BAA
Meeting Increasing Passenger Demand
With the UK government to publish its progress report on the 2003 Airports Policy white paper later this year, Global Aviation caught up with Mr Mike Clasper, Chief Executive of BAA, at The Institute of Economic Affairs’ “Future of Air Transport” conference last November. Here Mr Clasper outlines his views on how airports can increase their capacity to accommodate growing passenger numbers.
Meeting increasing passenger demand is fundamentally about runway capacity, making the best of the potential capacity there is in existing runways,and investing in new runways, which will deliver significant capacity increases. A lot can be done to make the best of capacity through operational improvements, but a significant capital investment in the airport is required.
For BAA to commit the significant funds that are needed for infrastructure investment, we need the reassurance from government that our investments will be safe and the political and regulatory risk is at an acceptable level. In the UK, the White Paper has established a 30-year policy framework which has given us the confidence to plan for a second runway at Stansted, and to work with the Government towards,potentially, building a third runway at Heathrow. But within this framework we have had to make an assessment that future regulators and Governments,of whatever political hue, will respect the commitments we make.
The issue to meet passenger demand is not confined to our UK operations, the same assessment is used each time we consider an investment abroad,especially where we are taking a state enterprise into the private sector, as we did in Naples and Melbourne.With the acquisition of Budapest Airport, in late 2005,which involves a substantial investment into the airport,BAA has a commitment to invest in the airport’s growth for the future.
Even for a substantial company like BAA, these decisions can only be made when we believe Governments are serious about attracting and retaining foreign investment, and that future Governments will respect these investments. BAA believes the Hungarian Government justifies this confidence, even though these are issues, which cause political controversy.
Aviation growth is a very controversial issue in the UK, and BAA has welcomed the White Paper’s clarity about meeting additional demand. Talk has been centred around delivering growth of surface access,the planning system and, how we pay for it. Although,these are main issues, and growth will not happen unless both Government and industry sort them out.The issue that is central to all these, is runway capacity, without it there is little point in discussing the others
Runway capacity dominates the issue of aviation growth around London. But it is not an issue that all in the industry have experience of. I once had to explain slot constraints to a no-frills airline operator. To him,flying was about choosing a slot that suited his operation and using it. He wasn't’t aware of the pressures of scarcity at Heathrow, Stansted and Gatwick.
There are fundamentally three ways for developing runway capacity:
- Improving operations,
- Developing new infrastructure around existing runways,
- Building new runways
Many of the steps that could be taken under these developments carry social or environmental costs,which we have a duty to work to mitigate, while still maintaining their clear economic benefits.
For an airport operator it is essential to look at each capacity-enhancing measure with the fullest possible understanding of both costs and benefits. If, having done so, the decision is made to proceed with delivering capacity, then there is the responsibility to see that decision through.
Operational efficiency
For BAA, those steps that have the lowest impact but deliver the least benefit are those that improve the operational efficiency at our four existing London runways. They are of course still very worthwhile
Air traffic controllers have an important role in delivering these efficiencies through effective airspace planning. We are fortunate to have in the National Air Traffic Service (NATS) This year NATS will handle more than two million flights carrying over 180 million passengers.
I am confident that NATS will continue to deliver, for airlines and passengers, the capacity in the air that is needed to match capacity on the ground. And I believe that the core of long-term business for both BAA and NATS will be in developing the South East’s runways.
Closely linked to airspace planning is the need to maximise slot efficiency. There is very little scope around London to increase the number of peak-time slots. Airlines, therefore, have needed to look at taking up unused off-peak slots.
That is happening, and at Heathrow we already have a flat profile, with little difference in peak and off-peak usage: the runways are already operating at near maximum slot usage
Load factors and large aircraft
The next step in matching capacity to passenger demand is making sure that the planes are more full –what is known as increasing the load factors
From an airport point of view, full aircraft make fuller use of runway slots. It is a quick, way to squeeze more operational efficiency out of a scarce slot resource. For airlines it is not so simple. A half-empty plane may be more profitable than one three-quarters full, but froman airport operator’s perspective, the calculation is straightforward and linear.
There is also a shift towards bigger aircraft. It is not only the jump to the A380 – though the dual deck stands we need to accommodate it at Heathrow are already built. There is a more gradual, incremental shift within airline fleets to bigger aircraft, for example from the A320 to A340, or from different models of 737’s,helping to edge up aircraft loads by 20 or 30 seats at a time. Some of this capacity comes free. Some requires new infrastructure, but all of it – take up of slots, means more passengers per aircraft and bigger aircraft –increasingly pushes the airlines, Heathrow as an example – the airlines favour towards long-haul routes,where there are often greater returns than on short-haul.
Open Skies
Recently, a tentative agreement was reached in Washington on the liberalisation of transatlantic services, which sounds very encouraging. If concluded on present terms it will deliver greater market access between the EU and the USA, culminating with the liberalisation of rights to fly between Heathrow and the USA, which will not only promote greater competition but lower prices and spur further passenger growth
This will all depend on what conclusions the EU Transport Ministers reach. We want to work with any airline that wishes to operate additional US services out of Heathrow, but it is important to point out that the scope to accommodate such new services at present is limited. There are few spare slots – at any time of day. And airlines will only be able to operate runway slots if there is also space in the terminal for their passengers and somewhere to park their aircraft. Even then, we would be pressured at present to find suitable office accommodation, ticket desks and other space for new operators. Terminal 5 will relieve a number of these constraints, but it will not be on line until March2008
When moving up the curve of potential operational measures, the benefits are larger, but so are the impacts, and so the issues become a lot more difficult and controversial.
Night flights
There are limits to the hours of operation at our London airports, imposed for perfectly understandable and defensible community reasons that effectively cut these airports’ capacity for a third of every 24-hourperiod. If there were greater use of runways in periods that are currently restricted this would realise considerable capacity – assuming people wanted to fly at three in the morning. In BAA’s response to the recent Government consultation, we opposed any relaxation of the night flights regime, and we made clear our understanding and sympathy with the problems that night flights cause to people living under flight paths. But this is an issue, which has to be considered and debated if we are serious about evaluating all the options for making the best use of runways. It is right, though, that such judgements are made by Government, and BAA will work within whatever restrictions the Government decides are appropriate for striking the balance between economy and community,
In London, it is central Government that has reserved the power to determine such matters. But at Aberdeen airport, the local authority voted to lift its local restrictions on night flights, having taken the view that the economic and other advantages of increased flight movements outweighed for their communities the problems of night noise.
Mixed mode
Another operational capacity issue, which applies only to Heathrow, is how we currently use our two runways in segregated mode, with one used for arrivals and one for departures, alternating at 3pm every day. This gives local communities predictable relief from noise for half the day, but necessarily constrains aircraft movements, compared with those which could be achieved with the simultaneous use of both runways for both landings and take-offs. The question of moving to mixed mode operations is soon to be the subject of a Government consultation. There is no doubt that this would be a tremendous benefit for the economy,increasing the range and frequency of services from the airport, maintaining Heathrow’s, airlines’ and the UK’s international competitiveness as well as helping to reduce delays and costs for airlines and passengers.
If mixed mode is implemented – whether for part of the day or all day – it will have a significant impact on those communities living under both the arrivals and departures flight paths. Our aim at this stage is to provide the Government with the fullest understanding of the community and environmental costs along with the economic and operational benefits of this option. Ultimately, the decision will be theirs.
New infrastructure around existing runway
These are all the major ways to extract more operational gain from existing runway capacity. Some of it needs new physical infrastructure to ensure that there is enough capacity in the associated facilities –whether in terminal buildings, baggage systems,security operations, fire services or even car parks.BAA’s investment over the last decades and much of the investment we will be making in future years has been about providing the associated infrastructure to match the capacity potential of our runways – there has not been a new runway in the South East of England for over 60 years
Heathrow’s Terminal 5 remains on budget and ahead of schedule for a March 2008 opening, and will provide terminal capacity for 30 million passengers. BAA has recently unveiled plans for Heathrow East, a project that will bring a T5 level of quality to the central terminal area and provide capacity for 30 million passengers.
At Gatwick, BAA has the support in principle from the local authorities to develop the airport to grow from32.5 million passengers to around 40 million, and we have a £685 million programme for that development.
And at Stansted, BAA already has a range of permissions for much of the physical infrastructure that will allow us to grow beyond 22 million passengers today, and we will be applying to remove the planning cap on passenger numbers to realise that growth potential.
New runways
Lastly, we move beyond making use of latent runway capacity into developing new runways. This brings the biggest benefits in terms of increased aircraft movements and the number of passengers carried. It also brings the greatest impacts. BAA accepts this and we work very hard to meet our responsibilities to deal with those impacts. But we also need to remind ourselves that the White Paper was clear on this issue– maximising capacity is the first step. It is not a lasting solution. Two new runways in the South East are needed to meet the long-term growth in demand
The Government stated that the first of these is second full-length runway at Stansted, a project we are calling Generation 2, because it marks a transformation of the airport beyond what is implied by two miles of concrete. It is a huge project. Government estimates are that it could cost up to £4 billion in total.Our intention is to build the development in phases,and with our preferred option for the location of the second runway have launched a public consultation on it. Our estimates for the cost of this project have indicated for some time that it is likely to be less than the Government’s early estimates.
In 2007, we will submit our formal planning application for Generation 2. Our hope is that the reformed planning process will deliver a decision within a couple of years, rather than in the seven years it took from formal application to decision for T5. If that happens,and all else goes to plan we believe that we can open the new runway in 2013.
Alongside the preparatory work on Stansted Generation 2 goes the exploratory work on a third,short runway at Heathrow, which could lift capacity by25 million passengers or more. There is much to be done before we know if this runway and associated infrastructure is deliverable. The Government is presently leading a series of studies, called the Project for the Sustainable Development of Heathrow, into three main environmental issues: air quality, noise and surface access.
The Government must be convinced that the air quality in the area around Heathrow with a third runway will meet the air quality limits that the EU is introducing.This is a real difficulty for Heathrow, especially since the majority of the air pollution problem in the area is actually caused by commuter and other traffic moving around the M25 and in and out of London on the M4;only a small proportion of this traffic is bound for the airport. The Government must also be certain that the total area around Heathrow exposed to noise of 57decibels or above does not exceed 127 square kilometres. Then there is the need for the Government to be assured that the road and rail systems can support an airport handling nearly 120 million passengers a year. Only when each of these three issues is met will the Government give BAA the go-ahead to start planning for the third runway development.
Project Heathrow, as we call the process, aims to complete its studies and come up with answers,possibly by the end of this year, and BAA is playing a full and active part in these studies, along with the DfT,airlines, local authorities, academics, consultants,transport providers and others. Then, once these and other preconditions are met, BAA can move ahead the work on the terminal facilities, which would be needed for a third runway.
Ultimately, meeting increased demand depends on those areas where runway capacity can be developed. Which measures are taken in the end will depend on where the balance is deemed to lie between living with the impacts and exploiting the benefits. I cannot say for sure which measures will be adopted and which won’t,but I believe in many cases that the benefits are so clear to the prosperity of the UK that they will happen.
There is no doubt, for example, that we will be disadvantaging the competitiveness of the UK if the number of runways in the South East is not increased over the next period. It is also clear that the UK needs infrastructure growth to drive other areas of the economy. T5, for example, has trained more construction workers on its own than the rest of the UK put together.
The choices are tough. But the advantages are real,apparent and crucial to this country. As long as we can invest against a background of reasonable certainty,you can be sure than BAA will be ready to deliver our part of them.
Biography
Mr Mike Clasper is Chief Executive Officer of BAA plc.He joined BAA in 2001 as Deputy Chief Executive,prior to that he spent 23 years at Procter and Gamble.Mr Clasper was made a Commander of the British Empire (CBE) in 1995 for services to the environment and holds an Honorary Doctorate from Sunderland University.