal may not be quite dead, for reasons we’ll come to. In November, Davies outlined the case
Rise in charges Airport charges Capacity Extra flights Estimated cost*
for his three options, concluding that increased capacity at Heathrow offered significantly greater economic benefits than Gatwick. In Gatwick’s favour, the commission calculated its proposal would cost half as much as Heathrow’s and the noise from an expanded airport affect significantly fewer people. Heathrow, Gatwick and the Heathrow Hub consortium all greeted the commission’s assessment as a victory of sorts. But whichever one triumphs will ultimately be paid for by passengers in landing charges. Davies assessed a third runway would raise charges at Heathrow to £28-£29 per passenger. A second runway at Gatwick would take charges at the airport to £15-£18. That makes Gatwick look like the cheaper option, but it would mean an increase in existing charges of 66%-100% at Gatwick compared with 40%-45% at Heathrow.
That could prove significant because British Airways, by far the biggest operator at Heathrow, favours expansion at its hub. The biggest operator at Gatwick, easyJet, does not operate a hub, stands to see minimal benefit from the airport becoming one and has made clear it would oppose increased charges to pay for a runway. Politics remains the biggest issue.
Travel Weekly Insight Annual Report 2014 | 35
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