Introduction from Carolyn McCall to Airports Commission Evidence Session on airport operating models
I’d like to thank the Commission for inviting easyJet to give evidence.
As we all know, aviation plays a vital role in supporting the UK’s economy and connecting British businesses and people with the rest of the world.
Over the next few decades there will be demand for new aviation capacity in the South East.
Our industry needs a roadmap for that aviation capacity.
There are different views in our industry on the precise way to achieve that but we all agree that we want certainty.
easyJet’s main ambitions are that this is the last review and that all political parties agree to your recommendations – whatever they are.
easyJet and our business model
I’d like to say a few words about easyJet.
Since we were founded in 1995 with a mission to provide safe, affordable and convenient flights we have revolutionised the way people travel in Europe and now carry over 60 million passengers per year on some 650 routes with a fleet of over 200 aircraft.
This success has been built on our simple, efficient, point to point business model.
We fly one sort of aircraft which all our crew and engineers can operate on.
Without a business class, we have more seats per aircraft.
We have load factors of around 90%.
We utilise our aircraft efficiently – usually taking 25 minutes to turn them round at an airport.
Almost all our bookings are on line.
Lower costs mean lower fares for our passengers.
Our planes and crew are based at 23 airports in the UK and Europe.
We fly to and from primary airports, operating more of Europe’s biggest routes than any other airline.
Everyone at easyJet feels passionately about making travel easy and affordable for our passengers at every step in their journey.
The rise of point to point
easyJet is now Britain’s biggest airline carrying more passengers than BA and Virgin combined.
I only say this to illustrate one of the key points we want to make to you – namely that the most successful aviation business model of the last decade is point to point.
The reason for its success is because it provides passengers with what they want – direct flights to where they want to go, and at a good fare.
An airport like Edinburgh now has a choice of 31 destinations served by easyJet on direct flights without the cost and inconvenience of connecting through London.
Examples include Athens, Amsterdam, Berlin, Iceland, Madrid, Paris CDG and Geneva.
Routes which flag carriers lost money on or wouldn’t even contemplate flying are profitable for us.
Today’s airports built on yesterday’s model
That leads to our second point, which is that the airport infrastructure we operate in today reflects the business model of 30 years ago – hub and spoke.
When planning the infrastructure of the next 30 – 50 years the Commission should reflect on this as these trends are more likely to shape the future of aviation than the old ways of working.
Point to point accounts for around 90% of all passenger journeys in UK airspace and even at Heathrow less than 20% of passenger journeys use the airport to transfer to another flight.
There is an over-emphasis on the importance of the hub, or focal, airport and we ask that aviation policy does not favour hubs and transfer operations over point to point.
The economic benefits of aviation are almost entirely from passengers who begin or end their journeys in the UK – including Heathrow.
There is minimal direct benefit from transfer passengers.
easyJet open minded in advance of proposals but clear on costs
Existing capacity should be fully utilised. In the short term, Luton and Southend could enable 10 million more passenger journeys a year without any new runways.
Without other firm proposals to review, easyJet is open minded about medium to long term options.
However, we are very clear about three things:
- Capacity should be provided where there is passenger demand for it – aviation works best when consumers determine outcomes
- Airports should only build the infrastructure that provides the level of service that passengers’ value and are willing to pay to use. There should be no gold plating or expensive infrastructure that passengers don’t value.
- Passengers should only pay for new infrastructure when they actually use it – like toll roads – and not for years in advance.
Environment and sustainability
Finally, all new capacity must be delivered sustainably.
Sustainable Aviation’s work shows that aviation emissions can be put on a downward path without artificially constraining demand.
We recognise that local noise and environmental impacts need to be addressed as part of specific proposals and we look forward to the Commission’s considered views on these.
To conclude, passengers want to travel point to point and only transfer if they have to or if it is cheaper and they are very price sensitive.
Future connectivity will be driven by the demand from point to point passengers rather than transfer.
The future of aviation capacity should be determined by consumer demand not central planning and needs to be delivered cost effectively.
UK could lose global hub status, warns Heathrow CEO
10 July, 2013 (Heathrow Airport)
- Current European hubs unlikely to all survive
- UK’s international competitors all plan to increase capacity to around 50% more than the current limit at Heathrow
- OECD analysis indicates Heathrow could be operating at least 20 more long-haul destinations
- Global race for connectivity is underway
The UK risks dropping out of the premier league of international connectivity – that’s the stark warning Heathrow CEO Colin Matthews gave to the Airports Commission today. Mr Matthews told an oral hearing of the Commission that the current situation with five European hubs1 is unlikely to last, as airlines continue to consolidate and rival airports in Europe and the Middle-East expand to compete for vital transfer passengers.
Mr Matthews explained that Heathrow is one of only six airports in the world with regular, direct connections to more than fifty long haul destinations – four of which are in Europe2. But he warned that airlines are consolidating into fewer and larger carriers, which are then concentrating their operations at fewer and larger intercontinental hubs. In Europe it is highly questionable whether all current hubs will survive.
As the network airlines become more concentrated at hub airports, so does the transfer traffic. Transfer passengers brought in by an airline’s short haul network are used to support long haul routes. As an example, on the Heathrow – Dallas route last year, passengers came from 7532 different combinations of start and finish points3. Without transfer traffic, regular and direct long haul routes to all but a few tourist destinations become unviable and the home country loses out on the jobs and economic growth that come with links to other economies. Economic estimates suggest the UK is missing out on £14bn of trade each year because of its lack of hub airport capacity4.
But there is a limited pool of transfer passengers, and international network airlines are competing fiercely for them. Hub airports in continental Europe and beyond are expanding rapidly, as they attempt to suck transfer passengers from rivals such as Heathrow and support their own network carriers. Heathrow’s four European rivals have either committed to, or are developing, plans for enough runway capacity to serve an average of around 700,000 flights a year, nearly 50% more than Heathrow’s current limit of 480,000.
Recent analysis by the OECD noted that the capacity constraints at Heathrow mean London is already “under-performing in long-haul connectivity relative to its local market”, indicating that Heathrow could be operating to at least 20 more long-haul destinations, given the size of London’s metropolitan population.
Colin Matthews told the Commission that the UK still has one last chance to keep its status as a leading international hub. He told the hearing that despite Paris and Frankfurt being set to push Heathrow into third place in Europe within a decade, London is still in a prime position for global aviation, has strong local demand from a large and global city and is home to one of the world’s most important network airlines and alliances in the shape of BA and oneworld. Indeed, with additional capacity, Heathrow could be providing regular direct connections to 40 more long-haul destinations by 2030, particularly to long-haul emerging market destinations that are important for economic growth.
Mr Matthews added that any move away from the current hub airport model was extremely unlikely, dismissing suggestions that point-to-point and hub models could be integrated, or that low cost carriers could move into long haul markets.
Heathrow CEO Colin Matthews said:
“These straightened economic times have triggered a global economic race, with both companies and countries competing fiercely. If the UK does not want to be left behind by its foreign rivals, it must have the connectivity to compete and trade on the world stage. That connectivity can only come from a single hub airport in the right place for taxpayers, passengers and business. Only Heathrow can meet all these demands.”
Notes to editors:
- Five European hubs are: Heathrow, Paris, Frankfurt, Amsterdam and Madrid.
- 6 airports with more than 50 regular, direct long-haul destinations: Heathrow, Paris, Frankfurt, Amsterdam, Dubai, JFK.
- Heathrow analysis of IATA Data (Airport IS), 2012 (city pairs calculated adding combination of cities connected through a route when hubbing at both ends of the route is allowed)
- Heathrow’s ‘One hub or none’ report: http://mediacentre.heathrowairport.com/Press-releases/One-hub-or-none-390.aspx