Holland-Kaye interview – unsurprisingly pushes case for larger hub, which means ‘No’ to Gatwick

In a long, slightly obsequious, interview with John Holland-Kaye in Management Today, there are a couple of useful points. Holland-Kaye gives his usual responses to the typical questions, and thought he glosses over anything that does not suit his case, many are persuaded by him (as long as what he says is not critically challenged). One of the main questions is to what extent there will be a continuing, or even a growing, need for a massive hub airport to provide a greater supply of transfer passengers and fill large long-haul aircraft like the A380.  Holland-Kaye is paid to say there is.  However, it may be that the future model is the new generation of smaller long-range twin-engined planes such as Boeing’s 787 Dreamliner that fly point to point. In that case, the regional airports don’t need to use Heathrow and can have their own direct flights. Management Today wonders, having listened to H-K’s stock of good answers, why “If it’s all so simple, why wasn’t the decision taken years ago?”  It’s not just the politics.  The economic justification, rather than just going with the macho “winning the global race” mantra, is fragile.


Heathrow CEO John Holland-Kaye – Globalisation means ‘no’ to Gatwick

By Andrew Saunders (Management Today)

8 December 2014

As London’s new runway battle heats up, Management Today asks the boss of what may soon be only the world’s second busiest airport where he thinks it should go.

Guess what he said?

If there were an annual award for the CEO who is most on top of their brief, then John Holland-Kaye would surely be odds-on to win it.

Heathrow Airport’s affable new CEO may only have been in his job since July, but he has clearly been doing his homework when it comes to the red hot, top priority item in his inbox – the campaign to secure the decision that London’s new runway should be built at Heathrow.

With around eight months left before the Davies Commission plumps for either Heathrow or Gatwick – and only six or so until the General Election – things are definitely warming up, as everyone from the travelling public through the airlines to government and local residents makes their views known.

Heathrow may even be about to lose its ‘World’s busiest airport’ crown – Middle Eastern rival Dubai looks set to shift 71m passengers this year, neck and neck with Heathrow. But Dubai is predicting over 78m in 2015. Oh dear.

Consequently the 49 year-old Holland Kaye – who was Heathrow’s development director before taking over the left hand seat from Colin Matthews – sets out his stall in the determined manner of one who knows that the clock is ticking, and that success in his new role depends upon winning this argument.

Point one – added value. ‘The Davies Commission has stated that expansion at Heathrow will create £211bn of economic value for the country – nearly twice as much as expanding at Gatwick – and 180,000 jobs. That’s almost double the entire NHS budget. It’s a transformational prize and we need to grasp it.’

Point two – Reports of the death of the hub airport have been greatly exaggerated. “The hub and spoke system is one of the most efficient economic models for connecting people and things. It’s what the Royal Mail does, it’s what Google and eBay do” he says.
“The world is changing and we need to be connected to the growth markets in Asia and north and south America. Only the Heathrow hub can support long haul routes like that and help the UK win the race for economic growth.”

This addresses one of the key questions that the Davies Commission will have to answer: is what’s required a bigger hub to provide a greater supply of transfer passengers and fill large long-haul aircraft like the A380? Or a point to point set up to exploit the new generation of smaller long-range twin-engined planes such as Boeing’s 787 Dreamliner?

His arch-rival, Gatwick’s CEO Stewart Wingate, thinks point to point is the future. Holland-Kaye does not. “Being a hub at the heart of the global economy is better for the UK than being a spoke on someone else’s network, and having to fly via Paris or Frankfurt. That adds time, cost and inconvenience. It’s just not good enough.”

Point three – exports. “Over a quarter of the UK’s exports [by value] go through Heathrow currently. If we want to double exports we can’t do that without expanding at Heathrow.” This is a potent but little known pro-Heathrow point which he is eager to see more widely appreciated. Air freight accounts for 40% of total UK exports by value, 66% of which pass through Heathrow. Despite the fact that the airport is running at capacity, its freight volumes grew by 5.3% in the year to November. That includes everything from foodstuffs to pharmaceuticals and no less than 408 tonnes of diamonds, worth a sparkling £4.3bn.  [It could grow a lot more if there was the demand  – it is only belly hold, with no dedicated freight flights. AW comment].

Finally, lest we forget that any new runway should serve the needs of the entire nation, Heathrow is also, he says, the answer for regional renewal too. “It is the solution for the whole of the UK not just the south east. Not only would it provide more long-haul routes to make London the best connected city in the world, it would also offer new domestic routes to places like Inverness, Liverpool and Humberside, which have been cut off from growth through lack of capacity at Heathrow.”  [Airlines have chosen to cut those routes, as they can make more money by flying other routes. It has been a deliberate choice.  AW note]. 

Hmm. Heathrow may be more accessible for passengers from beyond the capital than Gatwick, but neither can boast the kind of direct mainline rail access enjoyed by other major hubs like Frankfurt or Schiphol. And its location – requiring as it does aircraft to fly at low level over one of the most densely populated parts of Europe – is hardly ideal in other respects. All the same, several regional airports have backed it, including Aberdeen, Leeds-Bradford, Liverpool and Newcastle.

Heathrow’s favoured option is to build a new 3,500m runway one mile to the north west of the existing facilities. The cost? It says £14.8bn, the Airport Commission estimates £18.6bn.

There is also a proposal on the table to extend the existing north runway to make effectively two runways operating in tandem at a cost of between £10bn – £13bn. By comparison, the cost to build a new runway at Gatwick is estimated at a relatively modest £7bn-£10bn.

His predecessor, 57-year-old Colin Matthews, surprised many when he stood down after six successful years at the top, citing the fact that he would be 70 by the time that any new runway was built (not likely to be before 2025). But Matthews – now head of the Highways Agency – was also rumoured to be less than enthusiastic about all the public attention that championing the bid would have entailed. He earned around £2.2m in his final year, and Holland-Kaye is believed to be in line to collect a similar sum.

Holland-Kaye on the other hand has been girding his loins for the media fight to come. Lean, tall and well-dressed, his easy manner and lack of pretention should stand him in good stead for appearing on the telly. “I am more comfortable with the high profile than I thought I would be. You never know what being on live TV will be like until you’ve done it. Now in some ways I prefer it live – it makes you much sharper.”

But what about those who claim that Heathrow’s dominance of the UK airport scene stifles competition and limits customer choice? “The alternative to Heathrow is not Gatwick. If we don’t develop Heathrow, passengers will go via Paris or Frankfurt or Amsterdam instead.  My ambition as chief exec is to take Heathrow from being one of the best airports in Europe to being one of the best in the world. We can absolutely do that.”

But despite – or perhaps partly because – of his seamless logic and ready stock of good answers, eventually the listener begins to wonder. If it’s all so simple, why wasn’t the decision taken years ago? That failure to act is largely political of course, history being littered with governments who have ignored the recommendations of previous official reports, right the way back to the stillborn Maplin Sands – progenitor of the now equally moribund Boris Island – in the 1970s. The spectre of whatever flavour of government is in power after next May dodging the decision yet again, is the one thing which unites both rival airports.

Not that Heathrow’s past efforts have been entirely blameless – particularly the promise of nearly 20 years ago that a third runway would never be built there. He told the Airports Commission earlier this month “I am shocked by that commitment. It should never have been made. And it could never be kept. It has hung over our relationship with local communities.”

By ‘fessing up he hopes to be able to move on. At least, born in Cumbria and with a career in the construction business – he was at housebuilder Taylor-Wimpy before Heathrow – he can claim not to be a native of the metropolitan elite. And a boss who knows how to build things will come in handy should the extra runway get the go-ahead in the end.

Indeed, a recent Populis poll suggested a surprising degree of local support, with – admittedly sometimes modest – majorities in favour of a third runway in eight out of nine nearby constituencies, [highly biased polls, with leading questions – not a true reflection of opinion. AW comment] despite widespread concerns over additional noise pollution for the 725,000 people who live under the flightpath. The prospect of an extra 40,000 jobs in the immediate vicinity must help.

Holland-Kaye himself now lives in Oxfordshire with his wife and two kids, but spent many years in Fulham spotting aircraft coming in and out of Heathrow in his garden. “I enjoyed sitting out there watching the tailfins come over, and I wasn’t even in the business then.

“But I’ve always enjoyed travel, there is something glamorous about the possibilities of it. The plane on this stand might take you somewhere prosaic like Brussels, but the plane on that stand could be going somewhere you’ve heard of but never been, like Zanzibar. It still gives me a thrill.”

The crux of his case remains tied to the gravitational allure of far-off places. To keep playing with the big boys and girls of the global economy, he says, the UK needs a grown-up, globally-competitive airport with direct flights to all points east in particular.

The future is more business class to Chengdu than cattle class to the Costa del Sol, he reckons. “My eldest daughter had to choose between GCSE French and Mandarin. She chose Mandarin, because she says it will take her further in her life than French.

“It’s a good analogy for Heathrow versus Gatwick. Gatwick is all about flights to Europe, whereas Heathrow is about taking her to the rest of the world. It would be a tragedy if our generation let kids like her down.”

So he is engaging, plausible and sincere.  [Is he? Seems not to actually have straight answers to a lot of questions, and avoided many at the recent Airports Commission evidence session on 3rd December. And some of the responses are downright disingenuous, always omitting any inconvenient facts that don’t suit his case. Far from being highly convincing.  AW comment].

But is he right, and will he prevail? In the end it will likely come down to politics. Airports Commissioner (and MT diarist) Howard Davies, is a wily bird who knows this and is giving nothing away. We – and the bosses of Heathrow and Gatwick – will just have to wait and see.


Length of new NW runway: 3,500m

Est cost: £18.6bn

Est completion: 2025

Capacity: 740,000 flights pa (currently 480,000)

Landing charges: ca £30 per passenger (currently £24)

Economic value created: £112bn-£211bn


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Public invited to Gatwick drop-in session with Airports Commission 6 – 8pm on Tues 16th December in Crawley

On Tuesday 16th December, the Airports Commission will be holding its second full public discussion day on airport runway proposals, about Gatwick.  The first was about Heathrow, on 3rd December. The Commission has now announced there will be a public drop-in session, available to anyone who wishes to attend, from 6 – 8pm on Tuesday 16th. There is no need to have a ticket.   The Commission says the purpose of this drop in session is for Commission staff to hear first-hand from people to be affected locally. Commission staff will be available to answer questions, and help people find the information they need in order to respond to the Airports Commission runway consultation, that closes on 3rd February. The main meeting during the day is by ticket only, as capacity is limited and there has been huge demand. There are no more tickets available. However, the Commission will be publishing a full transcript on their website so those unable to attend can read what was said.  But everyone is invited to attend the 6 – 8pm session at the Arora Hotel, Crawley.



Airports Commission Consultation: Gatwick Area Drop In Session

Members of the team supporting the Commission will be available to provide advice
on responding to its consultation on proposals for additional airport capacity in the
Longley Suite, Arora Hotel, Crawley from 18:00 to 20:00 on Tuesday 16 December 2014.
Tickets are not required to attend this event.

The Airports Commission has over the past six months carried out a significant
amount of work to analyse the economic, business and environmental impacts of the
proposals for additional capacity at Heathrow Airport. It has recently published the
results of this analysis for public consultation.

An important part of this process is to hear from those people likely to be impacted by
the proposals and we would like to encourage people to respond. The consultation
runs until 3 February 2015, and the consultation materials, including information on
how to respond, can be accessed on our website.

To hear views at first hand the Commission has also set up a public discussion session
on 16 December at the Arora Hotel, Crawley.

This will enable it to hear views from local communities and their elected representatives. This session has proved to be very popular and we will be publishing a full transcript on our website so those unable to attend are able to read what was said.

The Commission would encourage people to respond to the consultation, and look
forward to taking their views on board as we enter the final phase of our work to
identify the best overall proposal.

Drop in session Address
Longley Suite
Arora Hotel
Southgate Ave,
West Sussex
RH10 6LW
The venue is adjacent to Crawley station.
Parking: Parking is available at the hotel on a first come, first served basis. Guests
requiring step free access should park at surface level..




Airports Commission Gatwick Public Discussion Session – 16 December 2014.

Arora Hotel

Southgate Ave,

Crawley,   RH10 6LW

No-one who is not pre-registered will be given access to the venue. 

Airports Commissioners present at the event.

Sir Howard Davies (Chair)
Sir John Armitt
Professor Dame Julia King
Professor Ricky Burdett



To manage the event effectively, the Commission intends to stick rigidly to the programme.

Time Section (Invited) Witnesses Section Breakdown
0930-0945 Introduction Sir Howard Davies 1x 15 minute
0945-1000 Scheme Promoters Stewart Wingate

Chief Executive

Gatwick Airport Limited

1×15 minute proposal summary
1000-1030 Members of Parliament Henry Smith MP (Crawley)

Crispin Blunt MP (Reigate)


2×10 minute witness statements to include questions to promoters


1×10 minute promoter right to respond and Commission follow-up

1030-1050 Comfort Break
1050-1130 Community Groups Brendon Sewill (GACC)

Sally Pavey (CAGNE)

Major Richard Streatfeild (HWCAAG)

3×8 minute witness statements to include questions to promoters


1×15 minute promoter right to response and Commission follow-up

1130-1200 Public Statements from Public Gallery 1-2 minute statements
1200-1245 Lunch Break
1245-1400 Local Authority Leaders Cllr Peter Lamb (Crawley BC)

Cllr Paul Carter (Kent CC)

Cllr Louise Goldsmith (West Sussex CC)

Cllr Peter Martin (Surrey CC)

Cllr Tony Newman (LB Croydon)

5×10 minute witness statements to include questions to promoters


1×15 minute promoter right to response and Commission follow-up

1400-1415 Comfort Break
1415-1455 Business Representatives Martin Heffer, (Coast to Capital LEP)

Jeremy Taylor, Chief Executive,  (Gatwick Diamond)

Cath Lynn, Group Commercial Director, (easyJet Plc.)

3×8 minute witness statements to include questions to promoters


1×10 minute promoter right to respond and Commission follow-up

1455-1530 Public Statements from Public Gallery 1-2 minute statements
1530-1545 Closing Remarks Sir Howard Davies 1×15 minute




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Near miss of drone with plane landing at Heathrow in July – unregulated drones a potential safety hazard

The CAA has released information about a category A (the most serious risk of collision) near miss incident, of an Airbus A320 (which can carry up to 180 people) approaching Heathrow, over London, coming close to an unidentified drone. The incident was on 22nd July 2014 at 1416 GMT. The A320 pilot reported seeing a helicopter-style drone as the jet was 700 feet off the ground. The CAA has not identified the airline. The drone is reported to have been within 20 feet of the plane’s wing. The drone had not appeared on air traffic control radar and disappeared after the encounter. In another incident, in May 2014 the pilot of an ATR 72 turbo-prop plane reported seeing a helicopter drone only 80 feet away as he approached Southend at a height of 1,500 feet.  Now BALPA has warned that the large number of drones operated by amateur enthusiasts now poses “a real risk” to commercial aircraft.  Sales of drones have increased rapidly, with UK sales of 1,000 – 2,000 every month.  Costing as little as £35 for a basic one, they will be popular as Christmas presents – more advanced drones costing £3,000 can carry a high definition camera. Buyers have no training, but they are meant to stay below 400ft and avoid areas close to airports. There is no way to enforce these requirements.


This is the CAA safety summary for drones and CAA website

Heathrow plane in near miss with drone


Nick Beake reports on what is known about the drone incident at Heathrow  (see short video clip

Related BBC Stories

An unidentified drone came close to hitting a plane as it landed at Heathrow, the Civil Aviation Authority (CAA) has confirmed.

An Airbus A320 pilot reported seeing a helicopter-style drone as the jet was 700 feet off the ground on its approach to the runway at 1416 GMT on 22 July.

The CAA has not identified the airline or how close the drone came to the plane, which can carry 180 people.

It gave the incident an “A” rating, meaning a “serious risk of collision”.

This is the highest incident rating the CAA can give.

Investigators were unable to identify the drone, which did not appear on air traffic control radar and disappeared after the encounter.

Crash warning

In May the pilot of an ATR 72 turbo-prop plane reported seeing a helicopter drone only 80 feet away as he approached Southend airport at a height of 1,500 feet.

The incidents have prompted a warning from the British Airline Pilots’ Association (Balpa) that the rapid increase in the number of drones operated by amateur enthusiasts now poses “a real risk” to commercial aircraft.

The association’s general secretary, Jim McAuslan said drones could cause a repeat of the “Hudson River experience”, when a plane was forced to land in water in New York in 2009 after birds were sucked into its engines.

“The risk of a 10 kilogram object hitting a plane is a real one that pilots are very concerned about” he said.

“A small drone could be a risky distraction for a pilot coming into land and cause serious damage if they hit one.”

Sales of drones have increased rapidly, with UK sales running at a rate of between 1,000 and 2,000 every month.

They are expected to be very popular as Christmas presents.

They cost as little as £35 for a smaller model – more advanced drones capable of carrying a high definition camera and travelling at 45 miles per hour cost almost £3,000.

Only a very small minority of people operating drones have attended training courses in how to fly them.

‘Common sense’

A spokesman for the CAA said it had to depend on people using their common sense when they operated drones.

He said the current level of risk should be “kept in perspective” but warned that breaking laws governing the use of drones could potentially threaten commercial aircraft.

A drone
The CAA said it had to depend on people using their common sense when they operated drones

“People using unmanned aircraft need to think, use common sense and take responsibility for them”, he said.

“There are rules which have the force of law and have to be followed.”

Drones may not be flown higher than 400 feet or further than 500 metres from the operator, and they must not go within 50 metres of people, vehicles or buildings.

There are exclusion zones around airports and the approaches to them for drones weighing more than seven kilograms.

Mr McAuslan said there was an urgent need for rules to be tightened before much larger unmanned cargo planes – potentially the size of a Boeing 737 – took to the skies.



Drone was ‘within 20ft’ of crashing into passenger plane landing at Heathrow

Report finds that remote-controlled model helicopter almost caused a mid-air collision, after flying into path of an Airbus A320 jet landing at Heathrow

By Tom Brooks-Pollock

12 Dec 2014 (Telegraph)

A drone came within 20ft of striking a passenger aircraft shortly before it was due to land as Heathrow Airport, a report into the ‘near-miss’ has found.

The model helicopter passed dangerously close to the Airbus A320, 700ft above the ground on July 22 this year, according the report by the UK Airprox Board, the regulator.

It was the second recorded near-miss, or ‘airprox’, between a commercial passenger flight and a drone in Britain, and the first at Heathrow.

Officials concluded that the pilot of the remote-controlled aircraft, who has not been identified, “had chosen to fly it in an entirely inappropriate location.”

Crew on board the passenger flight had seen the drone, which flew 20ft over the A320’s wing, the report said. It was not picked up on radar, probably because of its small size.

It added: “That the dangers associated with flying such a model in close proximity to a Commercial Air Transport aircraft in the final stages of landing were not self-evident was a cause for considerable concern.”

Investigators contacted local model-flying club groups but were unable to identify the model helicopter involved, or its operator.

Members of the public are being reminded by the Civil Aviation Authority that it is illegal to fly drones, which are expected to be a popular Christmas present this year, in restricted airspace, including in flight paths.

The report said: “The Board were heartened to hear of work being undertaken by the CAA to bring the issue of remotely piloted aircraft operations to wider public attention.”



Drone in near miss scare at 700ft with Heathrow airliner: Fears that this year’s Christmas must-have gadgets could cause disaster in the skies

  • Incident was rated as risk rating of A – the most serious of near-collisions
  • Pilot spotted the drone at 700ft after air traffic control radars had missed it
  • It comes amid growing concerns about drones being flown by amateurs
  • Drones expected to be Christmas best-seller with models as cheap as £35

A drone flying near Heathrow almost crashed into a passenger jet – raising fears that this year’s must-have Christmas gift could cause a disaster in the skies over Britain.

The remote-controlled device, flown by an unidentified amateur, was spotted by the airliner’s pilot but alarmingly was not detected by air traffic control radars.

The UK Airprox Board, the air safety panel that investigates near misses, gave the incident the highest risk rating of A, meaning there was a ‘serious risk of collision’.

Scroll down for video 

A drone flying near Heathrow almost crashed into a passenger jet raising fears that this year’s must-have Christmas gift could cause a disaster - the remote-controlled device was flown by an unidentified amateur

It was the first near miss between a passenger jet and an unmanned aircraft at Britain’s biggest airport.

It comes after warnings over the dangers posed to passenger planes by recreational drones flown by amateurs.

They are expected to be a best-seller this Christmas, with models as cheap as £35 being snapped up.

Sales have risen rapidly – around 2,000 a month are being bought – and electronics retailer Maplin said they are currently one of its biggest sellers.

The most sophisticated designs cost up to £3,000.

A plane had a near miss with drone as it landed at Heathrow (pictured) on July 22 in the first recorded incident

They can include cameras and are usually used for recreational purposes – although increasingly they are being considered for commercial uses, such as carrying deliveries and monitoring farmers’ crops.

The Airprox Board will publish a report later this week into the Heathrow incident, which involved an Airbus A320 that can carry up to 180 passengers.

The jet was flying at an altitude of 700ft on the afternoon of July 22 this year when the pilot spotted the drone. He reported the near miss and an inquiry was launched by the board.

Worryingly, investigators were unable to identify the drone and it disappeared after the sighting.

It is the latest in a series of incidents involving unmanned planes.

In May, the pilot of a 74-seat plane reported that a quadcopter drone flew within 80ft as he was approaching Southend airport and in December 2012, the crew of a Boeing 777 coming in to land at Gatwick said they saw ‘two white or silver discs’.

Drones (file picture) are priced from just £35 and sales have jumped thanks to extra pre-Christmas demand.

In April this year, the owner of a remote-controlled plane was ordered to pay £4,340 in fines and costs after his machine crashed in a no-fly zone near a shipyard in Cumbria for defence company BAE Systems, where nuclear submarines were being built.

The British Airline Pilots Association (Balpa) has demanded better protection for the public against the risk of drones.

There are currently few rules on operating drones. But Balpa wants them to meet the same safety standards as piloted aircraft, including only being flown by operators with pilot-equivalent training.

Balpa general secretary Jim McAuslan said: ‘The UK should become a “safe drone zone” so we can make the most of the major business and leisure opportunities offered by remotely piloted aircraft, while protecting passengers, pilots and residents.’

The device was spotted by the pilot but was not detected by air traffic control radars at Heathrow.

He added: ‘The technology is developing quickly and we could see remote aircraft the same size as a Boeing 737 being operated commercially in our skies within ten years.’

In October, intelligence experts warned of the misuse of drones and called for ‘urgent’ measures to safeguard British airspace to cope with commercial use, which is expected to be more widespread by 2035.

Their research for a University of Birmingham report said that the ‘hazards presented by inadvertent or accidental misuse of [drones], or the consequences of their malfunctioning, are becoming better understood’.

And a conference on unmanned craft in London last month heard that police were worried about injuries on Boxing Day when amateur ‘pilots’ try out their new drones.







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70th anniversary of the Chicago Convention – there is STILL no tax on jet fuel for commercial planes, worldwide

The aviation industry lobby, ATAG and its website “Aviation: Benefits Beyond Borders” is celebrating the 70th anniversary (7th December) of the signing of the Chicago Convention. This, shortly after WWII, set up international agreements for how air travel would be managed between countries, with some sensible details of how airspace should be used,  standards of competence by the crews and air-worthiness of the planes. But it also had Article 24. This said aircraft flying to, from or across, the territory of a state shall be admitted temporarily free of duty. Fuel, oil, spare parts, regular equipment and aircraft stores retained on board are also exempt custom duty, inspection fees or similar charges.  With international aviation in its infancy after WWII, most countries extended this exemption to all aviation fuel and enshrined it in dozens of bilateral aviation treaties between countries. So there remains no fuel duty on fuel, worldwide, for any commercial flights (there can be on private leisure flying). The House of Commons briefing note says: “Contrary to common perception, the 1944 Chicago Convention only precludes taxation of aircraft fuel in transit, a provision which can be seen simply as a safeguard against double taxation.”



Transport & Environment says:

The Chicago Convention (the international treaty on civil aviation) excludes
states from taxing fuel that arrives on board an international aircraft to prevent double
taxation. With international aviation in its infancy after WWII, most countries extended this
exemption to all aviation fuel and enshrined it in dozens of bilateral aviation treaties between countries. These agreements should be reversed. There is no reason why today’s car drivers, small businesses and truckers should have to pay fuel tax while large commercial airlines can operate without having to make such a basic contribution to government coffers.




House of Commons briefing note on the taxation of aviation fuel, dated 2012, states:

Contrary to common perception, the 1944 Chicago Convention only precludes taxation of aircraft fuel in transit, a provision which can be seen simply as a safeguard against double taxation.

It says in November 2002 the Labour Government indicated that it would discuss the potential use of economic instruments to improve aviation’s environmental impact with the industry, before setting out its plans in a forthcoming white paper on aviation.  As an input to the white paper, the Royal Commission on Environmental Pollution published a report on the environmental effects of air transport at this time. It proposed a Europe-wide emissions
charge as an alternative to taxing fuel, given that unilateral action would be unsuccessful and international agreement was unlikely:
5.8 Renegotiation of the Chicago Convention and the subordinate bilateral agreements
would be an enormous task and would be unlikely to achieve a consensus on global
action. Therefore, there is a risk that unilateral action by a body such as the UK or
even the EU could easily be circumvented by the ready availability of cheaper, tax-free
fuel outside the EU.
5.9 Instead of a fuel tax, therefore, a better way of addressing the market distortion
would be a Europe-wide emissions charge, which airports would be required to levy on
all aircraft, passenger or freight, taking-off from or landing at European airports. The
charge would be differentiated between aircraft types and loads and the distance
travelled over Europe, or over the ocean to the point mid-way to the nearest country in
the direction of the flight, to reflect their estimated emissions.

… and it continues …


The European Taxation says, on the issue of Taxation of Aircraft Fuel:

Tax exemption of aircraft fuel contained in the tanks of an aircraft arriving at a Community airport is based on the provisions of the 1944 Chicago Convention. However, the exemptions granted to aircraft fuel, loaded to a carrier at an EC airport, are granted on the basis of bilateral Air Service Agreements concluded between Member States and third Countries and among Member States themselves.

The Commission favours taxation of aircraft fuel, as is the case for fuel used by other means of transport. The Commission presented a Communication on taxation of aircraft fuel in 2000 (COM(2000) 110 of 02/03/2000) and brought this issue for discussion at the ICAO’s 33 rd Assembly in September 2001. It appeared from the discussions that it will be very difficult, if not impossible, to reach an agreement on this issue at ICAO level.

During the discussions, which preceded the adoption of Directive 2003/96/EC, all but two Member States agreed that as a matter of principle commercial aircraft fuel should be taxed on the same basis as any other fuel. However, the question of competition with third countries needs to be taken into account and any distortion of competition with socio-economic implications has to be avoided.




Wikipedia says of the Chicago  Convention:

The Convention on International Civil Aviation, also known as the Chicago Convention, established the International Civil Aviation Organization (ICAO), a specialized agency of the United Nations charged with coordinating and regulating international air travel.  The Convention establishes rules of airspace, aircraft registration and safety, and details the rights of the signatories in relation to air travel. The Convention also exempts commercial air fuels from tax.

The document was signed on December 7, 1944 in Chicago, U.S., by 52 signatory states.  It received the requisite 26th ratification on March 5, 1947 and went into effect on April 4, 1947, the same date that ICAO came into being. In October of the same year, ICAO became a specialized agency of the United Nations Economic and Social Council (ECOSOC). The Convention has since been revised eight times (in 1959, 1963, 1969, 1975, 1980, 1997, 2000 and 2006).

As of 2013, the Chicago Convention has 191 state parties, which includes all member states of the United Nations—except Dominica, Liechtenstein, and Tuvalu—plus the Cook Islands


Wikipedia also says:  “The Convention prevents the taxation of commercial aviation fuel (though fuel for recreational purposes is not exempt). This has led to debate in the UK Parliament over whether the lack of tax represents a subsidy to the aviation industry, estimated at £10 billion annually in the UK.[3] Furthermore, the planned inclusion of international aviation into the European Union Emission Trading Scheme in 2014 has been called an ‘illegal tax’ by countries including the USA and China, who cite the Chicago Convention.[4]


Some important articles from the Chicago Convention are:

Article 1: Every state has complete and exclusive sovereignty over airspace above its territory.

Article 3 bis: Every State must refrain from resorting to the use of weapons against civil aircraft in flight.

Article 5: The aircraft of states, other than scheduled international air services, have the right to make flights across state’s territories and to make stops without obtaining prior permission. However, the state may require the aircraft to make a landing.

Article 6: (Scheduled air services) No scheduled international air service may be operated over or into the territory of a contracting State, except with the special permission or other authorization of that State.

Article 10: (Landing at customs airports): The state can require that landing to be at a designated customs airport and similarly departure from the territory can be required to be from a designated customs airport.

Article 12: Each state shall keep its own rules of the air as uniform as possible with those established under the convention, the duty to ensure compliance with these rules rests with the contracting state.

Article 13: (Entry and Clearance Regulations) A state’s laws and regulations regarding the admission and departure of passengers, crew or cargo from aircraft shall be complied with on arrival, upon departure and whilst within the territory of that state.

Article 16: The authorities of each state shall have the right to search the aircraft of other states on landing or departure, without unreasonable delay…

Article 24: Aircraft flying to, from or across, the territory of a state shall be admitted temporarily free of duty. Fuel, Oil, spare parts, regular equipment and aircraft stores retained on board are also exempt custom duty, inspection fees or similar charges.

Article 29: Before an international flight, the pilot in command must ensure that the aircraft is airworthy, duly registered and that the relevant certificates are on board the aircraft. The required documents are:

Certificate of Registration
Certificate of Airworthiness
Passenger names, place of boarding and destination
Crew licences
Journey Logbook
Radio Licence
Cargo manifest

Article 30: The aircraft of a state flying in or over the territory of another state shall only carry radios licensed and used in accordance with the regulations of the state in which the aircraft is registered. The radios may only be used by members of the flight crew suitably licenced by the state in which the aircraft is registered.

Article 32: the pilot and crew of every aircraft engaged in international aviation must have certificates of competency and licences issued or validated by the state in which the aircraft is registered.

Article 33: (Recognition of Certificates and Licences) Certificates of Airworthiness, certificates of competency and licences issued or validated by the state in which the aircraft is registered, shall be recognised as valid by other states. The requirements for issue of those Certificates or Airworthiness, certificates of competency or licences must be equal to or above the minimum standards established by the Convention.

Article 40: No aircraft or personnel with endorsed licenses or certificate will engage in international navigation except with the permission of the state or states whose territory is entered. Any license holder who does not satisfy international standard relating to that license or certificate shall have attached to or endorsed on that license information regarding the particulars in which he does not satisfy those standards”.



From the aviation lobby group, Aviation Benefits:

The Chicago Convention – anything but conventional

7.12.2014 (Aviation Benefits Beyond Borders)

220Px Chicago Convention Titelseite
There are very few regulations which are truly global and those that are we tend to take for granted. The laws of soccer are the same in Samoa as they are in Sudan. Ships have navigation lights and flags in the same places and the radio frequencies which can connect mobile phone users in Russia and Peru have also been universally approved.

Flying an aircraft from one country into or over another may seem like fairly uncontentious act but there is just one set of international laws of the air and they were agreed on December 7th, 1944.

It took nearly 1,000 people from 54 nations, crammed into the Stevens Hotel in Chicago, 37 days to agree the Convention on International Civil Aviation, or the Chicago Convention as it is now known. It is a remarkable document – a blueprint for the foundation of a civil aviation industry which would unite the world, drawn up at a time of intense global conflict. It needed ratification by 26 States to become law – which came into effect on 4 April 1947, 30 days after the 26th State had ratified the Convention. It now has 191 signatories.

History students looking back at the event now could well be forgiven for asking “why?”. Didn’t world leaders have more pressing items on their agenda at the time? The origins of the document really date back to 1942, when the agendas of allied leaders were even more crammed – but even then they knew that civil air transport would play a huge role in international relations when peace came and the more quickly the world could be united by peaceful aviation links the better it would be for everyone.

Which makes the Chicago Convention a little more than a fairly interesting international treaty – it is a truly historic document which lays out a future of peace and prosperity which was truly visionary. Reflecting on the way it was developed has parallels with international processes at play today (indeed I am currently at the UN Climate Talks in Lima).

ICAO 70TH Logo2 BannersThe fact that war was continuing to rage may have added a uniting pressure to the discussions, but I think one of the most important differences in negotiations back then was the faith governments had in their negotiators. They were true plenipotentiaries – people entrusted by their governments to make decisions and take actions on their States’ behalf. Today, negotiators at conferences such as that taking place here in Lima have constant mobile phone and email contact with their leaders back in the capitals, who seldom have an idea of the pressures of the negotiations, nor of the nuances at play in the room.

The Chicago Convention, battled out over 37 cold Chicago days in late 1944, has really stood the test of time and provided the humankind with a valuable document that helped to grow an industry and change the face of the modern world.



Aviation: Benefits Beyond Borders and enviro.aero have been established by the commercial aviation industry body, the Air Transport Action Group (ATAG).


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Heathrow gets award as “Green Business of the Year” from a West London group that it sponsors

Awards ceremonies and the process of winning awards is an amazing business. Almost anything can get an award of some sort, especially if you are one of the sponsors of the award. If you want to think of any one place in the UK that is responsible for more air pollution or more carbon emissions, you will find few that beat Heathrow. But no.  Heathrow has now won yet another (it has won two before) environmental award.  This time it is from West London Business Awards. Heathrow was the winner in the “Green Business of the Year” category. The runner up was another sponsor of the awards, Westfield. As the local paper reports, with a tremendous Freudian slip, the Heathrow schemes were successful in ….”reduced local air quality levels.”  This has all been too much for a local resident, who has “improved” on the local newspaper story, with a slight twist …. to report on the comedy awards.  One of the reasons for their award was “encouraging the use of car sharing”,  which is slightly spoilt by a photo, by the local writer, of a huge billboard advertising Heathrow’s new business car park.


Below is the story as it appeared in the local paper.  To see a version, “improved” by a local wag, incredulous about the award,  see below here).

Heathrow’s green win at West London Business awards

4.12.2014 (Get West London)


Heathrow schemes a success in proving commitment to reducing NOx emissions with lower carbon footprint and reduced local air quality levels  (sic)

Heathrow Airport wins West London Business’ Green Award


The greenest business of the year title was scooped by Heathrow Airport, in a controversial win, at the West London Business awards last week.

The airport was recognised for its continuous efforts in adapting aviation schemes to reduce their carbon footprint and improve local air quality through using newer, lower emissions aircrafts, emissions-based landing charges and encouraging the use of car sharing.

In addition, Heathrow has lowered its NOx (Nitrogen Oxide) emissions through using hybrid buses in the free travel zone around the airport, more electric vehicles used at the airport, and hosted the UK’s first hydrogen fuelling station, as part of its pledge to deliver reduced NOx emissions by 5% by 2020.

Heathrow’s director of sustainability, Matt Gorman, said: “Heathrow Airport has and continues to be a major economic driver in our region, and an indispensable part of London’s business community.

“We believe the benefits Heathrow brings need not come at the expense of local air quality, and we are committed to reducing our environmental impacts and acting a good neighbour to local residents.

“That is why this recognition is so important to us, and why we will continue to work to maintain our place as West London’s greenest business.”

Heathrow beat the likes of Westfield London in White City, who were highly commended, in the green business category for their Green Academy programme that diverts all waste produced from landfill and has increased recycling levels among other environmentally friendly initiatives.

West London Business chief executive, Frank Wingate, said: “Well done to Heathrow for winning the Green Award at the West London Business Awards.

“The airport has put in a lot of work in recent years to meet its environmental challenges and our judges were impressed by both the scale of the work and the measurable achievements, in what was a very competitive category.

“This is an aspect of Heathrow’s work that is not generally recognised.”




  • The West London Business Awards Sponsors 2014


The story as re- told by a local resident: 
5th December  2014.

Heathrow win big  at West London Business’ Comedy Awards sponsored by Heathrow.

To hysterical laughter the greenest business of the year title was scooped by Heathrow Airport at the West London Business Comedy Awards last week.

As the crowd sniggered, the airport was recognised for its continuous efforts in adapting aviation schemes to reduce their carbon footprint and improve local air quality through using newer, lower emissions aircraft, emissions-based landing charges and encouraging the use of car sharing.  See photo below.

Heathrow car park

Heathrow’s Head of Comedy, Matt Gorman, said: “Heathrow Airport has and continues to be a major economic driver in our region, and an indispensable part of London’s comedy community.

He continued, “We believe the benefits Heathrow brings need not come at the expense of local air quality, and we are committed to reducing our environmental impacts and acting a good neighbour to local residents.”

The gag about ‘acting’ like a good neighbour made someone laugh so much they nearly choked on their corporate prawn cracker.

“That is why this recognition is so important to us, and why we will continue to work to maintain our place as West London’s greenest business.” Stop it Matt, someone will crack a rib !!!!!

The headline act at the comedy awards was West London Business Executive Comedian, Frank ‘Loads of Money’ Wingate.

The room full of professional Heathrow comedians know when a master is at work and they roared as Frank performed his trademark entrance of pushing a wheelbarrow of Heathrow cash on to the stage and shouting China! China! China!

 “The airport has put in a lot of work in recent years to meet its environmental challenges and our judges were impressed by both the scale of the work and the measurable achievements, in what was a very competitive category” Frank Wingate continued, with a straight face.

“This ranks as highly as the previous Green winners at our last three comedy awards, the owners of Chernobyl, BP in the Gulf of Mexico and our partners, the Chinese Government.

Then with another rousing cry of China! China! China, Frank and his wheelbarrow left the stage as Rob Gray went up to collect his Comedy Award for entering The Guinness Book of Records in the Imaginary Friends section.

What a night!



Other awards Heathrow airport has won:


Heathrow has been winning awards for decades – here’s a selection of those we’ve collected in recent years:


  • Best Airport for Tax Free shopping – Business Traveller Awards
  • Terminal 5 – Best Airport Terminal – Skytrax World Airport Awards
  • Best Airport for Shopping – Skytrax World Airport Awards
  • Heathrow Commuter Team – Transport Team of the Year – London Transport Awards
  • Biodiversity Benchmark Award – Wildlife Trust


  • Terminal 2 building – Sustainability Leaders Award
  • ‘Champion of Champions’ for environmental performance – Green Apple Awards
  • Best European Airport for Families – Skyscanner Awards
  • Best Airport Shopping Business – Business Traveller Awards
  • World’s Best Airport – Runner up  – Conde Nast Traveller Awards
  • Best International Airport – Executive Travel 2013 Leading Edge Awards
  • Best Airport (over 25 million passengers) – ACI EUROPE Awards
  • Heathrow Express – Best Ground Transportation (Europe) Award  – Business Destinations magazine
  • Platinum Big Tick – Business in the Community Awards
  • Best Airport Shopping Worldwide – Skytrax World Airport Awards
  • Terminal 5 – Best Airport Terminal – Skytrax World Airport Awards


  • Terminal 5 – Best Airport Terminal – Skytrax World Airport Awards AwardsFamilyfriendly programme member – Silver winner – mumsnet
  • Best Airport for Tax-Free Shopping – Business Traveller Awards
  • Best Airport for arrival experience for the Games Programme – Future Travel Experience.
  • Best International Airport Worldwide – Executive Travel
  • Terminal 2 B – Gold Award – Green Apple Awards
  • Best Food and Beverage in the World – Food and Beverage Awards
  • Heathrow Sustainability Partnership – Best Sustainability Collaboration Winner – Ethical Corporation Global Responsible Business Awards


  • Best Airport Operator of the Year – Frontier awards in Cannes
  • Best Overall Airport Food and Beverage Offer – Food and Beverage Awards
  • Terminal 5 – Best Design of Food and Beverage – Food and Beverage Awards


  • Terminal 5 – Best Airport – Travel Agents Choice Awards
  • Best Airport for Tax-Free Shopping – Business Traveller Magazine
  • Best Airport Shopping Worldwide – Skytrax Awards
  • Best Pay Per Click Campaign – Travel Marketing Awards
  • Best PR Strategic Campaign – A Week at the Airport – Travel Marketing Awards






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Autumn statement 2014: Osborne to introduce ‘Google tax’ for large companies that shift profits abroad to avoid UK tax

In the Autumn Statement the Chancellor proposed a 25% levy on profits “artificially” shifted abroad to avoid tax by multinational companies.  This is nicknamed the “Google Tax” to tackle companies like Amazon, Apple and Starbucks. However, the measures also apply to Gatwick which has complicated arrangements to keep its tax burden low – it has not paid UK corporation tax for years. “We will make sure that big multinational businesses pay their fair share,” Osborne said. The tax is intended to raise more than £1bn over the next 5 years by tackling aggressive avoidance.  However, experts said the estimated £300m a year in extra revenues was just a fraction of the real profits multinationals are making in Britain.  The rules for the Treasury’s “diverted profits tax” will be published in draft legislation on 10th December and introduced in April 2015. They are designed to hit companies that use artificial structures to minimise UK profits and therefore lower their UK tax bills. The Chancellor hopes the Treasury will gain £25 million from the “diverted profits tax” in 2015/6 rising to £355 million on 2019/20.


Autumn statement 2014: Osborne to introduce ‘Google tax’

Chancellor proposes 25% levy on profits shifted abroad to avoid tax by US multinationals such as Amazon, Apple and Starbucks
3.12.2014 )Guardian)
George Osborne has launched a crackdown on tax avoidance by multinational technology firms such as Google and Amazon, by imposing a 25% levy on profits which are generated in Britain but “artificially shifted” abroad.


Dubbed “the Google tax”, the new levy was announced in the chancellor’s autumn statement alongside a move to punish banks for losses incurred during the global financial crisis.

Responding to outrage about the minimal contributions big corporations make to European governments, the Treasury is targeting Silicon Valley companies such as Google, Amazon and Apple, but the measures will reach beyond technology to high street chains such as Starbucks.

“We will make sure that big multinational businesses pay their fair share,” Osborne said. The tax is intended to raise more than £1bn over the next five years by tackling aggressive avoidance, while an unexpected strike against banks will raise another £4bn over the same period by reducing their ability to use losses racked up during the crisis to reduce tax payments now.

Labour MP and tax campaigner Margaret Hodge welcomed the strike against Silicon Valley, but experts said the estimated £300m a year in extra revenues was just a fraction of the real profits multinationals are making in Britain.

The rules for the Treasury’s “diverted profits tax” will be published in draft legislation on 10 December and introduced in April 2015. They are designed to hit companies that use artificial structures (video showing how it is done) to minimise UK profits and therefore lower their UK tax bills.

The rate is 5% higher than next year’s UK corporation tax rate of 20%, suggesting the chancellor hopes companies will choose to dismantle complex structures that divert profits to low-tax nations such as Luxembourg and Ireland, and choose to pay HM Revenue and Customs instead.

“The chancellor said this will raise a billion over five years, but ultimately this is a tiny proportion of the profits the multinationals he has in mind are generating,” said Toby Ryland, a partner at accountants HW Fisher & Company. “In reality, many of the UK’s double tax treaties with other countries dictate where profits can be taxed. Sweeping measures like this often come to nothing. The chancellor has made the right noises, but most multinationals will be able to side-step these new rules without breaking into a sweat.”

Google paid just £20m tax in the UK last year. But its actual British revenues were £5.6bn. The group as a whole has a profit margin of 20%, suggesting the company’s real profits in the UK could have been as high as £1.2bn. Taxed at the proposed 25% rate, this would deliver £280m a year in revenues for the Treasury from just one company. But the government expects to collect no more than £360m a year from the diverted profits tax.

Hodge, who has grilled Google over its tax policies as chair of the public accounts committee, tweeted: “Welcome new measures to crack down on companies who move their profits offshore.”

Osborne also said he wanted to increase the burden on banks bailed out at huge cost to the public purse in 2008. He is cutting in half the “carried-forward losses” used to defer tax. The government said it was unreasonable that these losses of roughly £17bn could be used to eliminate tax on current profits. Without the changes, some banks would not pay corporation tax for another 20 years.

Osborne said: “The banks got public support in the crisis and they should now support their public in the recovery.” Bank shares wobbled following the announcement. Bailed-out Lloyds Banking Group was hardest hit, falling just over 1%.

Jonathan Richards, executive director in financial services at consultancy EY, said: “This is unexpected and significant news for banks. It is likely to represent a significant additional cash tax cost for the banking sector over the next few years. If it results in banks being required to revalue their deferred tax assets, banks’ capital position and reported earnings could be affected.”

The industry was digesting the detail, but it appeared the chancellor was only targeting losses incurred in the UK, which would limit the impact. Barclays lists more than £4bn of deferred tax, but just £499m of this relates to the UK. Royal Bank of Scotland, 81% taxpayer-owned, has £3.1bn of deferred tax assets, £2.1bn of which is UK-related.

Ian Gordon, banks analyst, at Investec said Lloyds appeared to be most affected with £5bn of deferred tax assets “which, in the absence of disclosure or guidance to the contrary, we assume to be primarily UK-related”.

The banks are already paying a levy based on the value of their balance sheets which is supposed to be bringing in £2.5bn a year.




The Autumn Statement at   https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/382327/44695_Accessible.pdf

Offshore tax evasion
1.255 The government is committed to fighting tax evasion, which increases the burden on
honest taxpayers. The UK has played a leading role, including through its Presidency of the
G8, in the development and early implementation of a new global standard to automatically
exchange financial information for tax purposes. Almost all financial centres have now agreed to begin exchange of information under the new standard in 2017 or 2018. The UK has already signed agreements to this effect with 50 other countries and jurisdictions which will lead to a step change in HMRC’s ability to tackle tax evasion. In advance of these agreements coming into force from the end of 2015, the government will increase the amount and scope of civil penalties for tax evasion, and review how best to enhance the incentives for obtaining information on offshore tax evaders.
Tax evasion and fraud
2.155 Strengthening civil deterrents for offshore tax evasion – Following consultation,
the government will introduce legislation on enhanced civil penalties for offshore tax evasion.
This will amend the existing offshore penalties regime to:
• include IHT
• apply to domestic offences where the proceeds of non-compliance are hidden offshore
• update the territory classification system to reflect the jurisdictions that adopt the new global standard of automatic tax information exchange
• include a new aggravated penalty of up to a further 50% for moving hidden funds to
circumvent international tax transparency agreements
The changes will come into effect from April 2016, except for the aggravated penalty which will come into effect following Royal Assent. (Finance Bill 2015)
2.156 Enhancing financial incentives for offshore intelligence – HMRC will review its
existing framework for offering financial incentives for information on offshore tax evaders,
in particular those who remain outside the reach of international efforts to achieve tax
1.243 The government will go further to ensure that multinational companies pay the right
amount of UK tax. Where multinationals use artificial arrangements to divert profits overseas
in order to avoid UK tax, the government will now act. Autumn Statement announces
the introduction of a new Diverted Profits Tax to counter the use of aggressive tax
planning to avoid paying tax in the UK. The Diverted Profits Tax will be applied at a rate of
25% from 1 April 2015.
 Diverted profits tax 
2014/5       £0
2015/16   +£25 million
2016/7     +£270
2017/8     +£360
2018/9     +£345
2019/20   +£355



Margaret Hodge: Gatwick runway appeal ‘is hypocritical when it avoids corporation tax’

Gatwick has been accused of “hypocrisy” for avoiding corporation tax while campaigning to build a new runway, allegedly for the benefit of the UK economy. Margaret Hodge, head of Parliament’s Public Accounts Committee, said the airport should pay its “fair share” if it wants its runway campaign to be credible. She also criticised Heathrow which has not paid corporation tax for several years. But she particularly criticised Gatwick. Its Guernsey-based parent company Ivy Mid Co LP has invested in a £437 million “Eurobond” which charges the airport 12% interest, thus avoiding tax. Gatwick says this sort of bond is often used by other infrastructure companies. Companies in the UK should pay 21% corporation tax on profits, but by spending  £1 billion on upgrading the airport, Gatwick has made no profit recently. Despite pre-tax loses in recent years, it has paid dividends to its overseas shareholders of £436 million. Heathrow has also avoided profits by investing in new buildings etc.  Mrs Hodge said the companies “made a fortune” from their UK activities, which relied on public services,  adding: “For them to pretend they are only in it for the benefit of the UK economy is a touch hypocritical.”



See earlier:

Gatwick airport announces first profits for years and returns for its investors … UK tax?

Gatwick airport has announced its results for the year to 31st March 2014. It has made a profit, for the first time in 4 years. Gatwick says its passenger numbers reached 35.9 million in 2013/14 (4.8% up on 2012/13). Their turnover is up 10.2% to £593.7 million and EBITDA is up 14.2% to £259.4 million, with a resulting profit of £57.5 million. This compared to a loss in the financial year ending 31 March 2013 of £29.1 million. The airport has spent a great deal improving the airport, and so made losses – and paid no tax to the UK government for years. Gatwick says their investments and more marketing is being effective in attracting more passengers. It now has more aircraft movements at peak times (a cause of the noise nuisance being caused from new flight paths). Gatwick now claims 20% are travelling on business, largely on EasyJet. The figure was 17.5% in 2012. Gatwick says it will now be paying dividends to its investors, though it has not in recent  years. It expects to pay £125m to investors in the current financial year,  £65m return in the 2015/16 financial year and £60m in 2016/17. [Maybe also pay some UK tax?  



Gatwick Airport paid no Corporation Tax in three years

Gatwick Airport has a £1.2 billion capital investment programme to improve its infrastructure and facilities. But it paid no corporation tax for three consecutive years despite making £638m in profit before tax. Gatwick tried to defend this position, saying: “Whilst year on year we have lessened our financial losses we have yet to make a profit after tax. As a result the airport has not paid corporation tax …Our current £1.2bn capital investment programme and existing asset base, together with the associated debt structure, result in depreciation and interest costs which reduce our operating profits to a loss before tax.”  In the 2012/13 year, Gatwick Airport made £227.1m profit before tax, a 2.5% increase, as it benefited from flights to new destinations in China, Russia, Indonesia, and Turkey. Despite this, it reported a net financial loss of £29.1m, citing asset depreciation and £226.7m of capital investment in the year. Corporation tax is only levied on a company’s net profit. In the UK the corporation tax rate is 23%. Under UK tax law, corporations can claim tax allowances on certain purchases or investments made on business assets. Campaign group UK Uncut estimates that clever accounting rules and complex tax avoidance schemes cost Britain £12bn annually.      

IAG is to pay its first ever dividend and British Airways is due to return to profit

The parent group that owns British Airways, IAG, have said that they are now making profits and will give their first dividend, probably in November.  This is their first dividend since they were created in 2011 through the merger of British Airways and Spain’s Iberia. IAG has also bought bmi and Spanish budget carrier Vueling since its formation. Analysts believe shareholders will receive their first payment at the end of IAG’s 2015 financial year at the latest, as the controversial turnaround at Iberia, which required the loss of some 4,500 jobs and sparked strikes and political outcry in Spain, has stemmed the losses. IAG posted a €96m pre-tax profit for the six months to June 30 this year, up from a €503m loss at the same time in 2013.  IAG says it is on track to improve operating profit this year by “at least” €500m, from €770m in 2013. British Airways’ CEO, Willie Walsh said in August that BA had now returned to profit for the first time since 2007, the start of the financial crisis. BA has barely paid any UK corporation tax for years – it may pay round £61 million for the 2013 financial year.






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Air Passenger Duty on economy flights for children under 12 cut from May 2015 (under 16s from May 2016)

In the Autumn Statement, the Chancellor has announced that APD on children’s flights will be scrapped for all economy class tickets (not first class).  From 1st May 2015, APD for children under 12 will be abolished and in May 2016, APD for all children under 16 is to go. This means the Treasury will miss out on £40 million in 2015/16 and £85 million in 2017/18 and £95 million in 2019/20.  The air travel industry had called for the change on the basis that it would make an annual holiday more affordable for hard pressed families. But in fact it is most likely to benefit airlines, and those on higher incomes taking several flights a year. The families struggling the most financially might at most take one European flight per year (saving £13 per child). Those able to afford long haul trips will save £71 per child – so more savings for the better off?  It airlines, airports and tour operators really wanted to help make an annual visit abroad affordable for more families, they could stop hiking their prices during the school holidays. The annual APD tax take will now be £3.2 billion in 2014/15 and still £3.2 billion in 2016/17 (while the 2011 Autumn statement estimated it would be £3.8 billion). 


APD on children’s economy flights to be scrapped

The Chancellor today announced that Air Passenger Duty on children’s flights is to be scrapped for all economy class tickets. From May 2015, APD for children under 12 will be abolished and in the following year, APD for all children under 16 is to go.

The air travel industry had called for the change on the basis that it would make an annual holiday more affordable for hard pressed families. But in fact it is most likely to benefit airlines, and those on higher incomes taking several flights a year.

David Cameron was recently reported as telling a meeting of Conservative MPs: “I really like this one. I have three children under 10 myself. [1]”

AEF Deputy Director Cait Hewitt said: “This change might help boost airlines’ profits, but as most flights are taken by people on higher incomes who make several foreign trips a year, it will do very little for hard pressed families. If airlines, airports and tour operators really wanted to help make an annual visit abroad affordable for more families, they could stop hiking their prices during the school holidays or invest in cheaper public transport to airports.”

The majority of people flying pay the lowest rate of air passenger duty, currently set at £13 for a return trip anywhere within 2,000 miles. There is no evidence that people are deterred from taking an annual holiday because of the cost of APD.  [There is a double charge if a return flight is taken within the UK, as both trips are taxed – rather than only the outward trip].

Aviation already gets away with significant tax exemptions. Travelling by air is comparable to driving in terms of CO2 emissions per mile, but aviation pays neither VAT nor fuel duty – a significant effective subsidy. Imposing these taxes at the same rate as for motorists would generate £10 billion for the Treasury in contrast to the £3 billion raised annually from APD. [2]



  1. http://www.express.co.uk/news/uk/538912/Government-abolish-flight-ticket-tax-under-12s
  2.  See our recent blog on APD for more information http://www.aef.org.uk/2014/11/06/air-passenger-duty-what-is-it-good


Extract from the Pre Budget Statement


Air Passenger Duty

1.223 The government will exempt children under 12 from Air Passenger Duty on
economy tickets with effect from 1 May 2015, and will extend the exemption to
include children under 16 from 1 March 2016. This will help to reduce the cost of holidays
for families by up to £71 per child.
1.224 This announcement builds on the changes announced at Budget 2014, which reduced the cost of flying to countries over 4,000 miles from London, and froze short-haul Air Passenger Duty. Together, these changes mean that 99% of passengers will see a freeze or cut in Air Passenger Duty in 2015-16. The government believes that these tax changes should be clear and visible to consumers. The government will therefore consult on an amendment to pricing regulations which would require airlines to separate out Air Passenger Duty from their other fees and charges.
Cost £ million  2014- 0,    2015 – 40,   2016 – £80 million
This on the day that the international conference on climate change opens in Peru !
According to the Airports Commission, the cost of building a new runway at Gatwick would increase the charges per passenger by £12-28 ….  including children.
Air Passenger Duty: exempting children Tax – Fiscal impact (ie money lost to Treasury):
2014 – 15     £0
2015 – 16   – £40 million
2016 – 17   – £80
2017 – 18   – £85
2018 – 19   – £90
2019 – 20    -£95
Transport taxes
2.114 Air Passenger Duty (APD) – Autumn Statement announces an exemption from
reduced rate APD from 1 May 2015 for children under 12 and from 1 March 2016 for children under 16. (Finance Bill 2015) (3)
2.115 Air Passenger Duty transparency – The government has reviewed how to improve
tax transparency in ticket prices and will consult on an amendment to the Air Services (Pricing) Regulations to require the display of APD.
Current Receipts   (OBR forecast)
Air passenger duty
2013-14    £3 billion       (£ 2.9  from the 2011 autumn statement)
2014-15   £3.2 billion    (£3.2 from 2011 autumn statement)
2015 -16   £3.1 billion   (£3.4  from 2011 autumn statement)
2016 -17   £3.2  billion   (£3.8  from 2011 autumn statement)
2017 – 18  £3.4 billion
2018 -19  £3.6 billion
2019 – 20   £3.8 billion

Air passenger duty abolished for children under 12

3.12.2014 (BBC)

Air passenger duty (APD) for children under the age of 12 on economy travel will be abolished from May 2015, Chancellor George Osborne has said in his Autumn Statement.

From the following year, APD for children under 16 will also be abolished, he said.

Critics said the move inflicted “a fatal blow” to the tax.

The measure follows an announcement in the Budget in March to scrap two APD tax bands.

Air passenger duty is charged on all passenger flights from UK airports. The rate of tax varies according to where the passenger is going, and the class of travel.

“This will save a family of four £26 on a flight to Europe, and £142 on one to the US,” the Treasury tweeted.

The move will cost the Treasury £40m in 2015-16. The cost will jump to £80m the following year, and rise to £95m in 2019-20.

‘Early stocking filler’

Easyjet said that it would “proactively refund” passengers who have already bought tickets to fly after April 2015.

The British Air Transport Association (BATA) said the government move was “an early stocking filler for families”, but it “presents significant practical difficulties” for airlines.

“The industry has always said that changes to APD should have at least a 12-month lead in time due to advance bookings,” said BATA chief executive Nathan Stower.

Mr Stower noted proposals to devolve APD powers to Scotland, and called for the tax to be put “out of its misery”.

Mark Littlewood, director general at the Institute of Economic Affairs, said the move “not only increases tax complexity, but inflicts a fatal blow to the justification for the tax existing at all”.



Later comment:
Dermot King, managing director of Butlins, said: “Unfortunately, the Government’s new measures on APD (air tax) have created an anomaly whereby families who go abroad get a new tax benefit but families who stay at home do not.

“Tourism, particularly domestic tourism, can help drive growth in the UK economy but only if it remains competitive. We urge the Government to reduce Vat on UK holidays to a fair level, so that we can offset the impact of a falling Euro and reduced APD charges.”




Industry lobby “A Fair Tax on Flying” new campaign to try to get APD reduced for children

Another year; another Autumn Statement by the Chancellor. This year’s will be on 3rd December. And so another push by the industry lobby “A Fair Tax on Flying” to try to get the rate of tax on air travel cut. In the UK, as in most countries across the world, air travel is under-taxed. For historical reason, air travel pays no tax on jet fuel. In Europe, air travel is zero-rated for VAT. APD is the only tax paid on UK air travel, and that is at the rate of just £13 per return flight per person, for any destination under 2,000 miles from Britain. APD nowhere makes up the deficit of tax lost. The net loss to the Treasury annually may be about £9 billion. The “A Fair Tax on Flying” lobby, whose members are entirely from the aviation and travel industries, now is having a go at getting the Chancellor to cut APD for any child under 12 years old. They claim this is an unfair tax on children, and on what they try to make out is the virtual necessity of foreign holidays by air for everyone. This is a self serving campaign by the lobby, to boost its trade. They gloss over the inconvenient fact that they will raise the price of air travel during school holidays and half terms etc, and charge far, far more per passenger than merely the £13 for a European trip.

Click here to view full story….

Chancellor cuts rate of Air Passenger Duty for long haul (over 4,000 miles) flights from 1st April 2015

March 19, 2014

In the Budget 2014 the Chancellor has announced that rates of Air Passenger Duty (APD) are to be reduced for flights of over 4000 miles from London, from April 2015. Rates of APD will rise by the rate of inflation (RPI) during 2014. After 1st April 2015, distance bands for all journeys longer than 2,000 miles will all be lumped together. While the rate of APD during 2014 (from 1st April 2014) is £13 for a return trip below 2,000 miles (anywhere in Europe), and the rate for journeys of 2,000 to 4,000 miles in length is £69 – the rates from April 2015 will be £13 for the short flights, and £71 for all other distances. The rates of APD in 2015 for premium classes will be £26 and £142. Commenting on this retrograde move by the Chancellor, the Aviation Environment Foundation said it is a backward step environmentally and economically. Aviation is already massively under-taxed compared with the £10 billion that would be raised per annum if aviation wasn’t exempted from fuel taxes and VAT. APD was a means of redressing this problem but any cut means that taxes will have to be raised elsewhere to balance government spending. Long-haul flights contribute more greenhouse gases in absolute terms than shorter flights. It is therefore right that the duty is proportional to the distance flown and the associated emissions. Eliminating bands C and D breaks the link between environmental impacts and tax and breaches the principle of fairness.

Click here to view full story…


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Unknown cost to taxpayer of tunnelling M25 could equal several years total flood defence spending

If Heathrow airport was allowed to build its new north west runway, documents prepared for the Airports Commission by Jacobs indicate the cost of the works to tunnel the M25 (at its widest in that part of its circular route) could cost between £1.35bn to £3.22bn.  How much Heathrow would pay is not yet clear. The cost would depend on the length of motorway affected and the cost per kilometre.  Recent work to widen the M25 cost £3.4 billion for 35 kilometres. The Commission thinks that figure is too high, though it included 30 years-worth of maintenance (costing 20% of the total). The cost of the work should perhaps be around £50 million per kilometre, or more. The Commission says: “We note that the airport operator has suggested funding 50% of these works, with the remaining 50% borne by the public sector. The Airports Commission has not taken a view as to the split of funding between private and public sources and believes that this would be a matter for negotiation should the scheme be taken forward.” By contrast the Government spent £2.3 billion on floor prevention for the 4 years 2011 to 2015.


By contrast, the Telegraph states (2.12.2014  link ) that:

“Plans for a new settlement in Bicester, Oxfordshire, containing up to 13,000 homes, will be funded with nearly £100 million of public spending and loans.”

and the Standard said (13.5.2014   link )

“Heathrow said…..with the Government paying £1.2 billion towards the M25 tunnel and  motorway widening.”


By contrast the Government expects to pay about £2.3 billion on flood defences over the period 2011 to 2015.   See  http://www.parliament.uk/briefing-papers/sn05755.pdf  (Page 4)  which is around £600 million per year over the 4 years.



“Some 5.2 million properties are at risk of flooding in England. Annual flood damage costs are in the region of £1.1 billion. These costs could rise to as much as £27 billion by 2080. It has been estimated that maintaining existing levels of flood defence would require flood defence spending to increase to over £1 billion per year by 2035.”  Link  – Commons Library Standard Note.


“The Treasury is today revealing the projects that will receive a share of the £2.3 billion already earmarked for capital spending on flood defences over the next six years to improve protection for 300,000 homes.”   2.12.2014  (Friends of the Earth  link  )



“Under the Heathrow plan, a 600-metre, 14-lane tunnel would be built to replace an existing section of the M25, passing under the runway. The taxpayer would contribute £1.2bn towards improved transport links.”   13.5.2014  Guardian 


Appraisal Framework Module 4.   Surface Access: Heathrow Airport North West Runway

Heathrow Airport north west runway

Page 69

5.9 Road Scheme costs
5.9.1 Out-turn costs of recent road widening schemes on the M25 were used as a basis for estimating the total cost associated with providing the capacity enhancements summarised above. These total estimates include pure engineering costs, land costs, environmental mitigation costs and the consequential costs of the schemes themselves.

5.9.2 It has been reported that the recently-constructed M25 junctions 16-23 (M40-A1 (M)) widening programme cost £3.4bn for the 35km stretch. The Government’s Public Accounts Committee have been critical of these costs and have suggested that improved management could have resulted in a total spend of £2.4bn. Furthermore, the total costs included construction and 30 years-worth of maintenance. Assuming that the maintenance costs accounted for 20% of the total suggests a newbuild efficient cost of £1.92bn, equivalent to £55m/km.

5.9.3 It has also been reported that the recently-constructed M25 junctions 27-30 (M11-A13) widening programme through rural Essex cost £360m for the 27km stretch. This equates to a total spend per km of £13m.

5.9.4 Taking a weighted average of these costs per km (most of the widening due to the new North West Runway at Heathrow will be more similar to the junctions 16-23 programme than the junctions 27-30 programme), we have assumed that the Heathrow road widening costs will vary between £35m-£50m/km. A similar approach and a value of £50m per km was adopted during the Phase 1 analysis.

5.9.5 Table 16 overleaf summarises the estimated costs for the Extended Baseline with SRA surface access proposal for Heathrow.

5.9.6 Taking the unit road widening costs described above, we estimate that the strategic highway cost of the new North West Runway at Heathrow in the optimal surface access proposal will vary between £0.94bn and £2.23bn. This variation is due to two reasons as follows:

 The variation of the length of road to be widened depending on whether the criteria to widen is 100% capacity or 85% capacity; and
 The variation in unit widening costs.

5.9.7 These costs exclude risk and optimism bias. With an optimism bias of 44%, the Extended Baseline road surface package costs range from £1.35bn to £3.22bn.

5.9.8 Asset replacement and operational expenditure (OPEX) were not considered during this study, but analysis of these costs was undertaken in a different worksteam and are detailed in a separate report,  entitled ‘Deliverable 13.2: Cost calculations’.



“For the purposes of this analysis, the full costs of the M25 tunnelling works have been categorised as surface access improvements, rather than “scheme capital expenditure” works which ordinarily include engineering projects within the boundary. We note that the airport operator has suggested funding 50% of these works, with the remaining 50% borne by the public sector. The Airports Commission has not taken a view as tot he split of funding between private and public sources and believes that this would be a matter for negotiation should the scheme be taken forward.”

P 48. Section H2 of

Appraisal Framework Module 13. Cost and Commercial Viability: Cost and Revenue Identification Heathrow Airport North West Runway.






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Extent to which “Back Heathrow” is funded by Heathrow, and is not a true community campaign, revealed

“Back Heathrow” is an industry funded pressure group, the aim of which is to drum up support for a 3rd Heathrow runway. It was set up with at least £100,000 from Heathrow airport – maybe more.  Its website just says  that it had money from Heathrow to set up. Matt Gorman from Heathrow admitted at a public meeting in Putney on 27th November than Heathrow continues to fund it, but nobody will give any figures. “Back Heathrow” is a classic astroturfing campaign (ie. making out that it is community led, when it is not). Its co-ordinator is Rob Gray, was previously a director of the Aviation Foundation, another lobbying group established by the industry. Other staff working for Back Heathrow are current or former Heathrow employees. They have recently distributed hundreds of thousands of glossy newspapers to households across west London, with no mention anywhere on these that they are paid for (at least in part) by Heathrow. They try to give the impression of being independent information.  Back Heathrow claim to have 50,000 people signed up, but this is largely due to scare tactics, implying Heathrow workers  will lose their jobs without a 3rd runway.  This has now been revealed by the Sunday Times


‘Scare tactics’ land Heathrow in trouble

30.11.2014  (Sunday Times)

….. extracts ………..

full article at  http://www.thesundaytimes.co.uk/sto/news/uk_news/londonairports/article1489951.ece
Heathrow came under fire from senior politicians and environmentalists this weekend after bankrolling a community campaign group that claims to represent the “silent majority” who want a third runway at the airport.

…………….. Designed like a tabloid newspaper, the leaflets include stark warnings that “114,000 jobs are at risk if Heathrow shuts down”. Three of the four newsletters delivered during the past year fail to disclose that Back Heathrow is funded by the airport.

….. “This is straight out of Big Tobacco and anti-climate-change-type strategies where you simply scaremonger through an ‘astroturf’ group that you set up and fund at arm’s length,” said Jeff Gazzard, a spokesman for the Aviation Environment Federation (AEF).

………… The most recent newsletter, which was delivered to up to 750,000 homes, claimed more than 50,000 residents were supporting Back Heathrow’s campaign……….. [Rob Gray]  set up Back Heathrow as a limited company in July 2013 with Nathan Fletcher, a senior PR officer at the airport.  Fletcher, who is now Heathrow’s head of news, resigned as a director in April.

Michael Appleton, Back Heathrow’s communications manager, is a former communications officer at the airport.

……………..the group had also received a donation from Heathrow Hub, a group that has submitted a rival plan to expand the airport, as well as smaller donations from residents and businesses.

……………. Asked by The Sunday Times after the [Putney] meeting how much funding the airport had provided, [Matt Gorman] replied: “I don’t know exactly.” He then refused to answer further questions.


Full article at




Back Heathrow’s website is at  http://www.backheathrow.org/

And their “About us” page is at http://www.backheathrow.org/about_us

“Back Heathrow” says:

“Local people are supporting growth at Heathrow in their thousands.

“Already 50,000 people who live near the UK’s only hub airport have signed up to Back Heathrow, one of the country’s fastest-growing campaigns.

Back Heathrow wants to safeguard local jobs and secure a bright future for Heathrow, a major community asset. This means campaigning for the airport to grow, and standing against those who would let it suffer long-term decline or worse.

Thousands of local residents are speaking up for our local area by taking this golden opportunity to grow and prosper alongside a successful Heathrow.”

But the reality is, there is absolutely NO prospect of Heathrow closing. Or of losing any jobs (except through the staff cuts the airport and the airlines etc make, in order to make cost savings).

This has been a scare tactic using by Back Heathrow, from the start, to try to gain support. And to try to frighten people who work at Heathrow into believing their jobs could be at risk.


From Zac Goldsmith’s blog:


The “Back Heathrow” survey

An organisation called ‘Back Heathrow’, which portrays itself as a ‘community group’ but which is heavily funded by Heathrow Ltd, has just sent out a new survey to residents.  See: LINK

I have been asked if I think it is worth responding to the survey, and having discussed the issue with the Richmond Heathrow Campaign, and HACAN, I feel very strongly that it is not.

The reason, simply, is that it is extraordinarily disingenuous. The questions are crafted in such a way as to make it impossible for residents to express what I know from our referendum and countless opinion polls to be the majority view among people living in Heathrow’s shadow.

In addition, the choice it presents is a bogus one – between expanding Heathrow and closing it.

A few weeks ago, the new CEO of Heathrow admitted in Parliament that it was not true to suggest Heathrow would decline if it is denied an extra runway. The fact that his company is pouring vast sums of money into an outfit that continues to say the opposite is a poor reflection on Heathrow and a disservice to residents.

Despite the scaremongering by Back Heathrow, the real choice is not between closing down Heathrow and expanding it. The choice is between pouring taxpayer’s money into creating a vast foreign-owned monopoly on one edge of our great city – or investing in a network and enabling London’s main airports to compete properly.

This shocking Heathrow survey is part of a crude propaganda exercise, and I have no intention of contributing to it. I have instead placed it in my recycling bin and hope others do the same.

On September 19th, 2014,


“Back Heathrow” campaign formed, by the airport, to demonstrate – and boost – local support for a 3rd runway

“Back Heathrow” is a lobby group that has recently been formed, by supporters of a third Heathrow runway.  Its aim is to get people who favour Heathrow expansion to declare their support, and “give a voice to the hundreds of thousands of residents who support Heathrow.” It has been set up with funding from the airport, and 400,000 local tabloid-style propaganda newspapers have been delivered to local communities surrounding the airport. The text of the paper is shown below.  It pushes the scaremongering idea that there is a risk of Heathrow shutting down, causing the loss of “114,000 jobs” and that “200 of the UK’s biggest companies may move from Heathrow.” In reality, there is little prospect of Heathrow closing – and this is just a tactic to get publicity and worry people. Back Heathrow have written to local councillors, giving them the misleading impressing that it is a “new community campaign”.  It isn’t.  It is organised by the industry, not by the community.  Hacan said the formation of “Back Heathrow”  was “the actions of a desperate organisation, not confident of the arguments it is making.”






Images of an earlier edition of the Back Heathrow tabloid propaganda newspaper by Back Heathrow are at




The survey referred to came out with very different results to the wider surveys done by the affected local authorities.  See   http://www.airportwatch.org.uk/?p=16308


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Low cost airlines may increasingly challenge older airlines on some long-haul routes

For years there have been plans by the low cost airlines to get into long haul routes. An interesting article in the Economist looks at various aspects, and how this may be starting to become more likely. In the past, the economics did not work. Newer planes using slightly less fuel per passenger, and able to travel longer distances, may make this possible, on busy routes like trans-Atlantic.  The low cost airlines need to use their planes for more hours per day than legacy airlines have, and this means time differences and airports’ night curfews can make it harder to turn planes around quickly. If a plane has to stay away from its home base overnight, that means paying for crews’ accommodation costs.  The older airlines can partly fill their long haul planes with short haul feeder traffic. But that is becoming less of a benefit as increasingly more passengers “self-connect” by booking each leg of a trip separately online. The full-service airlines are also ordering newer, more fuel efficient planes, but they have the burden, compared to new low cost airlines, of high costs of legacy pension schemes and labour agreements, making their fares inevitable higher.  ie. More difficulties in forecasting future UK airport demand.


Low-cost airlines – Making Laker’s dream come true

Low-cost airlines have revolutionised short-haul flying. Now, after several failed attempts, they are poised to do the same on longer routes

Nov 29th 2014 (Economist)

 full article here 

…. Ryanair of Ireland is now the world’s biggest international airline by passenger numbers, carrying 81m people last year. Budget airlines round the world, from Southwest in the United States to AirAsia in Malaysia, have succeeded where Laker failed by sticking to shorter routes.

Subsequent attempts to apply the low-cost model to long-haul routes have flopped as badly as Laker. Oasis Hong Kong Airlines went into liquidation in 2008, a year after starting cheap long-haul flights to London and Vancouver. More recently, AirAsia’s sister airline for longer flights, AirAsia X, abandoned its attempts to run budget flights to Europe. The incumbent full-service airlines have lost much of their short-haul business (flights of up to three hours or so) to the low-cost carriers, but they continue to dominate the skies on the longest routes.

However, a number of airlines in Asia, AirAsia X among them, have continued to test the limits of how far the no-frills model will travel.

Scoot, an affiliate of Singapore Airlines, offers cut-price direct flights between Singapore and Tianjin in northern China that take around six hours, more or less the boundary between medium- and long-haul (there is no official definition).

Now, a fresh attempt to undercut the incumbents on long-haul routes is beginning. Norwegian Air Shuttle, a low-cost carrier that has been expanding rapidly across Europe, has begun flying across the Atlantic and to Thailand.

Next March Wow Air, an Icelandic carrier, will start flights on routes such as Boston to London, via Reykjavik, with introductory prices as low as $99 one way.

In Laker’s day, the fuel burned by long-haul planes made up a large proportion of the cost of operating the flights. That made it hard for budget carriers to find enough cost savings elsewhere to cut prices sufficiently to tempt flyers to switch from carriers offering more comforts.

This is now changing, with the launches of some new and far more fuel-efficient planes: Boeing’s 787 Dreamliner, already in the air, Airbus’s A350, which will start flying within weeks, and a revamped version of Airbus’s A330, coming in 2019.

Ryanair’s boss, Michael O’Leary, recently reiterated a promise that he would eventually sell transatlantic flights from as little as €10 ($13) one-way and with average return fares of around €200-300.

The full-service airlines will also be ordering these new planes, but their cost disadvantage compared with the nimble budget carriers (because of such things as their legacy pension schemes and labour agreements) will become more stark.

In recent years mergers and alliances between full-service airlines have made some of the most popular long-haul routes, such as across the Atlantic, a cosy oligopoly. The big legacy carriers have begun to improve their chronically dismal financial performance. Now, not only do they face a rising threat on intercontinental routes from the three Gulf “superconnector” airlines—Emirates, Etihad and Qatar—but soon they may suffer the same pitiless competition from the likes of Ryanair and Norwegian that they get on shorter routes.

This is why Norwegian is having such trouble getting permission to expand its transatlantic flights through a subsidiary registered in Ireland. For months, regulators in America have held up Norwegian’s permits on spurious safety grounds, under pressure from the country’s big airlines and pilots’ unions. European Union officials pressed the Irish subsidiary’s case at a meeting with American counterparts on November 25th.

Norwegian’s boss, Bjorn Kjos, has been able to apply to his long-haul venture many of the cost-saving tricks that have helped his short-haul business grow so quickly. Norwegian crams more seats into its 787s: 291, compared with around 250 in more common configurations. It works them hard: by scheduling back-to-back flights across the Atlantic and to Bangkok it keeps them flying 17-18 hours a day compared with a maximum of 15 hours at many full-service rivals. Where possible, as it does in short-haul, Norwegian flies to secondary airports with lower fees.

What is helping Norwegian establish a foothold in the transatlantic market is that, unlike some full-service airlines that are still flying older planes, he already has a fleet of seven 787s. Mr Kjos says he can achieve an operating cost per seat, per kilometre travelled, that is 20% cheaper than they can. That goes a long way to selling tickets which he claims are around 40% cheaper than the competition.

However, there are some things that budget airlines find harder in long-haul than on short routes. The combination of long routes, time differences and airports’ night curfews can make it harder to turn planes around quickly. Overnight layovers mean paying for crews’ bed and board.

Selling enough tickets to fill a medium-sized “widebody” plane like the 787 several times a week, and thus to run a reasonably frequent service, is a lot harder than filling the smaller “narrowbodies” the budget airlines typically use on short routes.

The older carriers still have enough of a short-haul business for this to feed connecting passengers on to long-haul flights. Norwegian can do some of this too, but the problem may be going away, as ever more passengers “self-connect” by booking each leg of a trip separately online. Some airports, such as Malpensa in Milan and Gatwick in London, have begun to make this easier, by arranging for connecting passengers’ bags to be transferred from one flight to another, even when they are switching to a different airline.

In all there are a number of reasons why passengers should be able to look forward to flying longer for less. However, Ryanair’s Mr O’Leary is uncharacteristically cautious about whether long-haul, low-cost’s moment has finally arrived. For a start, he thinks his Viking counterpart, Mr Kjos, has erred in not offering business-class seats on his longer flights. The full-service airlines make most of their profits on business seats, and Mr O’Leary thinks even ruthless cost-cutters like his own airline will need to offer some in order to make long-haul routes pay.

Furthermore, says Mr O’Leary, business travellers expect flexibility, and will want one or two flights a day to the main destinations. So, he reckons, a fleet of 30-50 of the new, efficient planes will be needed. Boeing and Airbus are working flat out and have a long waiting list. Mr O’Leary thinks it may be four to five years before he has received enough of the new planes to launch his attack on the long-haul market.

So the older, high-cost airlines have a little breathing-room, for now. But in three years or so the two big manufacturers will start delivering a further set of highly efficient planes: revamped versions of Boeing’s 737 and Airbus’s A320, the narrowbody craft that the low-cost airlines already use on their short routes.

What is different is that each will come with long-range versions capable of crossing the Atlantic and, in Boeing’s case, flying from London to Delhi. These smaller planes will be far easier to fill and much cheaper to run. When the skies are filled with swarms of them, fares should hit rock-bottom and Laker’s dream may finally come true.







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