Long-awaited moves to expand airport capacity in London are gaining traction, but familiar debates between airlines and airports on expansion remain. Graham Dunn reports
Following the UK Government’s approval of expansion plans at London City, Gatwick and Luton airports, together with the continued steps towards a third runway at Heathrow, growth is on the agenda for the UK capital.
There is, though, debate about how best to deliver this growth, and a familiar tension between airlines and airports on the cost of such expansion.
“We always want to make sure our customers feel there is value for money,” said Heathrow Airport Chief Executive Thomas Woldbye at the Airlines 25 event in London in November.
“We are never going to be the cheapest airport in the world. Operating what is, virtually, a big airport in central London is just very expensive. Building costs are twice as high, and we build a lot, so it is an expensive place. That said we want our airlines to appreciate there is value for money. And if you look at demand, if there wasn’t value for money, why would we have a long list of airlines that want to get into the airport and pay for slots?”
Woldbye suggests the focus on talks with airlines should be on how both airports and carriers can become more efficient. “The third runway is an excellent opportunity to do that because it provides growth and it is easier to make an airport more efficient when it is growing,” he said.
The UK Government’s ongoing review for the third runway at the hub will now be based on Heathrow Airport’s proposals. This features a longer 3,500m runway than the competing Arora proposal, which included a shorter runway.
Competitive hub
Speaking earlier at the same event Sean Doyle, Chief Executive of Heathrow Airport’s biggest operator British Airways, said: “We need to make sure we are competitive and we need to build this runway as quickly and efficiently as we can.”
As part of IAG, Doyle flagged that the group allocates capital on the basis of performance and that if Heathrow becomes “uncompetitive”, IAG has opportunities at Barcelona, Dublin and Madrid to deploy capacity.
“That is why for everyone’s sake a competitive Heathrow is very important,” Doyle added. “We’ve lot of markets that we could fly to, that we don’t fly to today. And every business needs the lever of growth. I don’t want to have a situation where British Airways is constrained for growth at a hub, and our hub actually becomes less relevant in terms of the O&D [markets] it serves compared to other hubs.”
Given the many years of talk of a third runway at Heathrow, Woldbye was asked if he would bet on it happening. “I’m not a betting man,” he said, “but I’m intent on making it happen.”
UK low-cost carrier easyJet, which marked its 30th anniversary in November, again indicated an interest in serving Heathrow at the right price and if slots were available, something Woldbye suggested could be possible with the airport’s expansion.
“If we look at the third runway in the future, there is no reason we shouldn’t have low-cost airlines so we also cater for that part of the sector,” he said. “Our job is not to tell people how to fly; our job is to have the widest range of products on the shelves.”
Corneel Koster, Chief Operating Officer at another Heathrow operator, Virgin Atlantic, also stressed the need for “affordable expansion” at the airport. “It is important that expansion unlocks value and that it offers additional growth. But it cannot just come at all costs,” said Koster, who succeeds Shai Weiss as the airline’s chief executive next year. “It needs to also have a level playing field, where home-based carriers get similar terminal equivalence and opportunities to serve and delight their customers.”
Gatwick development
Koster also backed the expansion at Gatwick, which in September secured government approval to bring its northern runway into routine use. “We absolutely believe there is a business case for additional capacity at Gatwick as well as Heathrow,” said Koster.
New Gatwick Airport Chief Executive Pierre-Hugues Schmit said its expansion has factored in the growth elsewhere in London. “There is demand,” he said. “But what matters in the end is there is an option that matches a certain pricing point and our plan intends to be affordable for the airline community and the passenger.”
In the meantime, the Gatwick chief said the airport was continuing to invest in capacity and resilience, particularly in its peak morning periods where it has increased movements from 56 to 57 flights an hour. “We think we can still do better on a single runway, but obviously at some point we need the second runway,” he said.
IATA Senior Economist Maja Marciniak had earlier told delegates that while the UK passenger market has increased 24% since 2014, that is lower growth than other markets in Europe have experienced. Meanwhile, the number of routes flown has only grown 2% over that period.
“All the other major comparative markets have seen a larger increase,” she said. “We are seeing the UK is growing, but there is more potential in the market and there is more to do to attract that growth.”
She added: “When capacity is constrained, it’s very challenging to open a new route without closing one. And that is exactly what we are seeing with the UK.”
Marciniak cited data showing that medium-haul routes between 1,500km and 4,000km have increased 27% since 2014, but that routes under 500km are down more than a third.
“We are seeing airlines strategically re-evaluate their networks, offering more of the medium haul and scaling back on the very short haul. There are a number of reasons why that might be, but the outcome could very likely be an impact on the domestic connectivity and the availability of connections to more remote airports,” she said.
Regional operations in the UK suffered a blow in October when Eastern Airways suspended operations amid financial challenges.
Luke Farajallah, Chief Executive of Scottish regional carrier Loganair, highlighted the importance of ensuring a regional strategy is attached to growth at Gatwick and Heathrow. “Everyone wants to bring footfall into an airport,” he said. “But there is a need for people to recognise the growth opportunities that come with regional traffic into and out of London.”
