Admirable but tested

Admirable but tested

Nowhere in the UK, it seems, will you find better service at a port or airport than in the North East. But the honour doesn’t come easily, as Brian Nicholls records.

The most admired airport and seaport are both in the North East, apparently. Port of Tyne was named the UK’s best port of call during industry awards in 2011 and Newcastle Airport, for the fourth year running, has been named the UK’s best by the British Air Transport Association for its standards of service to passengers and airline customers.

Both port and airport are thriving, though the airport would prosper more without the Government’s air passenger duty. This is imposed on airlines purportedly to reduce carbon emissions although everyone knows road traffic is a worse offender.

The fatuous duty, a revenue raiser for the Government, mops up the airport’s entire turnover almost, impoverishing many airports besides this one at a level more than 8.5 times the European average – and without giving the nation, in return, a central airport fit for purpose to feed into.

Port of Tyne has been delivering its best volumes ever and its best financial performance on the back of major investment. It is estimated now to contribute £500m to the regional economy, and to support 10,000 jobs directly and indirectly.

Its £13.7m jump in revenue, taking it to £59.2m has enabled it to shoot up 26 places to 103 in the North East list of Top 200 Companies. It is expected to announce a third year running of record results.

Success stems partly from record business in car shipments. Its combined car volumes through three car terminals nears 700,000 now, making it the UK’s number one port for car exporting, and number five in Europe.

Coal and wood trade is a big earner, and tourism brings now about 80,000 cruise passengers – up 80% in a year – contributing maybe £45m to the regional economy. Include the ferry passengers between North Shields and Amsterdam, and the figure nears 600,000.

A new terminal now deals with cargo pertaining to the Far East, Scandinavia and the Baltic Region. Liverpool is chiselling hard to prise away many cruise passengers who presently visit the Tyne, and sustaining resistance will be one of the North East port’s biggest challenges of 2013.

Successful though it is, Port of Tyne remains second to Teesport in income, its ascendant £113.4m taking it to 57th place in the latest North East Top 200. PD Ports, owner of Teesport, is playing a big part in - and rightly deriving benefit from - Teesside’s steel revival, embodied in SSI UK’s rescue of Redcar’s massive plant.

Within five months of its restart, 1m tonnes of steel slab had been sent abroad via Teesport. Teesport, one of the UK’s top three ports, has grown in logistics stature, the nation’s green policies now guiding more goods in and out of there from abroad, rather than handlings in the South of England with roadhauls up and down the country, exhaust fumes and all.

Major retailers Asda and Tesco have set up large logistics and distributive operations within Teesport, and Teesport’s importance as a distribution point for the North East, North West and Southern Scotland will grow.

Newcastle Airport handles between 4.5m and 6m passengers a year, supports 3,200 jobs on site and perhaps 4,600 more across the region. Its export business is worth £173.6m, of which a staggering £150m is aboard aircrafts of Emirates airline.

The airline serves particularly the automotives, pharmaceutical and energy industries. The decision by Emirates to use Newcastle daily has had a remarkable effect on the North East’s export business, and it has paid off for the airline too.

From September Emirates introduced daily to Newcastle one of the world’s largest airliners, a Boeing 777.

It has 428 seats compared with 278 seats on the Airbuses that were used previously, and has almost double the freight capacity.

Emirates opens doors not only to Dubai but also Bangkok, Sydney, Perth, Beijing, Hong Kong, Tokyo and Mauritius. Performances of the airport partly owned by seven local authorities has been less impressive at boardroom level, as a High Court hearing verified recently when it criticised a refinancing deal that cost millions unnecessarily.

The mismanagement that unfolded was staggering. A former stakeholder, Copenhagen Airports, also drew fire but was no longer by then associated. It has since proved possible to cover £100m of debt by having AMP Capital take a 49% stake made available through Copenhagen’s departure.

Taxpayers were still expected to shoulder a £68m burden via six of the seven local authorities – all but North Tyneside having agreed a debt restructure. But a further £68m investment committed is expected to reduce debt and support long term growth and development.

Services to and from France are being ended but life goes on and a new link with Copenhagen begins on February 4. Boardroom challenges at Durham Tees Valley Airport near Darlington are quite different: how to get a once flourishing airport profitable again? In 2006 more than 900,000 passengers used it.

In 2010 the figure plumbed a 35-year low, and in 2011 the figure was down to 192,410, a mere 527 passengers a day. Uncertainties had grown last year when a £1.6m loss prompted previous owners Peel Airports to sell out.

Fortunately, Peel Investments (DTVA) - a wholly owned subsidiary of Peel Group – bought in and now holds a 75% stake. The six local authorities hold the remaining 25%. Durham Tees Valley Airport, which some believe would do better by reverting to its original name of Teesside Airport (albeit Durham County Council is a shareholder) is now getting new capital injections from Peel Investments and all the local authorities holding a financial stake.

Owner Peel Holdings has been trying to turn fortunes round with a six figure marketing campaign and a six figure Regional Growth Fund bid that may yet be successful. A survey that BQ detailed at the time showed most regional airports handling fewer passengers, some having lost even bigger percentages than Teesside.

Because actual numbers were fewer there, the loss was more acutely felt. Traffic collapse there escalated when British Midland, which had linked Teesside and London for 40 years, abandoned its daily services in 2009; Lufthansa had bought it and, as per the current sad situation, the German airline seemed keener on gaining Heathrow landing slots than sustaining another nation’s lossmaking internal service. No other airline stepped in.

Last year IAG – British Airways and Iberia – got permission to purchase what in effect was the British Midland subsidiary from Lufthansa. Having rejected Teesside overtures before, there seems little prospect BA would restore a London link now. But KLM has used Teesside extensively since 1974, regarding it as an important feeder into its international hub of Amsterdam, providing revenues that would otherwise go to other airlines using London airports.

It proves daily that Teesside serves a purpose. Efforts are being made to lease hangar space and develop space near the runway. The terminal is also being spruced up and a controversial £6 a head levy on passengers directly – to try stemming losses – may be rescinded as public relations are built up within the airport’s core area.

The best prospect for the airport’s future, the development of a freight centre creating perhaps 1,500 jobs, has arisen with news that the Chancellor George Osborne is financing another round of the Regional Growth Fund.

A bid airport bosses made for £5.9m last October was rejected. The terminal, which would take 10 years to complete, is being seen as the airport’s lifeline in the wake of falling passenger numbers. A new RGF round of bids is expected to be considered in March, and plans for the freight facility are expected to be refined.

A freight terminal had been proposed before the crisis but was defeated by, among other things, Nimby objections from villagers nearby. Such a development would not be to the exclusion of passenger services as the now disbanded regional development agency One North East once suggested.

Both North East airports urgently need to see the crisis of London’s inadequate hub provision rapidly solved. Already £3.6bn of North East exports rely on air travel, 96% via a hub airport, and greater back-up will be needed in future.

Consensus in our region seems to prefer the option of a third runway at Heathrow – faster and cheaper to bring about, albeit with a displacement of homes. Meanwhile stronger bonds with Scandinavia beckon.

Regular flights between Newcastle and Copenhagen start on February 4. Eastern Airlines recently stepped up services between Newcastle and Norway, and a restored ferry between the same two points, an ambition at both ends, would largely recover trade lost when the service ceased in 2008.

Port of Tyne and Teesport, both investing heavily over the past decade, aim to grow business through renewable and offshore energies. Other North East ports, such as Seaham and Hartlepool, are doing nicely too. Blyth is well experienced now in handling turbine components and hosts a growing renewables cluster.

Port of Sunderland, breathing better under the city’s current master plan, is fancied to revive its trade further with the possibility of being asked to handle some of the new car models shortly to be exported by Nissan.

Brian Nicholls is editor of the North East edition of BQ Magazine.