The world’s emerging economies are regularly opening new airports and expanding existing ones – is the dithering UK in danger of being left behind? Martin Cowen reports
Analysing airport infrastructure from a global perspective covers many disciplines – economic growth, public-private sector, and the built and natural environments for starters.
Many countries have a more proactive approach than the UK and, as the 21st century develops, there is a danger that the UK could be left behind. Two opposing aphorisms sum up the different approaches to airport development: “Build it and they will come,” and: “You can bring a horse to water but you can’t make it drink”.
One example of the latter is Ciudad Real Central airport, also known during its short time as Don Quixote or South Madrid airport. This was built during the mid-to-late 2000s, before credit became crunched, at a cost of more than €1.1 billion. It opened in 2009 and closed three years later with debts of some €300 million.
The airport was part of an ambitious project which included a nearby theme park and a new rail link between the airport and the Madrid-Seville high-speed train line. The runway was built to take the A380. Cargo facilities were of international scale.
Ryanair, Vueling and Air Berlin tried and failed to operate commercially viable services to the airport. Ryanair brought in 22,000 passengers during its six-month deal with the airport. The terminal was built to handle 10 million passengers a year.
And it gets worse. The airport was put up for sale by auction at the end of 2013 with a €100 million reserve. It didn’t sell. Latest news from Spain is that the administrators would take €80 million for it.
INCENTIVES
Clearly, this shows that building an airport is no guarantee that the traffic will follow. But that traffic can be incentivised: Ryanair established itself as Europe’s biggest airline by using local, national and pan- European incentives to fly to secondary airports, breathing life into many small regional gateways around Europe.
Ryanair reportedly sailed close to wind with some of its commercial deals with airport operators, while state aid is another controversy that will not go away. State aid for existing airports within the European Union is perfectly legal within certain parameters. New guidelines were released this March that allow state aid to help develop new airports and provide financial support to existing ones.
The new customer-friendly and business-travel compliant Ryanair has another relevant observation on airport development: during the press conference announcing its plans to sell its seats through Amadeus (following on from a similar deal with Travelport earlier this year), CEO Michael O’Leary pointed out that the airline was increasing its presence at primary airports as part of its attempt to get more business travel bookings via its new global distribution system partners.
But Ryanair is able to get access to the primary airports, he said, because full-service carriers are cutting back capacity at big European airports as they find it hard to make money from their short-haul intra-European operations. He said this is particularly true in Germany where Ryanair is looking to grow.
However, airport development can be a sore subject in Germany: in 1996, five years after the idea was first raised, it was announced that a new airport for Berlin – Berlin Brandenburg – would be built on a site next to the existing Schonefeld airport. The new complex would incorporate Schonefeld within its boundaries.
Berlin’s historic Tempelhof was closed in 2008, and Berlin’s third airport, Tegel, was to close when Brandenburg opened, leaving Berlin with a single airport. It took 10 years for the various legal hoops to be leapt through before construction work could begin and ground was broken in September 2006.
At the time, authorities said that Berlin’s new airport would open in June 2010. It didn’t, and still hasn’t – there is still no date on the calendar and earlier this year a leading German politician, Martin Burkert, said the airport wouldn’t open until 2017 at the earliest.
NEW WORLD ORDER
Contrast these examples from established European economies with what is happening outside of Europe, where scenarios are very different indeed. The situation in China and the Middle East is a sign of how the world is changing, and how these economies are embracing airport development as more than just a facilitator of growth – airports are part of the growth in their own right.
All discussions about economic powerhouses default to China, and airport development is no exception. In research released earlier this year by the Sydney-based Centre for Aviation (CAPA), the statistics for China are breathtaking. Apart from there being US$45 billion (£28 billion) worth of airport development on an ongoing basis, by the end of 2015 there will be a further 69 new regional airports operational. At the end of last year there were 193 civilian airports in China, 24 of which handled more than 10 million passengers per annum.
Beijing Capital International is now the second busiest airport in the world, but is operating at close to full capacity. So in 2013 the Chinese authorities decided to build another airport in Beijing. Known as Beijing Daxing, it will have eight runways and is scheduled to open in 2018.
The Chinese government’s commitment to its airport infrastructure is not in doubt, although western operators might look at the financials and despair. CAPA claims that 90 per cent of regional airports in China are running at a loss. “While it might be in China’s interests to attempt to improve the economy in its regions by constructing these airports, there is the very real question of whether they will ever operate at a profit, and as a consequence how long they can operate at a loss if the national economy should implode,” CAPA warned.
This public sector support of an airport infrastructure put the European regulations on state-aid into perspective. Similarly, a different economic model applies in the Middle East, where the Gulf state airports, like their airlines, seem to have unlimited funds for expansion.
In September, Dubai announced plans to spend US$32 billion extending facilities at Al Maktoum International airport – which only opened last year. Ultimately, it will be capable of handling 200 million passengers a year and will become the hub for Dubai’s flag carrier, Emirates. Within six to eight years the development will have room for more than 100 Airbus A380s at any one time. The scale of this project matches the ambitions of Dubai, and there is a level of government backing for the project which matches the Chinese.
Elsewhere in the region, Qatar saw the opening of Hamad International earlier this year. The airport, which will be the home for Qatar Airways, will see its capacity increased until it is capable of handling up to 90 million passengers a year.
As mentioned at the outset, while the UK dithers over the addition of a single runway, the world’s emerging economies are regularly opening new airports and expanding existing ones. The world’s economic power is moving east and airport trends reflect that.
The UK is exposed to this paradigm shift in many ways. Having a new runway is unlikely to stem the tide but it would give the UK a fighting chance to remain competitive over the next couple of decades
DISMAL OUTLOOK FOR BRITAIN
The snail-paced progression of a decision about UK airport capacity continues. The £100 billion-pound Boris Island in the Thames estuary is now not an option. Attention is currently focused on three alternatives: a second runway at Gatwick; and either a third runway at Heathrow or extending one of its existing runways so it can operate as two independent runways.
But hold on: Boris Island could be back on the agenda. Its eponymous proponent, London mayor Boris Johnson, has promised that he will campaign for the airport if he gets elected in next year’s General Election. He is standing in the safe Conservative seat of Uxbridge and South Ruislip, which borders the Hayes and Harlington constituency that covers Heathrow.
The UK general election is too close to call at the moment – with many pundits talking up the likelihood of no overall majority. This raises the prospect of another five years of coalition with the Lib Dems, who are opposed to all expansion options. Whatever recommendation Sir Howard Davies’ Airports Commission makes, chances are it will face some sort of political upheaval, at local, national or even pan- European level, if not all.
But don’t forget, the commission isn’t going to make the decision. Its purpose in life is to oversee the process by which a recommendation will be made. Whichever government (or coalition) is in charge can choose to accept or ignore that recommendation.
So when will this recommendation, for what it’s worth, be made? The commission began its 12-week public consultation this week, which will run until February 3, with the release of 40 documents looking at all aspects of the three short-listed options.
Once this public consultation period has ended, how long does the commission have to come up with the recommendation? Luckily here the government is crystal clear. “Consultation responses should usually be published within 12 weeks of the consultation closing,” it says.
But: “Where departments do not publish a response within 12 weeks, they should provide a brief statement on why they have not done so,” the government says. So if it’s going to take more than 12 weeks to respond to the consultation, that’s okay – you just have to let people know.
After the end of this consulation period, the commission members will get their heads down for a couple of months as they compile their final report and recommendation, which is due to be published in June, shortly after the general election in May.
Despite the urging of the travel industry, the Conservative and Labour parties have yet to commit to carrying out the commission’s recommendations. Aviation minister Robert Goodwill said earlier this week that there will be “no blank cheque” issued for whatever scheme the commission finally proposes but he did promise that they would use the report as the “basis to make the decision”.
But, of course, all of this depends on the result of the general election and that is very much up in the air.