Boris objects to proposed cap by EU on state aid to airports – his estuary schemes would need minimum £20-30 billion from government
London Mayor Boris Johnson said EU proposals barring the use of state aid for the construction of airports serving more than 5 million people a year would undermine plans to grow the UK’s aviation capacity. Government subsidies for large airport projects, currently assessed on a case-by-case basis, would be outlawed starting in early 2014, whether for new infrastructure or upgrades of existing facilities, according to the draft EU guidance. In his letter to the Competition Commissioner, Joaquin Almunia, Boris wrote that there are “unintended and potentially catastrophic consequences” in “tying the hands” of member states, and he said the measures would limit London’s ability to expand vital links to emerging markets in Asia and South America [which, of course, is nonsense]. Boris said the new EU rules would limit London to expanding terminal capacity at existing airports with less ambitious, and more easily financed, plans than his over-ambitious Thames estuary schemes. TfL said in its submission that a new hub as envisaged by Boris requires an estimated £20 – 30 billion pounds of state investment. The EU consultation on state aid to airports and airlines has just ended, and the EU will now start to analyze feedback received.
London Mayor Slams EU Aid-Cap Threat to New London Airport
By Gaspard Sebag & Kari Lundgren
Sept 26, 2013 (Bloomberg)
London Mayor Boris Johnson said European Union proposals barring the use of state aid for the construction of airports serving more than 5 million people a year would undermine plans to grow the U.K.’s aviation capacity.
“We will of course carefully assess all the arguments raised, including in Mr. Johnson’s letter,” he said.
The Commission said on publishing draft guidelines in July that airports with annual passenger numbers above 5 million are “usually profitable and are able to cover all of their costs.”
Transport for London, the body that implement’s the mayor’s transport strategy, said in a submission accompanying his letter that while incremental investment can usually be privately financed, the delivery of larger one-off developments in the order of tens of billions of pounds would still require aid.
Such projects would include the expansion or replacement of a major international airport, according to the document.
Johnson has said Heathrow, Europe’s busiest hub, should be replaced by one of two undeveloped sites in the Thames estuary or by an expanded Stansted airport, 35 miles north of London.
The proposals, along with those of Heathrow, Gatwick, Stansted and other airports and stakeholders, were submitted to the state-appointed Davies Commission on U.K. airport capacity earlier this year, with a final recommendation due in 2015.
“If the changes that the EC are proposing were adopted, they would seriously damage the ability of the commission to consider all options on a level playing field,” Johnson said.
TfL said in its submission that a new hub as envisaged by Johnson requires an estimated 20 billion pounds ($32 billion) of investment. link Heathrow has also described as “challenging” the likelihood of raising private funds for a more modest proposal for new runways costing from 14 billion pounds, it added.
A four-runway hub could quadruple the number of cities in China and South America served from London and add 50 percent more in the U.S., while restoring routes to U.K. locations now served only from Amsterdam Schiphol, Johnson said in July.A lack of airport infrastructure across Europe could cap the number of flights to 14 million annually by 2035, 2 million fewer than demand forecasts suggest will be needed, Tfl said.
Consultation on rules for European Commission state aid to airports and airlines
Date added: September 18, 2013
Under the European Commission, state aid is granted to various sectors of the economy. However, a key issue is the impact it has on distorting the market, and giving an unfair advantage to those companies or organisations receiving it. Airports and airlines are one sector that receives large amounts of state aid through the EC. The Commission’s DG Competition is tasked with overseeing state aid. There have been earlier sets of guidelines on state aid to airports and airlines, but there is a current consultation – due to end on 25th September (which may be extended). The exact amount of state aid given to the aviation sector is somewhat shady, but is at least €3 billion, for those subsidies that are fully notified.There have been widely publicised cases, such as that of Ryanair at Charleroi airport. Transport & Environment have produced an easy-to-read briefing on the state aid situation, and people are urged to respond to the consultation. The state aid gives the aviation industry unmerited subsidy, and helps to encourage very high carbon travel.
Patrick McLoughlin says taxpayer will not pay £30 billion for a new hub airport
February 12, 2013 Speaking at the Commons Transport Select Committee on 11th February, the Transport Secretary, Patrick McLoughlin said that the estimates for a new hub airport for the UK were up to £80 million. A report by Oxera reported recently that a new 4-runway hub airport could need up to £30bn of public subsidy, mainly to cover road and rail links. Mr McLoughlin called these “very substantial figures” and said “We do not generally subsidise airports . . . I am not looking for ways of spending extra money on something provided by the private sector”. Airports in the past have had public subsidies, through road building paid for by the public purse, that benefits the airport. He highlighted how much of the UK’s aviation infrastructure was privately funded. Boris gave evidence, at the same session, promoting his view that there was a need for a new hub, other than Heathrow, and this should be at one of two sites in the Thames Estuary, or at Stansted. Click here to view full story…
Boris targets Arab states in bid to raise £80bn for a new airport
February 11, 2013 Boris Johnson plans to take a week-long tour of the Gulf states in mid-April, to drum up financial backing for his plans for a new international airport. He intends to visit Dubai, Qatar and Kuwait to raise up to £80 billion. He still wants a Thames estuary mega-hub airport, but his senior aides consider expansion of Stansted a more realistic option. Boris says a new hub airport, wherever it is, could be delivered with private finance and operated as a viable commercial business. His £80 million estimate covers the cost of terminals, runways, ancillary facilities and rail and road access. He was inspired by Hyderabad’s “aerotropolis”,30% funded by money from Gulf states. Mr Johnson also announced a team of experts including British-Iraqi architect Zaha Hadid, designer of the Olympic aquatics centre,to draw up plans for a hub east of London. Other advisers include Pascall+Watson, which designed Heathrow Terminal 5 and the redevelopment of St Pancras station, and Atkins, which worked on the Olympics. Click here to view full story…
New research suggests a hub airport (eg. Thames estuary) for London cannot be built without public subsidy
January 25, 2013 A report by the economic consultants, Oxera, commissioned by the Commons Transport Committee has shown that a massive hub airport in the Thames estuary would only be viable if it had a subsidy, from UK taxpayers, of some £10 – 30 billion (in today’s money). Oxera looked at various scenarios, and found that otherwise such an airport would not be viable or provide the sorts of returns that a private investor would require. Depending on the airport’s design, it could cost £20 – £50 billion. The potential impact on Heathrow and other airports – and necessary compensation – were had to be taken into account, and would have an impact on a new hub airport’s commercial viability. Transport committee inquiry chairman Louise Ellman said: “The results suggest a new airport would require public investment and have considerable impact on Heathrow and other London airports. The research findings also shed significant light on the scale of investment required to deliver essential related surface transport links for any new airport. “We hope this work delivers something new to a crucial debate.” Click here to view full story…