GACC says Gatwick’s rash promise to cap landing charge at £15 puts its runway plan in doubt
Gatwick airport have made a very rash promise not to raise their landing charges above £15 (plus inflation) for 30 years, if they get a 30 contract from the government (details below). Brendon Sewill, of GACC said: “The whole runway project is in doubt…. Gatwick’s rash promise not to raise airport charges above £15 per head …. seriously puts in question whether building a new runway at Gatwick is a viable business proposal – either for the present owners or for the new owners if Gatwick is sold.” The Airports Commission calculate that Gatwick charges would need to rise to ‘between £15 and £18, with peak charges of up to £23. GACC points out that Gatwick’s promises are meaningless unless they are put into a legal agreement binding on the present airport owners – and future owners. If so, the £15 would become a legal maximum – rather than the current £9. Even at £15, some airlines, and passengers might well decide instead to use much cheaper airports such as Stansted or Luton. GACC has pointed out to the Airports Commission the risk that Gatwick may have fewer passengers than forecast, in which case the cap of £15 may not be sufficient to cover the costs of a new runway and new terminal. Brendon Sewill asks: “What would happen if the money runs out when the new runway is only half built?”
Rash promise puts Gatwick runway in doubt
16.3.2015 (GACC – Gatwick Area Conservation Campaign)
“The whole runway project at Gatwick is in doubt”, says GACC Chairman Brendon Sewill. “Gatwick’s rash promise not to raise airport charges above £15 per head (plus inflation) for thirty years seriously puts in question whether building a new runway at Gatwick is a viable business proposal – either for the present owners or for the new owners if Gatwick is sold.”
The Airports Commission calculate that Gatwick charges would need to rise to ‘between £15 and £18, with peak charges of up to £23.’ They commented that raising the money to finance the project ‘may be challenging in a context where there is uncertainty around passenger demand forecasts.’ Now, according to GACC, it is even more challenging.
GACC points out that Gatwick’s promises are meaningless unless they are put into a legal agreement binding on the present airport owners – and future owners. “We have discussed this with the Commission, and are confident that – whether they recommend Heathrow or Gatwick – all the promises made by the airport owners will be made legally binding. If so, the £15 would become a legal maximum.
GACC points out that even if charges were pegged at £15, that is a big increase compared to £9 at present. Some airlines, and passengers, might well decide instead to use airports such as Stansted or Luton where there would be no extra costs. Already easyJet and British Airways have expressed serious concern about a possible rise in charges at Gatwick.
‘When airlines have waged an apoplectic campaign against air passenger duty – £13 on a flight to Europe – they are hardly likely to welcome being charged £15 per passenger to land at Gatwick.’
GACC pointed out to the Airports Commission the risk that there may be fewer passengers than forecast (as has happened with Manchester’s second runway), in which case the cost of the runway would have to be shared among fewer people, so it might be that a £15 charge might not be sufficient to cover the costs of a new runway and new terminal.
Sewill asks: “What would happen if the money runs out when the new runway is only half built?”
 Consultation document November 2014 paragraph 3.41
 Opened in 2001. Forecast 60 million passengers. 2014 only 22 million
 GACC consultation response paragraphs 97-101. www.gacc.org.uk/the-runway-issue
The “30 year contract”
Asked what this contact says, or whether it exists, below is what Gatwick senior management have said:
“The exact nature of the thirty year contract has yet to be finalised – its purpose would be to clarify the commercial and regulatory environment in which we would be operating, including the anticipated timing of any new runways beyond that granted to Gatwick. Whilst we understand that one government cannot bind a future government irreversibly, if there was a legal contract in place and the future proved different from that which had been committed to, the contract could also govern what might happen in those circumstances.”
Make of that what you can !
(ie. there is no contract, and it would probably be impossible for a government to enter into…. so this offer to keep landing fees to £15 seems to be little more than a PR puff….)
Gatwick “promises” to cap landing charges to £15 + inflation for 30 years (if it gets an unspecified 30 year “contract” from Government)
Gatwick airport, in frenetic publicity in the months before the Airports Commission runway recommendation (expected late June) has made various pledges – in the hope of currying favour. It says it will “bear all the main risks” of a new runway. Sir Roy McNulty, chairman of Gatwick, has written to Sir Howard Davies saying – among other things – that the landing charge will be kept at £15 (plus inflation) for 30 years. As long as there is no new Heathrow runway. (It is currently £9). Sir Roy said it is “in return for Government agreeing a 30 year contract” though exactly what that means is not explained. Presumably a contract that there will be no other runway? Gatwick also says it will “bear all the main risks of the expansion programme . . . including long-term risks related to traffic levels, market pricing, construction and operating costs”. How exactly? Gatwick’s main airline, EasyJet, is not happy with charges rising to £15. The Airports Commission consultation documents considered Gatwick’s estimate of £15 to be too low, and instead considered “average charges rising to between £15 and £18, with peak charges of up to £23.” These higher levels were due to lower estimated levels of air passenger demand than Gatwick’s optimistic figures, and higher infrastructure costs. [ Airports Commission’s consultation document Page 47].
Gatwick Chairman Sir Roy McNulty outlines the new guarantees Gatwick has made to the Airports Commission and Government
13.3.2015 (Gatwick Airport’s press release)
SIR ROY MCNULTY:
“The debate about airport expansion is entering a crucial phase in the lead-up to the Commission’s recommendation.
“However, after two years of debate with many facts, figures and key arguments put forward, it is easy to lose sight of the overall deal being offered by each option.
“That is why earlier this week, on behalf of the Gatwick Airport Board, we published five guarantees that crystallise the key commitments Gatwick are prepared to make on our second runway plans.
“We believe that airport expansion must provide a fair deal for everyone – to the Government, to airlines and passengers, to the local community, and to the environment.
“Yet these aspects have not been discussed nearly enough and we feel the balance of the discussion needs to change. So what is Gatwick’s offer?
1. FAIR TO TAXPAYERS – A PRIVATELY FUNDED RUNWAY READY FOR TAKE-OFF IN 2025
- To ensure airport expansion is fair to the taxpayer, we are strongly of the view that a new runway should be privately funded. We have full confidence that our plans will be privately financed without any Government subsidy meaning that by 2025, London would have a competitive airports system fit for a global city, all at no cost to the taxpayer.
2. FAIR TO PASSENGERS & AIRLINES – AIRPORT CHARGES CAPPED TO KEEP FARES LOW FOR EVERYONE
- Our second guarantee is that in return for Government agreeing a 30 year contract, passenger charges will be subject to an inflation-linked £15 limit. This means fares would be kept low for all passengers – from cost conscious business travellers to hard pressed families – and would be fair to passengers and airlines.
3. FAIR TO GOVERNMENT – NO PUBLIC SECTOR RISK FOR GOVERNMENT TO CARRY
- In terms of the delivery of a new runway, our view is that most of the risks should be borne by the airport promoter – not Government, not airlines and not passengers. Our commitment is to bear the long-term risks of the expansion programme which we believe is fair to Government.
4. FAIR TO LOCAL PEOPLE – CASH COMPENSATION FOR THOSE MOST AFFECTED BY NOISE
- Our expansion plans affect far fewer people than alternative schemes but we still believe higher levels of spending are needed on noise mitigation and compensation. To ensure we are fair to the local community, our ground-breaking proposal (so far unmatched by other promoters) is to provide £1,000 yearly compensation towards the Council Tax of those people most affected by aircraft noise.
5. FAIR TO THE ENVIRONMENT – AIR QUALITY TARGETS ALWAYS MET
- Our final guarantee is that air quality levels will remain within current legal limits in the area close to the airport and that (unlike Heathrow) this can be achieved without introducing a congestion charge. Gatwick’s location means that expansion is uniquely able to balance the economic growth we need with an environmental cost we can afford. We believe this is fair to the environment.
“Together these guarantees assure any Government that Gatwick expansion will not be a drain on the public finances and would deliver an economic benefit the UK needs at an environmental cost we can afford.
“Above all, our guarantees also show that Gatwick expansion is deliverable. After years of delay something needs to happen – this is the first time we have been seriously considered for expansion, and it is clear only Gatwick can guarantee Britain gets the runway it needs.”