Gatwick’s main airline, easyJet, questions Gatwick case for 2nd runway and does not want to pay higher landing charges
Carolyn McCall, CEO of EasyJet, the largest airline at Gatwick, has said passengers want expansion at Heathrow, not at Gatwick. Ms McCall said easyJet is “quite concerned” at the prospect that Gatwick’s landing charges would rise to pay for a 2nd runway. They are having confidential talks with the airports on future charges. EasyJet makes on average £8 profit per seat. If Gatwick’s charges doubled from the current £9 to an average of £15 to £18 (or even up to £23) as predicted by the Airports Commission, this would hit EasyJet’s economics. Ms McCAll said: “This whole issue of capacity should be about where the demand is. Airlines have to want to go into that airport, and the congestion we have is predominantly around the Heathrow hub. Passengers need to really value what this infrastructure brings, and if they don’t see any benefit it’s going to struggle.” A new runway risked emulating unpopular toll roads. “It will be years and years before [passengers] see any positive effect.” As one of the UK’s largest and fastest growing airlines, EasyJet’s opinion will need to be given careful consideration by the Commission.
The Airports Commission’s consultation document (Page 47) states that:
“Gatwick Airport Ltd has estimated, for example, that per passenger charges would
rise from £9 currently to £12-15 as a result of expansion. This is lower than the
charges predicted by the Commission’s analysis, which indicate average charges
rising to between £15 and £18, with peak charges of up to £23. As can be seen,
the Commission’s estimates show significant potential variation reflecting the
variation in passenger demand across its scenarios. In the upper end demand
scenarios, charges would be close to Gatwick Airport Ltd’s own estimates,
although still slightly higher, reflecting higher costs and a more conservative view
of how the infrastructure delivery might be phased. Conversely, the higher end of
the Commission’s predicted range of charges reflects lower estimated levels of
demand leading to peak charges above £20 (roughly the current level of charges
at Heathrow). “
From Guardian article:
EasyJet reports record £581m profit
….. Extract …….
EasyJet is the dominant airline at Gatwick airport, where it has negotiated a long-term deal, but McCall said it was concerning that the recent Airports Commission evaluation of Gatwick’s second runway plan had indicated landing charges would need to rise substantially to pay for it, from the current level of around £9 per passenger to as much as £23, against the airport’s own reckoning of £15.
She said: “[Howard] Davies [the commission’s chair] has said Gatwick has underestimated dramatically. It is obviously concerning. When you think our average fare is £60 and we make £8 profit per seat, £23 is a huge amount of money.”
She said easyJet was in discussions with both Gatwick and Heathrow, its rival for the commission’s recommendation for a new runway, and added: “This whole issue of capacity should be about where the demand is. Airlines have to want to go into that airport, and the congestion we have is predominantly around the Heathrow hub. Passengers need to really value what this infrastructure brings, and if they don’t see any benefit it’s going to struggle.”
She said a new runway risked emulating unpopular toll roads. “It will be years and years before [passengers] see any positive effect.”
She said easyJet would publish analysis when it had concluded discussions with the airports and its own number-crunching. “It’s a long-term bet, what is best for easyJet, Heathrow or Gatwick.”
The difference in landing charges has previously deterred easyJet from attempting to enter Heathrow, but McCall added: ”We work out of hub airports all across Europe where the yield is right. There’s no reason we wouldn’t do it in London.”
EasyJet questions case for new runway at Gatwick airport
By Peggy Hollinger (FT)
Ms McCall, speaking as the group announced a 22 per cent jump in annual pre-tax profits to £581m in 2013-14, said easyJet was “quite concerned” at the prospect that airport landing charges could rise at Gatwick to cover the costs of a second runway.
“We make £8 profit per seat and our average price is just £60,” she said. If Gatwick’s charges doubled to an average of £15 to £18 as predicted by an independent commission examining the case for expansion, “that is quite worrying in terms of our economic case.”
Passengers seemed to favour Heathrow, Ms McCall added. “This whole issue should be [decided] where the demand is,” she said. “The congestion we have does predominantly appear to be around Heathrow.”
It said 62 per cent of business travellers who booked a flight with easyJet returned to fly again. Leisure travellers were also proving more loyal, with the percentage of passengers making a repeat booking increasing from 50 per cent to 57 per cent.
“Popular new initiatives like allocated seating meant many people tried us for the first time and we are absolutely focused on driving loyalty, so they choose us flight after flight,” said Ms McCall.
The load factor – the percentage of seats filled – hit 90.6 per cent in the year to September 30, up 1.3 percentage points. Passenger numbers rose 6.6 per cent to 64.8m and annual revenues climbed 6.5 per cent to £4.53bn.
See full article at:
Gatwick hits back at easyJet and BA over second runway plans
by Joel Lewin (FT)
Gatwick has hit back at easyJet and British Airways after both airlines questioned the case for the UK’s second largest airport having a new runway.
Nick Dunn, Gatwick’s chief financial officer, on Thursday suggested the two airlines, the largest and second largest operators at the airport, were concerned about the prospect of increased competition from rival carriers if a second runway was built at the West Sussex facility.
He was responding to easyJet’s chief executive, Carolyn McCall, who said on Tuesday that a sharp rise in landing charges at Gatwick to pay for a second runway would be “quite worrying in terms of our economic case”. He was also tackling comments last month by Willie Walsh, chief executive of International Airlines Group, parent of British Airways, that there is no business case to expand Gatwick.
Mr Dunn said: “For either one of those parties [easyJet and British Airways] increased capacity into the system will create increased competition for passengers, so I understand why airlines would reflect on that . . . [it] will of course mean more competition for them.”
He added easyJet’s criticism was based on estimates made by the Airports Commission, the independent body studying whether to build a new runway at Gatwick or London’s Heathrow, the UK’s largest airport.
The commission, which is due to make recommendations after next year’s general election, has estimated Gatwick’s landing charges would rise from £9 per passenger today to an average of £15 to £19.
Gatwick disputes the commission’s calculation, claiming charges would rise to no more than £12-£15 per passenger if a second runway costing about £7bn was built.
Mr Dunn said that increased competition between airlines at Gatwick would benefit travellers who could enjoy cheaper flights and more destinations.
David Bentley, analyst at the CAPA centre for aviation, said Gatwick would be concerned that easyJet, its biggest customer, had responded so negatively to the company’s expansion plans.
“They’re a very powerful airline to be challenging Gatwick. Occasionally airlines will throw airports out of kilter with their thinking,” he added.
The dispute came as Gatwick reported the busiest six months in the airport’s history, with passenger numbers up 8 per cent to 22.5m in the six months to September 30 compared to the same period last year.
Chief executive Stewart Wingate said: “The capacity crunch facing Gatwick underlines the urgent need for a new runway.”
Turnover grew 8.6 per cent to £391.6m in the company’s first half, driven by the rise in passenger numbers.
Operating profit grew 15 per cent to £162.5m. However, pre-tax profit fell 3.9 per cent to £122.4m because of lower gains on derivatives compared with the same time last year.
Gatwick is owned by a consortium led by Global Infrastructure Partners.
EasyJet CEO still has no details of the practical economics of a Heathrow or Gatwick runway
In an interview, by Buying Business Travel, with Caroline McCall, the CEO of EasyJet she said Heathrow is an expensive airport, which is why they do not fly from there. On Gatwick’s and Heathrow’s bids for runway expansion she says: “We’ve seen none of the economics behind either of those visions. Inevitably it will be the airlines and therefore the passengers, that will fund this. Therefore, it’s a very, very big decision for Easyjet – because any increase in passenger fares is something that affects our low-fare proposition”….”We make £7 profit per seat – that’s it. We’ve raised that from £4.50 over the last four years. I think Heathrow are talking around £15 billion, Gatwick are talking around £7-8 billion. If you think about the price per passenger for that, you can see we have to be really, really careful about any capacity going into either airport, and before we take a view on it, we have to understand the economics.” And they want to focus on more business travellers: “because we know we get higher yields.”
A new runway at Heathrow or Gatwick would mean big increases in passenger fees – New report
easyJet says it would fly from Heathrow, “if it was right for us” debunking Gatwick’s Heathrow myth
Gatwick airport, in its bid to try to pursuade the powers-that-be of its suitability as the site of a new runway, has often said that the low cost airlines would not fly from Heathrow. However, easyJet has now said that it would consider flying from an expanded Heathrow. Carolyn McCall, the chief executive of easyJet, said it would look at flying from Heathrow in future “if it was right for us”, and it if wasn’t too expensive. Gatwick claims that the increase in demand for air travel will be for short haul flights, mainly to Europe or countries adjacent to Europe. Heathrow claims the demand for air travel in future will be long haul. According to Gatwick’s chief executive, Stewart Wingate, Heathrow is inaccessible for low-cost airlines and charter carriers due to its high landing charges. But Ms McCall points out that easyJet already flies to and from other hub airports in Europe, such as Schiphol, Rome Fiumicino and Paris Charles de Gaulle. Though Heathrow has high landing charges, so do the other European hub airports. Ms McCall made her comments shortly after easyJet announced a 7-year pricing deal with Gatwick and revealed it is in discussions to take over the airport’s north terminal, potentially forcing out British Airways. It made no mention of a 2nd Gatwick runway.
Willie Walsh says there is no business case for a 2nd Gatwick runway – BA has Gatwick’s 2nd largest number of passengers
Willie Walsh, the head of IAG, will not support a 2nd Gatwick runway, even if it is chosen by the Airports Commission or backed by the next government. He does not believe there is a business case to support its expansion, and there is insufficient demand from airlines for extra capacity at Gatwick. Mr Walsh campaigned heavily for a 3rd Heathrow runway before 2010, but has made frequent comments indicating he does not believe UK politicians will have the “courage” to build that. Willie Walsh says British Airways would resist higher landing charges, which would be necessary to fund a runway – either at Heathrow or Gatwick. (EasyJet has also said in the past they don’t want a new runway, if it means substantially higher charges – their model is low cost). BA would want lower costs, not higher costs, from a new runway. IAG’s shares have now risen as it has now made a profit at last, and will be paying its first dividend (and maybe some UK tax). Gatwick’s main airline is EasyJet with around 37% of passengers, and British Airways 2nd largest at around 14%.
Willie Walsh: ‘No business case’ to support a second runway at Gatwick
Boss of British Airways’ parent company suggests there isn’t enough demand from airlines for a second runway at Gatwick Airport
By Nathalie Thomas, Transport and Leisure Editor (Telegraph)
31 Oct 2014
Willie Walsh, the head of British Airways’ parent company, has ruled out supporting a second runway at Gatwick, even if it is given the go-ahead by policymakers, arguing that he doesn’t believe there is a business case to support expansion at the West Sussex airport.
Mr Walsh, who is chief executive of International Airlines Group (IAG), suggested there is insufficient demand from airlines for extra capacity at Gatwick.
His intervention comes at another critical moment in the long-running inquiry over where to build Britain’s next runway, as the body set up to investigate the issue prepares to test public opinion through a national consultation. Gatwick is battling against its larger rival Heathrow for the right to expand.
Mr Walsh campaigned heavily for a third runway at Heathrow during a previous inquiry, only to see a decision to expand Britain’s biggest airport over-turned by the Coalition when it came to power. He has taken a step back during the current process, which is being carried out by Sir Howard Davies’ Airports Commission, but said on Friday that he would be unable to support expansion at Gatwick, even if it was recommended by policymakers.
“I would not support a runway at Gatwick because I don’t think there is a business case to support it,” the airlines boss said.
Mr Walsh said his objections are “principally based on the demand environment” but he warned that BA would also strongly resist any increase in charges to fund expansion, either at Gatwick or at Heathrow.
“I don’t think it [demand] is as strong as Gatwick would argue,” he said. He warned both airports that they would have to demonstrate “how charges [for airlines] will reduce rather than increase”, as IAG unveiled its third quarter results on Friday.
But a spokesman from Gatwick hit back: “Demand is strong and we are close to full capacity today. Airlines and passengers are voting with their feet and Gatwick is the fastest growing airport in London, as our monthly traffic figures underline.
“Building a second runway at Gatwick will be cheaper than expanding Heathrow and those savings will be passed on to passengers who increasingly want affordable flying. A new runway at Gatwick would also give London two world class airports, delivering more competition, choice and even lowers fares for passengers and UK plc.”
Shares in IAG soared on Friday on guidance that full-year operating profit could rise to as much as €1.37 billion (£1.07bn) following a 30pc jump in profits during the key summer months.
The airlines giant, which is next week expected to lay out a road map towards paying its first dividend, said third quarter operating profit before exceptional costs reached €900m, a better-than-expected €210m improvement on the same period last year, as a major restructuring at its Spanish flag carrier, Iberia, continued to pay off.
IAG, which was formed through the 2011 merger of BA and Iberia, said it now expects full-year operating profit, before exceptional costs, to be between €550m and €600m higher than in 2013, when it reached €770m, representing a slight upgrade on previous guidance. The upgrade pushed shares in early trading to a six-month high.
“The recent Ebola outbreak hit all the airlines, but IAG, with its robust management, has pulled out some bumper, analyst-beating figures. Already increased price targets have been issued this morning by analysts. A return to year-highs of 460p [a share] look inevitable,” said Amrit Panesar, senior trader at Accendo Markets.
BA also performed strongly in the third quarter, making an operating profit of €607m during the three months to September 30, compared to €477m during the same period in 2013.
Operating profit at Iberia jumped to €162m from €74m previously but growth at IAG’s budget airline, Vueling, was far more muted, edging up just €1m to €140m, as competition in the European low-cost market heats up.
The third quarter performance pushed up group operating profit after exceptional items for the first nine months to €1.048bn, a significant turnaround from €348m at the same point last year.
IAG’s performance contrasts dramatically with that of its German rival, Lufthansa, which on Thursday issued its second profit warning this year as it struggles to restructure its cost base.
IAG has been consulting investors on a dividend policy, which it is expected to lay out at a capital markets day next Friday.
Gatwick launched a new report claiming that even with a second runway it would be able to meet EU and UK air quality targets
Willie Walsh tells Transport Committee there is no business case for a Gatwick 2nd runway
At the Transport Committee evidence session, Stewart Wingate, Gatwick chief executive, said he would oppose a 3rd runway at Heathrow and wanted to see Gatwick develop as a competing hub airport. But BA’s Willie Walsh said airlines will only pay for expansion at one UK airport and that is Heathrow, implying he would oppose a 2nd Gatwick runway. Willie Walsh also told the committee there was no business case to expand Gatwick, and he was not aware of any discussion with airlines about the extra amount they would have to pay for a new Gatwick runway. Willie Walsh said “the only business case you could stand over is one to invest in a 3rd runway at Heathrow, but I’m not going to waste my time because it’s not going to happen.” Divide and rule ?