Halt the nose dive

Halt the nose dive

Prompt action is needed if the crisis in regional airline services is not to damage the North East economy, Peel Airports executive Hugh Lang tells Brian Nicholls.

No hint of despondency is expressed in Hugh Lang’s rich Scottish timbre, but there’s a determined glint in his eye as he sketches a graph indicating recent erratic passenger patterns in air travel. Each trough on the page shows travellers’ forebodings: the low point of a rumoured millennium calamity when aircraft might fall out of the sky (though they never did); fears of another 9/11; the Iraq war; a period of soaring fuel prices.

Every plunge in ticket purchases precedes a rise, but the trend underlying the graph’s mini-mountain caps is increasingly upward. Hugh, as group airports director of Peel Airports - Durham Tees Valley Airport’s 75% majority shareholder - has no doubt the the present industry-wide fall-off will be reversed. He is concerned though, that misgivings expressed about DTV Airport’s plight, however well intended, might suggest the airport’s position is parlous.

Its current adversity, he points out, is by no means unique, but it does challenge the wellbeing of the entire North East economy, and the region’s ability to attract and retain vital inward investment. While DTV in 2008 remained the UK’s 25th busiest airport, despite passenger numbers falling 12%, Newcastle’s 11% drop took it three places down to 13th in the national throughput table.

Humberside and Doncaster/Sheffield fell 9% and 10% respectively, and even Manchester dropped 4%. Falls higher than DTV’s were evident at Norwich, Blackpool and Coventry, and only five regional airports out of 26 showed a plus as passenger numbers using UK airports fell five million to 236 million. The declining value of the pound, a slump in the ownership of overseas property and previous airline failures have all taken their toll. Now, as the price is paid for banking misadventures, it is lack of spending money and plummeting turnovers in leisure andbusiness travel, respectively, that hit air bookings further.

Amid this decline, three airlines have recently pulled out of DTV: Ryanair (which flew to Dublin), Flyglobespan and, most seriously, British Midland through its Bmi activity, ending its three flights daily to Heathrow and aborting its near 40-year link from Teesside to London. However, the airport serving Leeds, the nation’s third biggest financial centre, has lost four flights a day to London.

Forgive the irony, but DTV is in good company. In his cabined office away from the main terminal, Hugh pores over statistics with all the concentration there must have been in the wartime ops room when Goosepool, an RAF station, stood where DTV stands now. The documents stack about five inches deep. “Take the short-term view and you say, ‘what’s going on here?’ Take the long-term view and what’s going on is market correction. Aviation, like a barometer, reacts very quickly to change, or rather people using it do. They stop booking. Numbers go down quickly, but also come back up quickly. Everyone’s asking, ‘when do you hit bottom?’ He has no doubt economic recovery will come, what perplexes him is that DTV isn’t only an airport issue, but an issue of government regional policy. He describes the curtailment of links between Heathrow and the regions as a creeping cancer. “Leeds/Bradford, a key destination for finance services, has lost its air link not only with Heathrow, but beyond. Newcastle could lose services.

Even Manchester and Aberdeen have been cut.” His particular concern is how the global competitiveness of Tees Valley and the North East could suffer unless corrective action is taken. He chairs Tees Valley Unlimited - a partnership of public, private and voluntary bodies preparing a case to have Tees Valley recognised as one of the two pilot city regions proposed by the Government.

The permanent loss of a Heathrow service would result in serious setbacks, including:

• The cost to passengers and the business community (and therefore the regional economy): about £3.7m a year.

• The UK’s largest integrated complex in process industries (expected investment over the next five years, £4bn): logistically deprived.

• Major petrochemical firms (including what will be the world’s largest low-density polyethylene plant): foreign-owned multinationals needing London and Amsterdam connectivity.

• The world’s largest biodiesel and bioethanol plants: require connectivity, as does Wilton Centre, Europe’s largest private-sector non-military research centre.

• 26 multinational firms on the former ICI site, world-class engineering firms (K Home Engineering, Whessoe, Amec, Kvaerner and Cleveland Bridge): require fast links to international markets.

• Almost a quarter of the 88,000 DTV passengers going to Heathrow in 2007: business travellers going abroad via Heathrow.

• Heathrow is the only UK airport with connections worldwide: flights to alternative London airports or departures from Manchester, Leeds/Bradford or Newcastle would not suffice.

• Alternative travel by rail takes up to four hours because of crossing London to Heathrow: no prospect of a high-speed rail service to London for at least 12 years.

• Relying wholly on DTV’s remaining Schiphol connection: reduces connectivity to Asia and North America considerably, to the Middle East by almost half and Australasia totally.

• Approved plans for Skylink International Business Park at DTV Airport, planned to host 2,000 jobs: jeopardised.

This is not simply a problem of one airline withdrawing a Heathrow service; it’s a complex confluence of limitations that involve many parties and factors, including these: The Government - for higher duty on air travel, making tickets dearer and deterring sales by subsidising rail travel.

BAA Airports - for a 75% leap in landing charges for Heathrow over five years and a 6.4% increase for DTV flights against 0.8% for Middle East ones. Other hub airports base landing charges on aircraft take-off weight (smaller aircraft serve the regions), but Heathrow landings are less differentiated (£512 for 244 seats, £461 for 49 seats). BAA, eager to maximise gains from Heathrow shops, prefers large aircraft (more shoppers).

Department for Transport - its 2003 White Paper said the Government was prepared to ringfence slots for inland routes under a Public Service Obligation that works well on mainland Europe. But it has only been imposed so far at Glasgow and Edinburgh.

Airlines - faced with above-inflation cost rises and flat charges for landings, are inclined to utilise an Open Skies policy. Previously, only a few airlines were allowed transatlantic routes; now any airline can apply if it has the landing slots (which are consequently more valuable), so regional landing slots can be converted to more profitable long-haul.

All these points are being put to the Government as it prepares a Future of UK Airports consultation with the industry.

Hugh says: “We’ve tweaked our submissions to tie in with what’s happening at Heathrow. Is there enough capacity for the future, and how will it be delivered?” A memorandum has been composed by Tees Valley Joint Strategy Unit, which is funded by local authorities and acts as a secretariat to Tees Valley Unlimited, as its sub-regional private sector partner.

Hugh asserts: “We have a Government saying let’s reduce the economic gap in gross value added between the North and the South; let’s promote economic development in the regions. But at the same time, let’s cut off domestic feeder services from the regions to London, let them go to Schiphol. Is that right?” Not only regional economies but the national economy would suffer; on Teesside, Heathrow and Britain’s loss becomes Schiphol and Holland’s gain. The Competition Commission’s recent instruction to BAA to dispose of Gatwick, Stansted and a Scottish airport, in theory offered an alternative. But Gatwick is not a hub and has only one runway. “We’re all paying the price for lack of investment,” Hugh says.

“While we face this, Schiphol has been building six runways. Another European airport has developed four. Our planning procedures take so long that UK plc has been left behind.” The Government does believe Heathrow should be a proper hub with domestic feeder services. “Yet it has left it to the commercial side, BAA and the airlines, to sort things out and all they’re doing is chasing the buck,” Hugh says.