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Colin Matthews defends steep rise in Heathrow landing charges despite revenue increase – to pay shareholders

Colin Matthews has defended steep rises in landing charges that will push up air fares by saying returns to investors now have to come first, despite a leap in revenues at Heathrow in 2012, due to record passenger numbers in 2012 and higher retail sales per passenger than in 2011.  Spending on the airport facilities is to slow over the next 5 years while charges rise. Colin Matthews wants to “make a fair and market return to shareholders.” It s largest shareholder is the consortium led by the Spanish Ferrovial group, which bought BAA for £10bn in 2006, although it has sold down its former majority holding to just over a third of shares. The sovereign wealth funds of Qatar, Singapore and China own a total of over 40%, with the rest held by Canadian pension fund CPDQ and private investment firm Alinda Capital Partners. Investors had spent £11bn on Heathrow since 2003 and would go elsewhere without returns. The airport paid a dividend of £240m last year, its first since the 2006 takeover.

Heathrow chief defends steep rise in landing charges despite revenue leap

Heathrow boss Colin Matthews says investors, who have spent £11bn on the airport since 2003, need to see ‘a fair and market return’

  • by , transport correspondent (Guardian)
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The boss of Heathrow has defended steep rises in landing charges that will push up air fares by saying returns to investors now have to come first, despite a leap in revenues at the airport on the back of record passenger numbers in 2012.

Spending on the airport facilities is to slow over the next five years while charges rise, but chief executive Colin Matthews said: “What we need to do now is to make a fair and market return to shareholders.”

The largest shareholder remains the consortium led by the Spanish Ferrovial group, which bought BAA for £10bn in 2006, although it has sold down its former majority holding to just over a third of shares. The sovereign wealth funds of Qatar, Singapore and China own a total of over 40%, with the rest held by Canadian pension fund CPDQ and private investment firm Alinda Capital Partners.

Matthews warned that investors, who he said had spent £11bn on Heathrow since 2003, would go elsewhere without returns. The airport paid a dividend of £240m last year, its first since the 2006 takeover.

The airport has set out plans to raise charges by 40% in real terms over the next five years – a proposal attacked by airlines which have demanded significant cuts after steep rises in recent years, including a 12.7% rise last April that contributed to an extra £130m in levies. Around £3bn is earmarked for investment in its infrastructure and services.

Matthews said that there was “a very good level of agreement” with airlines over the vision for an improved Heathrow, and insisted the higher charges – which will spell higher fares – were necessary. “The balancing item is how quickly we get there. The faster we invest, the faster the short-term increase in prices. We do have a good agreement over investment priorities – the balancing act is affordability with the rate of progress.

“Airlines put pressure quite rightly on every single line of their costs. We’ve made that upfront investment which is then paid down through landing charges over decades. We have to make a fair return to debt and equity to sustain the investment in Heathrow.”

The sale of Stansted, for a higher than expected £1.5bn, should complete within the next two weeks, he said, but would not impact on the equation. “Stansted is an asset that the shareholders owned – and the price was a good price. But that’s separate from Heathrow.”

The decision on charges lies with the regulator, the CAA, which will give an indication in April of where charges are likely to be set before its final ruling later this year.

Heathrow’s revenues rose 8% to £2.5bn while pre-tax losses were cut from £255.8m in 2011 to £32.8m. Interest payments on Heathrow’s debt wiped out operating profits of over £570m, meaning the airport paid £8m in tax, after a £64m tax credit received in 2011. Matthews said the tax figure categorically did not represent any kind of subsidy for Heathrow’s investors. “People pay tax when they make profit.”

Matthews said 2012 had been a good year for the airport: “We had record passenger scores for assessing the quality of their journey in Heathrow – partly down to the Olympics.”

He said record passenger numbers of 70 million were likely to rise again slightly in 2013, although the airport was at capacity in terms of flights numbers. Additional A380 planes – which have around 100 seats more than 747s – would be the biggest driver of any increase.

Matthews has recently been joined on the board of Heathrow by Akbar al-Baker, the outspoken chief executive of Qatar Airways, after the state’s sovereign wealth fund took a 20% stake in the airport. Matthews said that al-Baker had not yet attended a board meeting, but was just one voice of many who supported the demand for greater hub capacity in the UK.

Despite the capacity crunch, the Heathrow boss said he did not hold with calls made last week to bring forward the verdict of the Davies Commission to before the election. “My view is that whatever decision is taken has to stick. The last two decisions have been promptly undone. That does no good whatsoever to the country. If in order to win broad enough political support that takes until 2015, then I’d rather that than have a decision in 2013-14 which is undone at the next election, because that is just wasteful.”

http://www.guardian.co.uk/business/2013/feb/18/heathrow-chief-defends-steep-rise-charges

 

 


 

Mr Matthews was speaking as Heathrow Airport Holdings said 2012 revenues rose 8% year-on-year, helped by a 10.5 % increase in the user fees it charges airlines.

Although big-ticket events such as the London Olympics and Paralympics boosted passenger numbers at Heathrow by 0.9% to 70m during the year, this was offset by a 3.2% decrease at Stansted to 17.5m passengers.

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Heathrow’s net retail income per passenger was £5,82 in 2012, cf. £5.58 in 2011. Up 4.4%

Heathrow full year results:

http://t.co/zVm3cUV9   and   http://t.co/fMPNAJQR

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Earlier:

Heathrow Airport produces its 5 year business plan with large rise in landing charges to pay for £3 billion investment

Date added: February 12, 2013

Heathrow Airport has produced its business plan for Q6 (which is the 6th period of 5 years, from April 2014 -2019). It plans to spend some £3 billion on infrastructure, like work on Terminal 2. As Heathrow and the CAA over-estimated the number of passengers using Heathrow over the past 3 years, their income has been lower. Therefore Heathrow plans to raise its landing charges per passenger, by as much as 30 -40% by 2019 – much more than inflation. It said its prices “inevitably” had to rise in order to ensure a “fair return” to its investors. The CAA will publish its final decision on whether it has approved Heathrow’s proposals in January 2014. Launching the investment plans, Colin Matthews said the airport envisaged passenger numbers increasing from just under 70m now to around 72.6m by 2018-19. Heathrow’s 5-year plan is separate from any decision on whether a 3rd runway is built. Maximum airport charges allowed by the CAA are calculated using a complex formula taking into account the total value of Heathrow’s assets, return on capital invested and forecast number of passengers.

Click here to view full story…

 

 

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Heathrow to delay 2nd phase of work on Terminal 2 till around 2019 or later

Date added: February 13, 2013

Heathrow will seek to complete and open the first phase of Terminal 2 by 2014, enabling it to close Terminal 1. But Heathrow Airport has confirmed it is delaying the construction of the £2.5bn 2nd phase of its Terminal 2 building in its latest 5 year business plan (Q6). This means building work starting at the end of the 2014 – 2019 period. The business plan says Heathrow does not now expect to complete the project until “late in Q7” – meaning it could be as late as 2024 before the building is complete. In 2010 BAA said the building, which will add capacity for a further 10 million passengers a year, would be complete by 2019. Heathrow Airport still expects to spend £3bn over the Q6 period, with investment reducing year on year over the period, from £660m in 2014/15 to £464m in 2018/19. “The next quinquennium at BAA will largely be about asset replacement rather than major new projects.” Launching the investment plans, Colin Matthews said Heathrow envisaged passenger numbers increasing from just under 70m now to around 72.6m by 2018-19 (compared with DfT forecasts of 75m by 2020 – see below). So no rapid need for space for 10 million more passengers.

Click here to view full story…

Read more »

Bed protest. Hertfordshire & Bedfordshire residents call for a cut in Luton airport night flights

A group of protesters arrived at Luton Borough Council on 15th February to deliver a bed signed by people who are fed up with night noise from Luton Airport. The BANN (Beds Against Night Noise) protest was given good media coverage and made the point that it’s not only Hertfordshire which suffers noise and disturbance – plenty of residents in Bedfordshire are also woken up by late night arrivals, cargo planes and early morning departures. One of the protesters said the PR spin in Luton airport’s Master Plan claimed they would ”consult” the public, and they were taking noise seriously by adding 6 new noise mitigations. However, those so-called mitigations would only affect a fraction of 1% of the total flights – and Luton plans to double night flights between 10pm and midnight and start the morning departure rush at 5am, which is utterly unacceptable. Local people are now  demanding that there is legislation to control night flights at Luton in the same way as at other London airports. There is currently a petition to significantly reduce night flights at Luton, not increase them.

 

Beds as in Bedfordshire !   (where Luton airport is located)

Beds Against Night Noise !

Posted on 

A group of protestors arrived at Luton Borough Council yesterday to deliver a bed signed by people who are fed up with night noise from Luton Airport. The BANN protest was given good media coverage and made the point that it’s not only Hertfordshire which suffers noise and disturbance – plenty of residents in Bedfordshire are also woken up by late night arrivals, cargo planes and early morning departures.

Bed_protest_HALE_Feb_2013

One of the protestors, Chris Nickolay, said “When the Airport stops listening and just rides roughshod over local communities, we have to make our point loud and clear. The PR spin in their Master Plan claimed they would ”consult” the public, and said they were taking noise seriously by adding 6 new noise mitigations. Well now we know the truth. Those so-called mitigations would only affect a fraction of a percent of the total flights – and they plan to double night flights between 10pm and midnight and start the morning departure rush at 5am. That’s utterly unacceptable, and hundreds of local people are now demanding that there is legislation to control night flights at Luton in the same way as at other London airports. Just letting market greed cause sleep disruption to thousands of people is simply not an adequate control: we want a night noise curfew backed up by strict planning restrictions.”

The petition launched by local campaign groups calling for a significant reduction in night flights from Luton Airport can be accessed by clicking here >> Night flights

http://www.hale.uk.net/category/news/

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The petition to the Managing Director of Luton Airport, Eric Pickles, and the Luton Borough Council Planning officer states:

Luton Airport: Significantly reduce night flights 

Petition by HALE, LADACAN, LANAG, SoS 

Night flights at Luton Airport are currently unregulated and affect far more people than at London City Airport, which has a night movements curfew. Planes from Luton Airport are much bigger, and there are plans to almost double the existing 8,500 night flights per annum. There are more night movements at Luton than at Heathrow. The World Health Organisation links noise disturbance at night to serious health problems. We are calling for a significant reduction in night flights at Luton Airport instead of the further increase which is being proposed.

To:

Glyn Jones, Managing Director, Luton Airport
Eric Pickles, Secretary of State
Planning Officer 12/01400/FUL, Luton Borough Council

 

Luton Airport: Significantly reduce night flights

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Noise mitigations “affect less than 1% of flights”

Posted on 

An official response by Terence O’Rourke [Terence O'Rourke is a planning, design and environmental practice, which prepared the application summary for Luton Airport] to questions raised by the Hitchin Forum proves that the so-called noise mitigations proposed by Luton Airport are so feeble as to be almost worthless. The much-vaunted commitments to take seriously the noise concerns of local people have been exposed as hollow by the Airport’s own planning consultants.

Just look at what the Airport said in its September 2012 Master Plan – we have added emphasis to show the commitments which the Airport told us it would be making:

“10.13 The current national aviation policy is the Future of Air Transport White Paper 2003 (FATWP). In this White Paper, the government supports development at
the Airport which makes full use of its single runway on condition that the overall environmental impacts of such development will be carefully controlled and adequate mitigation provided.” (Master Plan Sep 2012)

“10.17 Regarding land use planning and management, paragraph 4.34 states that ‘planning policies and decisions should aim to avoid noise from giving rise to significant adverse impacts on health and quality of life as a result of new development, and mitigate and reduce to a minimum other adverse impacts … including through the use of conditions’. As demonstrated in section 9, we are incorporating a robust package of noise mitigation as part of the proposed development, which aligns fully with the APF.”

Now look at Terence O’Rourke’s responses to the questions raised by Hitchin Forum:

Q: How many flights would have been affected in 2011 by the Chapter 2 ban?
A: Less than 1% of night flights would have been banned in 2012.

Q: How many aircraft in 2012 exceeded the 82dB(A) night noise violation limit and would have exceeded the proposed 80bd(A) night noise violation limit?
A: In 2012, less than 1% of aircraft (3) exceeded the 82 dB(A) night time noise limit.
In 2012, less than 1% of aircraft (14) would have exceeded an 80 dB(A) night time noise limit.

Q: How many aircraft in 2012 were vectored out of the NPR swathes below 4,000ft?
A: LLAOL estimates that less than 1% of flights are currently vectored off NPR swathes between 3,000 and 4,000 ft.

Q: How many flights in 2012 would have exceeded the proposed daytime noise limits?
A: The total number and percentage of aircraft that would have exceeded each of the three proposed daytime noise limits in 2012 is summarised below. • 85 dB(A): 29 (less than 1%) • 82 dB(A): 62 (less than 1%) • 80 dB(A): 138 (less than 1%)

And in case you’re wondering, “less than 1%” is developer-speak for miniscule fractions of a percent: for example 138 aircraft per year in 2012 is about 0.1% of the total. And as a further insult to our intelligence, they describe the above as “a robust response”…

You can read the full set of questions and answers by clicking here >> Hitchin Forum Q&A

http://www.hale.uk.net/category/news/

 

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Earlier:

Luton local residents say “Enough is Enough” on aircraft noise – and do not accept the planned expansion

February 15, 2013 Luton airport has a consultation – that ends on 18th February – into their planning application, to almost double the number of passenger, from around 10 mppa now to 18mppa before 2030. The extra flights would mean a lot more noise for those living locally under flight paths. One of the local residents’ groups, LANAG, has now submitted its response to the consultation, and say that while local residents support the desire for Luton to have a top quality airport, the airport already has twice the number of people affected by noise than there were in 2002 and 4 times the number of aircraft movements at night. They therefore say, “Enough is Enough” and do not accept the increases in aircraft movements and noise that would result from expansion. LANAG wants no more people affected by noise than currently , and say there must be a plan to take 2,800 people out of an environment that, according to the WHO is deleterious to health – due to noise levels. Click here to view full story…

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and

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Luton airport planning application would increase night flights (11pm to 7am) by 50%

January 29, 2013    Local campaign group HALE (Hertfordshire Against Luton Expansion) says that Luton Airport’s expansion plans are based on projections to increase flights at night by 50%. This is based on information in the airport’s planning application which shows that the number of take-offs and landings between 11pm and 7am is projected to rise to 52 by 2028, compared to 34 in 2011. HALE points out that this is just the average figure – during the summer peak there could be as many as 80 flights each night. There is a public consultation on the application until 18th February. HALE is urging people to respond to this planning application by demanding that Luton Borough Council forces its Airport to reduce, not increase, night flights; to monitor and fine night arrivals as well as night departures; and to install a noise monitor on the approach to runway 08 for the purpose.    Click here to view full story…

Read more »

Colin Matthews bothered Heathrow might be eclipsed by Dubai and Istanbul

Colin Matthews, head of Heathrow, believes the number of hub airports in Europe will in due course reduce from its current 5 down to 3.  This will happen as long-haul air traffic moves to hubs in the Middle East, which are better geographically located than the UK.  Airports in Dubai and Istanbul have huge projects to increase capacity, as they are in the right locations.   These emerging hub airports will “over time” divert traffic from Europe. Colin Matthew says this will intensify competition between Heathrow, Amsterdam Schiphol, Frankfurt, Paris Charles de Gaulle and Madrid. For some reason, instead of logically therefore not needing larger airports here, he implies that it means the UK has to compete fiercely to remain a huge European hub. He does say “The question at some stage will be not so much shall we have two [hubs] but how on earth are we going to be sure we have one at all? There are 27 member states in the EU, most of them do not have a hub. “It is not a birthright that we have this connectivity.”


 

 

Europeans threaten Heathrow hub

Heathrow will face a battle for survival against Europe’s four other hub airports as countries such as Turkey and Dubai build up their aviation capacity, according to its chief executive.

 By   (Telegraph)

 17 Feb 2013

Colin Matthews, head of Heathrow, warned that airports in Dubai and Istanbul have huge projects to increase capacity while Britain procrastinates over where to build extra runways.

These emerging hub airports will “over time” divert traffic from Europe, intensifying competition between Heathrow, Amsterdam Schiphol, Frankfurt, Paris Charles de Gaulle and Madrid, he said.

The aviation veteran believes the number of hub airports in Europe will eventually slim down from five to three as more long-haul traffic passes through emerging hubs in geographically advantageous regions such as the Middle East.

Britain, in the grip of a major debate over airport capacity, should not to let its competitive advantage in aviation “slip away” through “disinterest”, he said in an interview with The Sunday Telegraph, on the eve of the group’s full-year results.

“Dubai and Istanbul, if you read their intentions to build a hub, are putting in big hub capacity. That will over time shift the flows of international traffic away from Europe and the competitive pressure between Heathrow and other European hubs will increase,” said Mr Matthews.

“The question at some stage will be not so much shall we have two [hubs] but how on earth are we going to be sure we have one at all? There are 27 member states in the EU, most of them do not have a hub. “It is not a birthright that we have this connectivity.”

Heathrow’s principal rival will be Amsterdam, the airport boss said. And the UK must not allow its aviation industry to go the same way as shipping, which withered in the face of competition from Holland.

“There was a time when shipping in the UK had a similar position and that went to Holland. It would be a pity if aviation went the same way and it could because Schiphol would like to do that,” he said

 

http://www.telegraph.co.uk/finance/newsbysector/transport/9875444/Europeans-threaten-Heathrow-hub.html

 

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He also said, in an interview with the Sunday Telegraph

Sunday Interview: Heathrow boss Colin Matthews

http://www.telegraph.co.uk/finance/newsbysector/transport/9875119/Sunday-Interview-Heathrow-boss-Colin-Matthews.html

16.2.2013

…….

Heathrow has justified its price increases by arguing that its shareholders, who are still led by the Spanish conglomerate Ferrovial, have invested money upfront to fund improvements to the airport.

Since 2003, £11bn has been ploughed into Europe’s busiest airport, on projects including Terminal 5 and a new Terminal 2, which will open next year. The group is proposing to invest a further £3bn between 2014 and 2019.

Shareholders reap the rewards of those investments retrospectively through higher revenues, Matthews argues. And so far, those shareholders have “scarcely” made a return on the billions they have ploughed into improving facilities at Europe’s busiest airport.

About 8m fewer passengers than forecast by the Civil Aviation Authority have passed through Heathrow’s doors over the past five years, which has resulted in lost revenue of £650m. “We haven’t yet started making a return to shareholders anything like in proportion to their investment,” says Matthews.

He acknowledges why the airlines have balked at another 6pc increase above inflation after already shouldering a jump of 7.5pc above the retail prices index (RPI) over the past five years – a formula that has pushed percentage rises into the double digits.

But he stands firm on the point that Heathrow can’t be diverted from its long-term course of repaying investors, just because airlines have hit some economic turbulence.

“I understand that airlines put huge pressure on every single line item of their costs, and an increase of double digits [in charges] is a big amount, but that’s what is required to invest in Heathrow. We simply have to earn the return in order to pay back, over a long period of time, investment that has been made,” he says.

The poor returns could explain why Ferrovial, which led a £10.3bn takeover of BAA in 2006, has been systematically selling down its stake in the group, which now presides over a dramatically reduced empire of four airports after being forced by the Competition Commission to sell off Gatwick, Edinburgh and, most recently, Stansted.

In October, Ferrovial struck a deal with the China Investment Corporation, which allowed the Spanish group to reduce its holding in Heathrow to 33.65pc. The move followed less than three months after Qatar’s sovereign wealth fund took a 20pc stake in the business.

From the outside, it would appear as though Ferrovial is taxiing towards the take-off runway. “You’re going to have to ask them,” says Matthews. “I’ve had absolutely no indication of that – quite the contrary.

“The other way I’d put it . . . is I think it’s pretty encouraging that well-known, big sources of equity, be it in China, be it in the Middle East, the Gulf, from around the world, are interested in investing in Heathrow.”

The influx of sovereign wealth is a vote of confidence for Heathrow at a time when its long-term fate is wrapped up in the outcome of the Government-appointed Davies Commission on aviation.

Matthews is conscious of not wanting to sound too “bombastic” when promoting Heathrow’s cause to the commission, led by Sir Howard Davies, the former Financial Services Authority chief.

While his adversaries such as Boris Johnson, the Mayor of London, have been loudly banging the drum about building an alternative hub airport elsewhere in the South East, Heathrow is following what can only be described as a “gently, gently” approach.

The first stage in Matthews’ chess game is to promote awareness of why it is important for Britain to have a hub airport, rather than a network of point-to-point airports, or even a dual hub, such as “Heathwick”, linking Heathrow with a rival via high-speed train.

Other groups, including the Institute of Directors and the Conservative Free Enterprise Group of MPs, have published reports arguing for Heathrow to be expanded into a four-runway “super hub”.

But, so far, Matthews has been coy about the full extent of his ambition for Heathrow, preferring, for now, to back the hub argument. He insists the group has not yet commissioned detailed studies into building a third, fourth or even fifth runway.

“Some of the options people talk about [for a new hub airport] will turn out not to be practical or realistic so they will fall away and I imagine it will come down to a small number of options and we are willing to see what comes out of that,” he says.

The Davies Commission, which reports in 2015, has been dismissed by a number of senior aviation figures, including Willie Walsh, the head of British Airways’ parent company.

Matthews believes it represents Britain’s “best shot” at finally resolving the that has been raging for decades – as long as the outcome receives cross-party support. But he insists his willingness to let the commissioners do their job shouldn’t be confused with a “relaxed” attitude to how the UK’s competitive edge in aviation is ebbing away.

Read more »

Bristol Airport flies more Welsh passengers than Cardiff

Provisional figures for 2012 indicate that more passengers from Wales use Bristol Airport than Cardiff.  Over 1 million passengers used Cardiff in 2012, down about 200,000 in a year, with nearly 6 million at Bristol.  The statistics suggest the scale of the task facing the Welsh government in improving Cardiff Airport’s fortunes as ministers finalise a deal to buy it.  It is estimated that it amounts to the equivalent of about 1.1m passengers over a year flying from Bristol, having come from or going to places in Wales. The Welsh government is expected to take over Cardiff Airport over the next few months after a slump in passenger numbers from a peak of 2m in 2007. It is negotiating a price with Spanish owners Abertis and carrying out various checks and balances on the airport’s finances. The Mayor of Bristol says both airports have their problems, and it would be better if they could work together.


 

15 February 2013 (BBC)

Bristol Airport flies more Welsh passengers than Cardiff

The figures reveal the scale of the challenge facing the Welsh government as it finalises a deal to buy Cardiff airport from its Spanish owners

More passengers from Wales use Bristol Airport than Cardiff, provisional figures for 2012′s first half indicate.

Figures previously published also showed just over 1m passengers used Cardiff in 2012, down about 200,000 in a year, with nearly 6m at Bristol.

The statistics suggest the scale of the task facing the Welsh government in improving Cardiff Airport’s fortunes as ministers finalise a deal to buy it.

The figures are based on a Civil Aviation Authority survey of Bristol.

The newer, provisional figures indicate that slightly more passengers on their way to or from Wales used Bristol than Cardiff in the first six months of 2012.

It is estimated that it amounts to the equivalent of about 1.1m passengers over a year flying from Bristol, having come from or going to places in Wales.

The CAA statistics have been provided to members of the Welsh assembly by Bristol Airport.

The Welsh government is expected to take over Cardiff Airport over the next few months after a slump in passenger numbers from a peak of 2m in 2007.

It is negotiating a price with Spanish owners Abertis and carrying out various checks and balances on the airport’s finances.

But despite the stronger position of Bristol Airport, the city’s first directly-elected mayor is concerned the takeover will create unfair competition.

In an interview for BBC Wales’ Sunday Politics Wales, George Ferguson [Mayor of Bristol] said both airports have their problems, and it would be better if they could work together.

Mr Ferguson said he supported competition, but added: “The danger is that Wales gives special deals on taxation and what have you, and it won’t be on a level playing field. So I think that’s the fear of Bristol Airport.

“But nevertheless we’ve got two unsatisfactory airports to my mind. Neither of them are well positioned.

“It would be great – I’m not proposing a [London mayor] Boris [Johnson]-style estuary airport yet but i think it would be great if we combine forces.

“But the problem is that we’ve got one in private ownership and one that’s going to be in public ownership that probably makes that combination more difficult.”

The Welsh government said it has appointed a core team of specialist advisors and contractors to assist through the period of due diligence.

A spokesman added: “As we have said repeatedly, it would not be appropriate to make any further comments on the proposed purchase while we undertake that due diligence work.

“If the opportunity arose in the future, we would be happy to explore how the two airports could work together.”

Robert Sinclair, chief executive officer at Bristol Airport, said they welcomed the mayor’s support for fair competition on a level playing field and his comments on the dangers of “special deals on taxation”.

However, he added: “We have also made significant investment to improve public transport access from across the south west and south Wales, and rank as one of the most noise efficient airports in the UK.

“So we take issue with the mayor’s view that Bristol Airport is somehow ‘unsatisfactory’ and badly positioned, neither of which is borne out by analysis of our passenger figures or consideration of environmental impacts.”

Cardiff airport has been asked to respond.

http://www.bbc.co.uk/news/uk-wales-21473968

 

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See earlier:

Cardiff Airport: Carwyn Jones tells Assembly Members ‘no concerns’ over deal

January 31, 2013     The First Minister of Wales, Carwyn Jones, has said the Welsh government is close to signing a deal to buy Cardiff Airport from its current owners, Abertis. He has told Welsh Assembly Members that checks on the airport’s finances had revealed “no concerns” though some experts had told him its commercial future as an airport was limited to a few years. The deal would be subject to a final price being agreed and due diligence being carried out on the finances of the airport. Cardiff had just over one million passengers in 2012, which is a drop of some 16% compared to 2011, which was itself some 14% lower than in 2010. The airport had two million passengers in 2007, and has been in decline ever since. It has hopes of growing its passenger number by 5 – 8% this year, which appears unlikely with a continuing recession. Ministers are considering a range of options on how to run the airport. Assembly Members are concerned the airport does not become a drain on taxpayers.     Click here to view full story…

 

Cardiff Airport buyout by Welsh government: Conservatives’ question if it’s value for money

January 10, 2013     On 18th December the Welsh First Minister, Carwyn Jones announced that the Welsh government wanted to buy Cardiff Airport from its current owners, TBI. He said they would be working towards a purchase over the next few months. and hoped the airport would be run on a commercial basis by an independent commercial operator on behalf of the government. Conservatives are calling on the Welsh government to prove that buying Cardiff Airport would be good value for the taxpayer, and see it as Labour’s attempt to “nationalise” the airport. Cardiff airport has had declining passenger numbers, down 13% in 2011 to a little over 1.2m, while passengers at Bristol increased by 1%. There was a further fall in the first half of 2012 to 440,000 from 558,000 – partly due to the departure of bmibaby. Despite assurances that it will not receive subsidies or burden the taxpayer, there have been questions about whether public ownership will succeed in turning around the airport’s fortunes.     Click here to view full story…

 

Cardiff airport losing money and losing passengers to Bristol

September 11, 2012    Cardiff airport has not been doing well over recent years, with passenger numbers in 2011 down by 43% compared to the peak in 2007. Now Swiss airline, Helvetic, will move its service to Bristol. Budget airline Vueling, which operates services to Barcelona, Alicante and Palma through the summer, will not run any flights from Cardiff through the winter period either. Passengers decreased 14% year-on-year in 2011, largely due to the withdrawal of budget airline bmibaby last October. The airport made a £319,000 loss in 2011, compared with a profit of more than £1m in 2010, £333,000 profit in 2009, £4m profit in 2008 and £7.2m profit in 2007.. First Minister Carwyn Jones has set up a taskforce, which met for the first time in June, to look at securing the airport’s future. Bristol airport seems to be expanding while Cardiff shrinks, with more Welsh travellers choosing Bristol instead. [Contains several recent Cardiff news items]  Click here to view full story…

 

 

Read more »

Luton local residents say “Enough is Enough” on aircraft noise – and do not accept the planned expansion

Luton airport has a consultation – that ends on 18th February – into their planning application, to almost double the number of passenger, from around 10 mppa now to 18mppa before 2030. The extra flights would mean a lot more noise for those living locally under flight paths. One of the local residents’ groups, LANAG, has now submitted its response to the consultation, and say that while local residents support the desire for Luton to have a top quality airport, the airport already has twice the number of people affected by noise than there were in 2002 and 4 times the number of aircraft movements at night. They therefore say, “Enough is Enough” and do not accept the increases in aircraft movements and noise that would result from expansion. LANAG wants no more people affected by noise than currently , and say there must be a plan to take 2,800 people out of an environment that, according to the WHO is deleterious to health – due to noise levels.

ENOUGH IS ENOUGH SAY LOCAL RESIDENTS

15.2.2013 (LANAG – Luton Airport Noise Action Group)

LANAG, the local resident’s group who want to control the noise impact of Luton Airport have issued their objection to the airport’s planning application that could see the airport double in size.

Peter Hunt, Chairman of LANAG said:  “Local residents support the desire for Luton to have a top quality airport. However, the airport is already twice as big as it was last given planning permission for in 1997, with twice the number of people affected by noise since 2002 and 4 times the number of movements at night. They therefore say, “Enough is Enough” and do not accept the increases in aircraft movements and noise resulting from expansion.”

He went on to say, “If planning permission is granted, then no more people should be affected by noise than currently and Luton Borough Council should make this a condition. At the same time there must be a plan to take 2,800 people out of an environment that, according to the World Health Organisation, is deleterious to health.”

 

A full copy of the LANAG submission – will be added here shortly.

 

LANAG is a residents action group dealing with aircraft noise to the west of the airport.

 

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Earlier

Luton airport planning application would increase night flights (11pm to 7am) by 50%

January 29, 2013    Local campaign group HALE (Hertfordshire Against Luton Expansion) says that Luton Airport’s expansion plans are based on projections to increase flights at night by 50%. This is based on information in the airport’s planning application which shows that the number of take-offs and landings between 11pm and 7am is projected to rise to 52 by 2028, compared to 34 in 2011. HALE points out that this is just the average figure – during the summer peak there could be as many as 80 flights each night. There is a public consultation on the application until 18th February. HALE is urging people to respond to this planning application by demanding that Luton Borough Council forces its Airport to reduce, not increase, night flights; to monitor and fine night arrivals as well as night departures; and to install a noise monitor on the approach to runway 08 for the purpose.    Click here to view full story…

 

Luton airport planning application submitted – to demands that it should be called in

January 9, 2013      Luton airport has submitted its planning application for expansion up to 18 million passengers, to its local authority, Luton Borough Council. However, Luton Borough Council is also the owner of the airport, and so local people are asking that the application should be called in. The application does not include a runway extension, but does include changes to taxiways, access roads, parking aprons, car parks and changes and extensions to terminal buildings. The work proposed is focused primarily on removing the bottlenecks which affect throughput of passengers and planes at peak times. By dualling the access roads and increasing the security check lanes, passengers can arrive and be processed more quickly. By extending the taxiways and adding more piers, planes can be filled up can get into position for takeoff more quickly. And by adding more customs and baggage reclaim facilities, arriving passengers can be moved more rapidly through the terminal. There are 250 documents in the application, making it difficult for local people to assess. The consultation period ends on 18th February. There is local concern about the amount of extra aircraft noise there will be, if Luton is allowed such significant expansion. There are also serious concerns about road congestion – currently about 80% of the airport’s passengers travel to it by road.     Click here to view full story…

Luton Airport expansion master plan consultation ‘flawed and misleading’

January 15, 2013     London Luton Airport Operations Ltd submitted its planning application to expand the airport, to the local authority (which is also the airport’s owner) Luton Borough Council, on 7th January. The deadline for comment is the 18th February. Luton Airport released its assessment of the recent Master Plan consultation, in which is gave the impression that some 65% of those consulted were in favour of the airport expansion. In reality, 612 votes were from airport employees, airlines, airport union members and businesses associated with the airport who, unsurprisingly, were 100% in favour of expansion. Only 450 responses came from the public, and those were 73% opposed. There were 94 from responses that were undecided. The fact that 29 of the 47 responses from stakeholder organisations, a group which included local councils, were ‘undecided’ indicated that the plans “didn’t have enough information” as the master plan did not include an environmental statement or details of where the aircraft would be flying. It simply proposed they would be doubling the capacity of the airport from about 9.5 million passengers and increase the number of flights by 60%.   Click here to view full story…

 

 

 

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Gatwick Airport wants freedom from regulation on prices by the CAA

With Heathrow and Stansted, Gatwick is one of only 3 UK airports that is subject to a price regime set by the CAA. It is arguing that should be allowed to negotiate landing charges directly with airlines, rather than being regulated, through entering into individual commercial agreements with airlines. Gatwick says such deals, which would be struck under a legally-binding framework, could incentivise airlines to offer more routes.  Gatwick says even for airlines that didn’t strike commercial agreements, charges would still be lower, increasing by 1.3% above the RPI over the next 7 years. By comparison, under continued regulation, charges would increase 3.3% above RPI over 5 years – which would mean landing charges rising from £8.80 per passenger in 2014, to £11.45 by 2018/19. But Virgin Atlantic is not keen on the idea, and nor is easyJet.  Virgin says “The CAA must continue to regulate to ensure that Gatwick delivers services our passengers need at a price which is good value for money.” 


 

Gatwick Airport pleads for freedom from regulation

Gatwick Airport has pledged a better deal for passengers and airlines if it is freed from price regulation.

Delays at Gatwick airport

Gatwick wants to negotiate commercial agreements directly with airlines Photo: REX

14 Feb 2013 (Telegraph)

The London airport, which is one of only three in the country that is subject to a price regime set by the Civil Aviation Authority, has argued that it should be allowed to negotiate landing charges directly with airlines.

Stewart Wingate, Gatwick’s chief executive, claimed the airport could offer airlines much better deals if it was able to enter into individual commercial agreements.

Such deals, which would be struck under a legally-binding framework, could incentivize carriers to offer more routes out of Gatwick, the airport said.

For those airlines that didn’t strike commercial agreements, charges would still be lower, Gatwick claimed, rising by 1.3% above the retail prices index (RPI) measure of inflation over the next seven years.

Under continued regulation, charges would increase 3.3% above RPI over five years, the airport said, taking charges from £8.80 per passenger in 2014, to £11.45 by 2018/19.

However, the plan was met with scepticism by Virgin Atlantic, which warned the airport continues to hold “significant market power”.

“The CAA must continue to regulate to ensure that Gatwick delivers services our passengers need at a price which is good value for money,” a spokesperson for the airline said.

“Around £1bn has been invested in the airport experience at Gatwick in recent years. Instead of repeating that level of expenditure, the airport should be looking at making smart investment decisions to further improve passenger services in a cost effective way.”

Low cost airline easyJet also urged the CAA to keep Gatwick within the regulatory system to protect passengers.

“All the evidence shows that Gatwick is a monopoly airport and therefore should continue to be regulated. Without regulation passengers face the risk of higher charges,” the carrier said, adding that it believed there was scope for cutting charges by 9pc below the rate of inflation.

Gatwick’s proposals, revealed as part of a business plan that will see it invest £1bn over five years, will likely heap further pressure on rival Heathrow, which earlier this week faced a backlash from airlines after it set out plans to raise prices by almost 6pc above RPI.

The rivalry between the two airports has increased after Gatwick said it wanted to build a second runway that would allow it to better compete with Heathrow.

Currently Gatwick, Heathrow and Stansted negotiate with the CAA over charges every five years before the regulator sets a maximum fee they are permitted to charge per passenger.

Charges are paid by the airlines but are usually passed on to passengers through higher ticket prices.

Gatwick, which was bought in 2009 by Global Infrastructure Partners (GIP), said it would be able to offer lower charges after a one-off 10.7pc price increase due to a passenger numbers undershooting CAA forecasts over the last five years.

The CAA had forecast 37.7m passengers would pass through Gatwick’s doors by April 2014 but traffic is more likely to be in the region of 33.8m.

A CAA spokesperson said: “We will carefully consider Gatwick’s proposal, alongside their customers’ responses, as we go through the process of setting our regulatory approach for the period after April 2014.”

The regulator will publish its own proposals in April.

 

http://www.telegraph.co.uk/finance/newsbysector/transport/9870345/Gatwick-Airport-pleads-for-freedom-from-regulation.html

 

 

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See also

 

Gatwick Airport produces new Business Plan to 2024 with prices based on customer contracts

Date added: February 14, 2013

Gatwick Airport has produced its Revised Business Plan to 2024 (the last one went to 2020) which sets out their proposals for the coming years. They are putting forward a new deal that would allow Gatwick and its airline customers to develop bilateral, tailored contracts to replace the current system of regulation. The CAA invited Gatwick to propose such a framework in October 2012. Gatwick says this would give better levels of quality, price and service to airlines and passengers. Gatwick says this will promote competition between airports, and mean lower charges for airlines and passengers. Under the deal, passenger fees will rise from £8.80 in 2014 to a maximum of £10.68 in 2020/21. This means an increase of RPI+1.3% over a 7 year period rather than RPI +.3.3%. Gatwick claimed that if it stays within the current regulatory framework, the maximum per passenger fee would rise to £11.45 in 5 years. The CAA will come to a decision on the initial proposal on the airline contracts framework on 30 April 2013 and make a final decision in January 2014. Gatwick is planning to invest a further £1 billion in the airport between 2014 and 2019.

Click here to view full story…

 

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Airlines object to Gatwick pricing proposals

easyJet, British Airways and Virgin Atlantic have all issued statements urging the Civil Aviation Authority to continue regulating Gatwick Airport’s charges.

The carriers were responding to Gatwick’s business plan for 2014-2019, published yesterday, in which the airport called to be taken outside the regulatory framework, whereby a price cap is set by the CAA on a five-yearly basis.

Gatwick’s ‘new deal’ proposes that, following a one-off price adjustment, the maximum average price level would rise by the retail price index (RPI) +1.3% over a seven-year period. This equates to an increase in its per passenger fee from £8.80 in 2014 to a maximum of £10.68 in 2020/21.

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BA said: ‘We believe that Gatwick Airport should remain a regulated business due to its substantial market power.

‘The airport’s charges over the past five years have risen by 56% and such relentlessly rising fees cannot continue in the coming years.

‘The charges should be reduced significantly and we hope that the Civil Aviation Authority ensures a fair settlement that works in the best interests of passengers using Gatwick Airport.’

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Virgin Atlantic said it believed the airport continued ‘to hold significant market power and the CAA must continue to regulate to ensure that Gatwick delivers services our passengers need at a price which is good value for money’.

………. and it continues ….

http://www.e-tid.com/airlines-object-to-gatwick-pricing-proposals/72831/

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Cross-Party letter sent to Transport Secretary – asking for final report of the Davies Commission to be published earlier

A sizeable group of MPs, peers and campaigns have joined with the leaders of nine local authorities to call on the Government to bring forward the publication date of the final report of the Airports Commission, headed by Sir Howard Davies.  They have written to Transport Secretary, Patrick McLoughlin, asking for the report to be published well before the 2015 General Election.  The scheduled date for publication is currently July 2015, two months after the Election.  They are also calling on Sir Howard Davies to “lay out very clearly the direction of his thinking” in his interim report which is due at the end of this year. In the letter they argue that such a lengthy period of uncertainty is not at all helpful to businesses seeking to make investment decisions or indeed the wider economy of the UK. Also that the residents of West London deserve to know what implications the Commission’s recommendations will have on their lives. 


Speed up Davies Commission: Cross-Party Letter sent to Transport Secretary

13th February 2013   (Hacan press release)

MPs, peers and campaign groups have joined with the leaders of nine local authorities to call on the Government to bring forward the publication date of the final report of the Airports Commission, headed by Sir Howard Davies.

They have written a joint letter (copied below) to Transport Secretary, Patrick McLoughlin, asking for the report to be published well before the 2015 General Election.  The scheduled date for publication is currently July 2015, two months after the Election.  They are also calling on Sir Howard Davies in his interim report, due by the end of this year, to “lay out very clearly the direction of his thinking.”

The letter, delivered to the Department for Transport today, has been signed by MPs and peers from all three main political parties as well as the leaders of Labour and Conservative local authorities.

John Stewart, chair of HACAN, one of the signatories of the letter, said, “There is unity across the political spectrum that the publication of the Davies Report should be brought forward.  There is support for what Sir Howard Davies is doing but a strong feeling that the electorate should know what his proposals are well before the next General Election.”

ENDS

Notes for Editors:

The Davies Commission was set up last year by the Government to examine whether extra airport capacity might be needed over the coming decades in London and the South East and, if so, where it should be.


 

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The Letter:

To:

Rt. Hon. Patrick McLoughlin MP

Secretary of State for Transport

Department for Transport

Great Minster House

33 Horseferry Road

London SW1P 4DR

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Wednesday 13th February 2013

Dear Mr McLoughlin,

We welcome the broad thrust of the Davies Commission and the desire to achieve a political consensus that will result in an enduring long-term decision about the UK’s aviation infrastructure.

We are particularly pleased that the Davies Commission will be adopting a sensible approach by looking at wider topics such as future demand, climate change and noise issues and not just selecting airports where expansion should take place.

It is vital that the Commission takes a view of the wider economic and environmental costs and benefits of aviation and we will be seeking to provide the Commission with robust evidence on these issues. We look forward to constructive engagement with Sir Howard Davies, his commissioners and staff over the coming months.

However, we do have concerns around the length of time before the Commission makes their final report. We argue that such a lengthy period of uncertainty is not at all helpful to businesses seeking to make investment decisions or indeed the wider economy of the UK.

Whilst we recognise the political sensitivities surrounding aviation policy, we believe that the electorate and particularly the residents of West London deserve to know what implications the Commission’s recommendations will have on their lives. Consequently, we the undersigned call upon the Government to bring forward the final report of the Davies Commission to a date before the General Election in 2015 and to ask Sir Howard to lay out very clearly the direction of his thinking in his interim report at the end of this year.

Yours sincerely,

Zac Goldsmith MP

Baroness Sally Hamwee

Baroness Susan Kramer

Mary Macleod MP

Seema Malhotra MP

John McDonnell MP

Andy Slaughter MP

Cllr Nicholas Botterill (Leader, Hammersmith & Fulham)
Cllr Steve Bullock (Leader, Lewisham)

Cllr Ravi Govindia (Leader, Wandsworth)

Cllr Jo Lovelock (Leader, Reading)

Cllr Lib Peck (Leader, Lambeth)

Cllr Raymond Puddifoot (Leader, Hillingdon)

Cllr Roger Reed (Deputy Leader, South Bucks)

Cllr Jagdish Sharma (Leader, Hounslow)

Cllr Lord Nicholas True (Leader, Richmond)

John Stewart (Chair HACAN)

Christine Taylor (Vice-Chair NoTRAG)

Peter Willan (Chair Richmond Heathrow Campaign)

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Heathrow to delay 2nd phase of work on Terminal 2 till around 2019 or later

Heathrow will seek to complete and open the first phase of Terminal 2 by 2014, enabling it to close Terminal 1. But Heathrow Airport has confirmed it is delaying the construction of the £2.5bn 2nd phase of its Terminal 2 building in its latest 5 year business plan (Q6).  This means building work starting at the end of the 2014 – 2019 period. The business plan says Heathrow does not now expect to complete the project until “late in Q7” – meaning it could be as late as 2024 before the building is complete. In 2010 BAA said the building, which will add capacity for a further 10 million passengers a year, would be complete by 2019.  Heathrow Airport still expects to spend £3bn over the Q6 period, with investment reducing year on year over the period, from £660m in 2014/15 to £464m in 2018/19.  “The next quinquennium at BAA will largely be about asset replacement rather than major new projects.” Launching the investment plans,  Colin Matthews said Heathrow envisaged passenger numbers increasing from just under 70m now to around 72.6m by 2018-19  (compared with DfT forecasts of 75m by 2020 – see below).  So no urgent need for space for 10 million more passengers.

 



Heathrow’s full business plan for Q6 (the 5 years from April 2014 to March 2019 is at http://www.heathrowairport.com/static/HeathrowAboutUs/Downloads/PDF/Q6_Heathrow_Full_Business_


 

In February 2012 BAA said ( link ): 

To minimise disruption to passengers, construction of Terminal 2 is taking place in two phases. The first phase will see the creation of the main terminal on the site of the old Terminal 2 and Queen’s Building.  It also involves the construction of a satellite terminal with additional aircraft parking stands and passenger gates called Terminal 2B. This first phase is due to open to passengers in 2014.

The second phase would extend the main Terminal 2 building northwards onto the existing Terminal 1 site. This phase, which would also include the construction of a second satellite building, T2C, would increase the capacity of Terminal 2 from 20 million passengers a year to 30 million passengers a year.

 


 

BAA confirms delay to £2.5bn Heathrow project

12 February 2013 (Building.co.uk)

By Joey Gardiner

Airport operator delays £2.5bn second phase of Terminal 2 building at Heathrow as it publishes £3bn five-year plan

Heathrow

BAA has confirmed it is delaying the construction of the £2.5bn second phase of its Terminal 2 building at Heathrow in its latest five year business plan for the airport, published today.

The delay, revealed by Building in October last year, will see building work starting on the £2.5bn project at the end of the five year period, called the sixth quinquennium (Q6), which runs between 2014 and 2019.

However, the business plan reveals that Heathrow’s owners BAA do not now expect to complete the project until “late in Q7” – meaning it could be as late as 2024 before the building is complete.

In 2010 BAA said the building, which will add capacity for a further 10 million passengers a year and had originally been seen as the focus of the Q6 programme, would be complete by 2019.

Despite the delay BAA still expects to spend £3bn over the Q6 period, albeit with investment reducing year on year over the period, from £660m in 2014/15 to £464m in 2018/19.

The investment level laid out by the plan is at the bottom end of the £3-4bn which had been expected by contractors and consultants for the Q6 period.

In the document, published on the BAA website today, BAA confirmed it will seek to complete and open the first phase of Terminal 2 by 2014, enabling it to close Terminal 1.  It added “we will also commence design and delivery of a further phase of T2, for completion late in Q7, in order to be able to continue to provide high quality terminals into the future as passenger numbers grow.”

Other works over the period include the development of a new integrated baggage system; and the construction of new taxiways and stands which will allow Heathrow to accommodate more of the most modern aircraft. Overall the emphasis will be upon smaller changes which deliver a better passenger experience, improved resilience and keep costs down.

In a statement the airport operator said: “Our plans seek to strike the right balance between continuing to invest for passengers and keeping charges at a level that is affordable for airlines. The lower level of capital investment than in Q4 and Q5 will help to keep charges at an affordable level for airlines.”

The publication of the more modest plans follow the departure of BAAs high profile capital director Steve Morgan in October, after he said “The next quinquennium at BAA will largely be about asset replacement rather than major new projects. I didn’t want to spend the next few years watching the paint dry.”

The publication also follows continued uncertainty over Heathrow’s long-term future as the UK’s only hub airport, with London mayor Boris Johnson yesterday reaffirming his opposition to further expansion at Heathrow. Giving evidence to MPs on the Transport select committee Johnson said he wanted a new hub airport to be constructed to the east of the capital, a move which he accepted might result in the closure of Heathrow.

Colin Matthews, chief executive of Heathrow said: “We have invested billions of pounds in new facilities such as Terminal 5 in recent years and passengers say they have noticed the difference. Our plan for a further £3 billion of private-sector investment will further improve the airport for passengers. The plan represents good value for money for airlines and passengers and comes at no cost to taxpayers.”

http://www.building.co.uk/news/sectors/infrastructure/baa-confirms-delay-to-%C2%A325bn-heathrow-project/5050159.article

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Related Articles

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 And

Heathrow Airport produces its 5 year business plan with large rise in landing charges to pay for £3 billion investment

Date added: February 12, 2013

Heathrow Airport has produced its business plan for Q6 (which is the 6th period of 5 years, from April 2014 -2019). It plans to spend some £3 billion on infrastructure, like work on Terminal 2. As Heathrow and the CAA over-estimated the number of passengers using Heathrow over the past 3 years, their income has been lower. Therefore Heathrow plans to raise its landing charges per passenger, by as much as 30 -40% by 2019 – much more than inflation. It said its prices “inevitably” had to rise in order to ensure a “fair return” to its investors. The CAA will publish its final decision on whether it has approved Heathrow’s proposals in January 2014. Launching the investment plans, Colin Matthews said the airport envisaged passenger numbers increasing from just under 70m now to around 72.6m by 2018-19. Heathrow’s 5-year plan is separate from any decision on whether a 3rd runway is built. Maximum airport charges allowed by the CAA are calculated using a complex formula taking into account the total value of Heathrow’s assets, return on capital invested and forecast number of passengers.

Click here to view full story…

 

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Below is the forecast for the number of passengers at Heathrow, in coming years, from the most recent DfT forecasts, January 2013. (Page 81 / 183)

DfT 2013 forecasts pax at main UK airports
Constrained forecasts (ie. no new runway, and not just predict-and-provide):
This forecasts Heathrow having 75 million passengers by 2020. By contrast, Colin Matthews said, on launching the Heathrow Q6 business plan, that they expected only 72.6 million passengers by 2018 -19.  A lot lower.
Presumably other forecasts are may also be lower that those of the DfT.
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and
Heathrow Q6 and Q7 pax forecasts and charges
This table (concerning airport charges, with X being the amount +/- GDP they could charge) gives estimates of future Heathrow passenger numbers.
This shows Heathrow only getting to 75 million passengers by 2023, not by 2020 – as in the Jan 2013 figures from the DfT.
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Comment from an AirportWatch member:
Interesting that better not bigger is actually starting to work. And that the Heathrow business plan is forecasting less than 1%pa growth to 2018/19.

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Heathrow Airport produces its 5 year business plan with large rise in landing charges to pay for £3 billion investment

Heathrow Airport has  produced its business plan for Q6 (which is the 6th period of 5 years, from April 2014 -2019). It plans to spend some £3 billion on infrastructure, like work on Terminal 2.  As Heathrow and the CAA over-estimated the number of passengers using Heathrow over the past 3  years, their income  has been lower. Therefore Heathrow plans to raise its landing charges per passenger, by as much as 30 -40% by 2019 – much more than inflation.  It said its prices “inevitably” had to rise in order to ensure a “fair return” to its investors. The CAA will publish its final decision on whether it has approved Heathrow’s proposals in January 2014.  Launching the investment plans,  Colin Matthews said the airport envisaged passenger numbers increasing from just under 70m now to around 72.6m by 2018-19.  Heathrow’s 5-year plan is separate from any decision on whether a 3rd runway is built.  Maximum airport charges allowed by the CAA are calculated using a complex formula taking into account the total value of Heathrow’s assets, return on capital invested and forecast number of passengers. 

 



Heathrow’s full business plan for Q6 (the 5 years from April 2014 to March 2019 is at http://www.heathrowairport.com/static/HeathrowAboutUs/Downloads/PDF/Q6_Heathrow_Full_Business_Plan.pdf


Heathrow announces £3bn of new private-sector investment in UK infrastructure

12 February, 2013 (Heathrow airport)

 
T2 Construction

Heathrow today announced £3 billion of investment in Heathrow airport in addition to the £11bn that has been invested since 2003.

The announcement forms part of the airport’s business plan for ‘Q6’ – the regulatory period which covers 2014-2019 – and it represents one of the largest private-sector investments in UK infrastructure.

The plans include the completion of Terminal 2 and the early works on extending the building; the development of a new integrated baggage system; and the construction of new taxiways and stands which will allow Heathrow to accommodate more of the most modern aircraft.

Heathrow is the UK’s only hub airport, accounting for 78% of all long-haul flights from the UK. Every five years the Civil Aviation Authority (CAA) scrutinises the airport’s capital expenditure plans, operating costs and commercial revenues to set the maximum amount the airport is permitted to charge airlines over the coming period. The publication of the airport’s business plan for 2014-2019 serves as an input to the CAA’s decision.

Like much UK infrastructure Heathrow historically suffered from out-dated facilities and decades of under-investment. Since 2003, Heathrow has invested £11 billion in the airport – one of the UK’s largest private sector investments. Investment includes the construction of Terminal 5, a new Terminal 2 due to open in 2014, new baggage tunnels, and the refurbishment of Terminals 3 & 4.

Operational performance has improved and passengers say they notice the difference. The proportion of passengers rating their journey as ‘very good’ or ‘excellent’ has increased from 48% in 2007 to 72% today. The airport has moved from the bottom to the top quartile of EU airports for passenger satisfaction, and in 2012 Terminal 5 was voted the world’s best airport terminal.

Today, Heathrow is announcing a further £3 billion of investment focussed on better customer service; increased airport resilience and reliability, and improved environmental performance. The plans include ten priority areas for Q6:

 

  1. New Terminal 2. Heathrow will open the new Terminal 2 in 2014 which will result in most passengers travelling through new facilities. The subsequent move of airlines into the new terminal allows the closure of Terminal 1 in 2016. The end of Q6 will see the start of work on extending Terminal 2.
  2. Smoother journeys. Heathrow will build more self-service check-in kiosks and introduce new self-service bag drops which will give passengers greater choice and reduce airline operating costs. We will also enhance real time information and introduce free wi-fi.
  3. Consistent, courteous service. Heathrow will provide additional customer service training for staff, and introduce mobile staff with tablet computers to provide greater assistance to passengers.
  4. Improved efficiency. We will deliver £248 million of savings to minimise airline charges by improving operational efficiency; retiring old facilities such as Terminal 1; and investing in new facilities, such as self-service bag drops, which reduce airlines’ costs.
  5. Better surface access. Heathrow will extend its innovative personal rapid transport ‘pods’ to link Terminals 2 & 3 with their business car parks. The airport will fund part of the Crossrail project which will link Heathrow to the City of London, Canary Wharf and the East End quickly and efficiently.
  6. Valued airport products and services. We will continue to evolve our range of commercial products and services to meet the demand from our diverse mix of passengers, including develop premium retail and additional lounges, all of which contribute to significantly offsetting airport charges.
  7. Higher punctuality. We will introduce new airport management technology and additional runway rapid exit taxiways to help improve punctuality and reliability at Heathrow. We have an aspirational target of 90% on time performance, up from 80% today and around 63% in 2007.
  8. Quicker connections. We will reduce the waiting time for transfer security so that 99% of the time passengers wait less than ten minutes – the shortest security queuing standard of any major hub airport in Europe. A new integrated baggage system will improve baggage reliability which has already improved from 40 missed bags per thousand passengers in 2007 to 15 per thousand today.
  9. Quieter aircraft. Heathrow will invest in upgraded stands and taxiways that will help to make it the busiest hub for A380s in Europe. These modern aircraft are popular with passengers, as well as quieter and more fuel-efficient than the aircraft they replace. Following the introduction in 2011 of new incentives and penalties to encourage airlines to operate the quietest aircraft, we will continue to trial new operational procedures that can reduce noise for local communities and roll out improved noise insulation schemes for local properties.
  10. Reduced pollution. Heathrow will increase the provision of pre-conditioned air which allows aircraft to switch off their engines while on the ground. We will also introduce more airside electric vehicles, cutting local pollution and reducing operating costs for airlines.

Colin Matthews, Chief Executive of Heathrow said:

“Heathrow is the UK’s only hub airport and a strategically important national infrastructure asset. Heathrow faces stiff competition from other European hubs and we must continue to improve the service we offers passengers and airlines. We have invested billions of pounds in new facilities such as Terminal 5 in recent years and passengers say they have noticed the difference. Our plan for a further £3 billion of private-sector investment will further improve the airport for passengers. The plan represents good value for money for airlines and passengers and comes at no cost to taxpayers.”

Our plans seek to strike the right balance between continuing to invest for passengers and keeping charges at a level that is affordable for airlines. The lower level of capital investment than in Q4 and Q5 will help to keep charges at an affordable level for airlines. The level of charges at Heathrow is tightly linked to the historic level of capital investment in new facilities.

Heathrow’s business plan also needs to deliver a fair return to shareholders to encourage future investment in the UK. Over the Q5 regulatory period passenger numbers have fallen 10% below the level anticipated by the CAA, resulting in Heathrow receiving around £650 million less than the allowed return from aeronautical charges. Heathrow cannot recover this cost now or in future. Correcting the passenger forecast for Q6 inevitably results in increased prices.

Our Q6 plan includes a capital investment programme of £3 billion, a tariff increase of RPI +5.9% and an average maximum allowable charge per passenger of £24.56 over Q6. The detailed figures in Heathrow’s full business plan are set out below.

http://mediacentre.heathrowairport.com/Press-releases/Heathrow-announces-3bn-of-new-private-sector-investment-in-UK-infrastructure-45b.aspx

 

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12 February 2013 (BBC)

Heathrow Airport proposes ‘to raise ticket prices’

An aeroplane at Heathrow Airport
Heathrow forecasts it will serve around 72.6 million passengers by 2018-19.
 

Passengers using Heathrow could face a rise in ticket prices if a £3bn five-year investment plan proposed by airport bosses is approved.

Heathrow wants regulators to allow it to increase charges for airlines to use the airport, between 2014 and 2019.

The charges need to be approved by the Civil Aviation Authority (CAA),

Under the plan, they will go up by the equivalent of £19.33 per passenger for 2012-13 up to a possible £27.30 in 2018-19.

Virgin Atlantic described the proposed price rise as “incredibly steep” and British Airways said it hoped it would not “penalise customers”.

The CAA will publish its final decision on whether it has approved Heathrow’s proposals in January 2014.

Heathrow said the increased charges would pay for investment including the opening of the new Terminal 2 in 2014 and improved check-in and baggage facilities.

‘Stiff competition’

Launching the investment plans, Heathrow chief Colin Matthews said the airport envisaged passenger numbers increasing from just under 70m now to around 72.6m by 2018-19.   [This contrasts with the January 2013 forecasts by the DfT for 75 million passengers using Heathrow by 2020.   See link ].

But he admitted Heathrow, airlines and the CAA had all got their passenger forecasts wrong for the period 2009 to 2014.

He said the CAA issued its ruling on the charges Heathrow could impose on airlines for that period, on the basis of the west London airport handling 78m passengers a year by 2013, more than 8m out.

Mr Matthews said this miscalculation had resulted in Heathrow receiving around £650m less money over the last five years.

“Heathrow faces stiff competition from other European hubs and we must continue to improve the service we offer passengers and airlines,” Mr Matthews added.

Heathrow’s five-year plan is separate from any decision on whether a third Heathrow runway – currently ruled out by the coalition government – is built.

The Davies Commission set up by the government to look at aviation strategy is not due to publish a final report until summer 2015, which will be after the next general election.

Virgin Atlantic said: “We are totally committed to improving the passenger experience at Heathrow.

“However, we believe this can be done without a repeat of the incredibly steep price rises we have seen in airport charges in the last few years.

British Airways said: “We hope the regulator (the CAA) will give a fair ruling in the months ahead, which doesn’t penalise customers and airlines.”

http://www.bbc.co.uk/news/uk-england-london-21420761

 

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See also

Heathrow to delay 2nd phase of work on Terminal 2 till around 2019 or later

Date added: February 13, 2013

Heathrow will seek to complete and open the first phase of Terminal 2 by 2014, enabling it to close Terminal 1. But Heathrow Airport has confirmed it is delaying the construction of the £2.5bn 2nd phase of its Terminal 2 building in its latest 5 year business plan (Q6). This means building work starting at the end of the 2014 – 2019 period. The business plan says Heathrow does not now expect to complete the project until “late in Q7” – meaning it could be as late as 2024 before the building is complete. In 2010 BAA said the building, which will add capacity for a further 10 million passengers a year, would be complete by 2019. Heathrow Airport still expects to spend £3bn over the Q6 period, with investment reducing year on year over the period, from £660m in 2014/15 to £464m in 2018/19. “The next quinquennium at BAA will largely be about asset replacement rather than major new projects.” Launching the investment plans, Colin Matthews said Heathrow envisaged passenger numbers increasing from just under 70m now to around 72.6m by 2018-19 (compared with DfT forecasts of 75m by 2020 – see below). So no rapid need for space for 10 million more passengers.

Click here to view full story…

 

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Heathrow hits turbulence over airport charges

Heathrow is at loggerheads with the major airlines after proposing to increase landing charges almost 6pc above the rate of inflation from next year.

By   (Telegraph)

12 Feb 2013

British Airways, Lufthansa and Virgin Atlantic attacked the price increases, which could see landing costs jump from £19.33 per passenger at present to £27.30 by 2018.

The changes were announced as part of Heathrow’s business plan for the five-year period between 2014 and 2019.

The airport company said it intends to spend £3bn improving Britain’s only hub airport, marking one of the largest private sector investments in UK infrastructure.

Included in the £3bn investment will be some “start-up costs” for a new Terminal 2 building, due to open next year, and upgrades such as more self-service check-in kiosks and bag-drop facilities.

The group has also contributed £100m towards the Crossrail project, which will connect Heathrow to the City of London and Canary Wharf.

Heathrow, whose landing fees are regulated by the Civil Aviation Authority (CAA), said prices “inevitably” had to rise in order to ensure a “fair return” to its investors.

Maximum airport charges are calculated using a complex formula which takes into account factors such as the total value of Heathrow’s assets, return on capital invested and the number of passengers forecast by the CAA to pass through the airport’s doors over five years.

Colin Matthews, chief executive of Heathrow, said the regulator had “dramatically overestimated” the growth in passenger numbers between 2008-2013, resulting in income £650m lower than anticipated.

Passenger figures had been forecast to hit 78.2m but Heathrow has fallen more than 8m short of that target as fewer airlines than expected swapped their short-haul routes out of the airport for long-haul destinations served by larger planes.

Heathrow said investor returns in the past five years have, therefore, been “poor and unsustainable” and it has proposed to the CAA an increase in airport charges of 5.9pc on top of the retail prices index measure of inflation.

Mr Matthews denied any of the £3bn upgrades were in anticipation that the Government-backed Davies Commission on aviation would allow a third runway at Heathrow, though he conceded many of the changes would be “useful” for further expansion.

Both British Airways and Virgin Atlantic called on the CAA to force a cut in Heathrow’s charges at a time when airlines are having to slash budgets. Charges at Heathrow have tripled over the past decade, the airlines argued, making it the most expensive hub airport in the world.

Steve Griffiths, chief operating officer of Virgin Atlantic, said: “Virgin Atlantic is totally committed to improving the passenger experience at Heathrow. However, we believe this can be done without a repeat of the incredibly steep price rises we have seen in airport charges in the last few years.”

A BA spokesman pointed out Heathrow was proposing to cut its level of investment by a quarter from 2014. “The charges must be reduced significantly over the coming years,” he said. “We hope the regulator will give a fair ruling in the months ahead, which doesn’t penalise customers and airlines.”

Lufthansa said in a statement: “In the highly interdependent system partnership of airports and airlines, it is essential that airport operators take into account the business concepts and the economic capacities of their principle clients.

“An annual increase of the magnitude mentioned would clearly violate this logic and challenge the route economics of many airlines operating to London Heathrow airport, especially those, which operate high frequency services.”

Heathrow’s plans will be reviewed by the CAA, which will publish in April its own proposals for the maximum charges the airport should be allowed to impose.

Meanwhile, London Mayor Boris Johnson, who has ordered feasibility studies on creating an alternative hub airport to Heathrow, on Monday told the Commons Transport Select Committee that Britain had “an historic choice to make – does it continue to compound a mistake – the siting of Heathrow – or go forward with a better, long-term, suitable alternative?”

Heathrow could expect to receive a 15-year notice period before it would be forced to close, the Mayor’s aviation adviser, Daniel Moylan added.

http://www.telegraph.co.uk/finance/newsbysector/transport/9863754/Heathrow-hits-turbulence-over-airport-charges.html

 

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Patrick McLoughlin says taxpayer will not pay £30 billion for a new hub airport

Speaking at the Commons Transport Select Committee on 11th February, the Transport  Secretary, Patrick McLoughlin said that the estimates for a new  hub airport for the UK were up to £80 million. A report by Oxera reported recently that a new 4-runway  hub airport could need up to £30bn of public subsidy, mainly to cover road and rail links. Mr McLoughlin called these “very substantial figures” and said  “We do not generally subsidise airports . . . I am not looking for ways of spending extra money on something provided by the private sector”. Airports in the past have had public subsidies, through road and rail building paid for by the public purse, that benefits the airport. He highlighted how much of the UK’s aviation infrastructure was privately funded. Boris gave evidence, at the same session, promoting  his view that there was a need for a new hub, other than  Heathrow, and this should be at one of two sites in the Thames Estuary, or at Stansted.

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February 11, 2013

Doubts raised over hub airport subsidies

By Andrew Parker and James Pickford  (Financial Times)

http://www.ft.com/cms/s/0/bbb8fe90-7476-11e2-b323-00144feabdc0.html#axzz2Kgs0IY73

Patrick McLoughlin, transport secretary, has raised doubts about the case for the taxpayer subsidising a new hub airport, appearing in front of the Commons transport select committee on Monday.   (Link to the Parliament TV recording of the session)

…Mr McLoughlin highlighted how much of the UK’s aviation infrastructure was privately funded, saying: “We do not generally subsidise airports . . . I am not looking for ways of spending extra money on something provided by the private sector.”

Full FT article at  

http://www.ft.com/cms/s/0/bbb8fe90-7476-11e2-b323-00144feabdc0.html#axzz2Kgs0IY73

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New research suggests a hub airport (eg. Thames estuary) for London cannot be built without public subsidy

January 25, 2013     A report by the economic consultants, Oxera, commissioned by the Commons Transport Committee has shown that a massive hub airport in the Thames estuary would only be viable if it had a subsidy, from UK taxpayers, of some £10 – 30 billion (in today’s money). Oxera looked at various scenarios, and found that otherwise such an airport would not be viable or provide the sorts of returns that a private investor would require. Depending on the airport’s design, it could cost £20 – £50 billion. The potential impact on Heathrow and other airports – and necessary compensation – were had to be taken into account, and would have an impact on a new hub airport’s commercial viability. Transport committee inquiry chairman Louise Ellman said: “The results suggest a new airport would require public investment and have considerable impact on Heathrow and other London airports. The research findings also shed significant light on the scale of investment required to deliver essential related surface transport links for any new airport. “We hope this work delivers something new to a crucial debate.”   http://www.airportwatch.org.uk/?p=676 

 

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Another example of  public subsidy obtained for airport expansion:

Bimingham airport to get subsidy out of public funds for its runway

Here is another subsidy to the aviation industry. Birmingham council has issued invitations to tender for the runway extension and road diversion – about £70 million. It seems Birmingham and other councils will pay for the road, and the airport for the runway extension. But the councils are majority shareholders in the airport. There is also a pledge of £15.7m from the Regional Growth Fund. So while severe spending cuts are being made, the public has to fund airport growth.9.9.2011 (Aviation Environment Federation)

AEF believes that both airport extensions and surface transport enhancements
provided for airports should be paid for by the airport operator, not the taxpayer.

http://www.aef.org.uk/?p=1304

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The UK in airport subsidies

Does the free market have a free hand?

9.7.2009  (Guardian)

by George Monbiot

A Virgin Atlantic airline aircraft comes in to land at Heathrow Airport.

A Virgin Atlantic aircraft comes in to land at Heathrow Airport, in London. Photograph: Luke Macgregor/Reuters

Our research shows that over the past 10 years government agencies have spent £80m on helping private enterprise to increase the number of flights. Airports in the UK are – or are supposed to be – commercial operations. Airport companies build them then recoup their money by leasing space and landing rights to carriers and renting out pitches for shops. Until we had completed this research, government policy looked wrong but consistent: the free market was being allowed to let rip, regardless of the environmental consequences. Now we know that the government has intervened to accelerate this growth.

Of the £80m, £17m has been spent by bodies controlled by the national assemblies. Scottish Enterprise has spent £8m on developing air routes between Scottish airports and English or European cities, and on subsidies and grants to British Airways, Ryanair, Loganair and BAA. Invest Northern Ireland has spent £3m on developing new air routes. The Welsh Assembly Government has paid £6m to construct and run a new airport terminal, subsidise the Scottish company Highland Airways, give the airlines discounts for airport charges and market flights from Cardiff to Paris and Barcelona.

Here’s the full list of subsidies paid out to UK airports:

DATA: download the full table, with full details

AIRPORT SUBSIDIES, BY REGION

Click heading to sort

Development Agency
Total funding, £
North West Regional Development Agency (NWDA) 12,015,318
One North East 11,138,547
Yorkshire Forward 16,360,000
Advantage West Midlands 169,561
East Midlands Development Agency (EMDA) 2,474,350
East of England Development Agency (EEDA) 803,593
South West Regional Development Agency (SWRDA) 19,084,000
South East of England Development Agency (SEEDA) 400,000
London Development Agency 1,654,245
Scottish Enterprise 8,140,665.06
Invest Northern Ireland 2,944,713
Welsh Assembly Government 5,633,939
Total UK Funding 80,818,931.06

 

http://www.guardian.co.uk/news/datablog/2009/jul/07/airports

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£50m cash deal for Cardiff Airport expected by the end of March

20.2.2013 (Wales online)

which contains this statement:

In the short to medium term the Welsh Government would need to inject about £6m a year in capital expenditure and airline route development support – including agreeing to underwrite any losses in the first few years accrued by airlines establishing new routes out of Cardiff.

http://www.walesonline.co.uk/news/wales-news/2013/02/20/50m-cash-deal-for-airport-expected-by-end-of-march-91466-32841310

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TUESDAY, 7 JULY 2009

£19 million subsidy for south west airports

According to Guardian journalist Goeorge Monbiot, The government’s South West Regional Development Agency (SWRDA) has spent £19m in recent years on extending the airport terminals at Bristol and Bournemouth, aircraft parking at Exeter and airport works at Plymouth and Newquay. The subsidies to Bristol Airport were made in 2004 and included £15,000 to pay for an economic assessment and greenhouse gas emissions assessment for a proposed direct scheduled service to New York and £1.5 million towards extending the terminal.

The bulk of the £19 million of SWRDA subsidies were directed at Newquay, so greatly undermining the attractiveness and potential of the existing rail link to the town. Likewise the £4+ million subsidy to Plymouth airport will give airlines a further competitive edge over rail. Now it is possible to fly from Bristol to Newquay in 45 mins for just £29 one-way which, even allowing for airport travel and check-in, is quicker and cheaper than rail (over 4 hrs, £65 off-peak return). Those low air fares owe a lot to public subsidy.

Air travel accounts for less than 1% of total UK business turnover but accounts for 13% of greenhouse gas emissions. You might think curbing the growth in air travel, particularly of domestic flights that can realistically be undertaken by rail or coach, should be the very top of the government’s environmental agenda. Instead we find them pouring millions of our money into subsidies to support air travel at the expense of rail travel.

http://greenbristolblog.blogspot.co.uk/2009/07/19-million-subsidy-for-south-west.html

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A rail link to Glasgow airport did not happen, as the government refused the funding.

Airport rail link grounded

Sep 18 2009

by Alison Rennie, (Paisley Daily Express)

A CONTROVERSIAL decision to scrap the multi-million pound Glasgow Airport Rail Link was last night branded “an absolute disgrace.”

The Scottish Government sensationally cancelled the troubled project yesterday amid concerns over public spending cuts.

Over five years in the planning, the £400million link was billed as a massive investment in Renfrewshire’s economy and essential to improve rail links between Paisley and Glasgow.

But, announcing his Budget yesterday, Finance Secretary John Swinney said a “real terms” cut in the amount of money being given to the Scottish Parliament by Westminster and the impact of the recession mean the plan cannot be funded.

…. and it continues …

http://www.paisleydailyexpress.co.uk/renfrewshire-news/local-news-in-renfrewshire/paisley-news/2009/09/18/airport-rail-link-grounded-87085-24718607/

 

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European Commission rules on airport subsidy issues

Posted 03 September 2012

The European Commission has concluded that financial arrangements between the airport of Tampere-Pirkkala in Finland and Ryanair do not constitute state aid in the meaning of EU rules because they are in line with market terms.

In another case, the Commission has found investment aid in favour of Chania Airport in Greece to be in line with EU state aid rules, in particular because it is well-targeted and proportionate to the objective pursued. In a third decision, the Commission ordered Ireland to recover incompatible state aid in the form of preferential airport taxes for certain short-haul destinations from the airlines that had benefited from this measure, as they distorted competition between airlines.

Commission Vice-President in charge of competition policy, Joaquín Almunia, said: “Our ultimate aim is to establish a level playing field for all airlines and airports regardless of their business model, from flag carriers to low-cost airlines.

Today’s decisions further clarify the application of principles of EU state aid control to the sector. We will look at other cases of state aid to airports and airlines in the coming months, applying a consistent approach.”

….  and it continues ….

http://www.routesonline.com/news/37/momberger-airport-information/161357/european-commission-rules-on-airport-subsidy-issues/

 

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The guidelines on state aid to regional airports at http://europa.eu/legislation_summaries/competition/specific_sectors/transport/l06030_en.htm imply that it is different if an airport has below 1 million passengers per year. Last year Cardiff had only just over 1 million passengers, 16% down from 2011 link

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There was also this report from August 2011, in Europe: link 

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