2.1.2 Indirect benefits
- Many businesses in the UK rely on air transport significantly for there day to day business as well as the use of freight transport.
- An Airport is proven to attract inward investment from companies who need good transport links.
- It is widely accepted now that the public enjoys the privilege of flying airports allow people to travel for leisure purposes to a variety of destinations.
2.2 Other Benefits
It is clear that aviation is advantageous to the nation and that growth would benefit the economy. Although environmental lobbyists argue this contribution, where they believe that such success of the industry is due to the vast amounts of tax relief the industry receives.
But without such an industry then Britain’s trading powers and financial position in the world economy will be lost. If the UK did not have such a large aviation economy other nations in Europe would benefit and the UK will be solely reliant on those nations. The industry transports £35 billion of UK exports which is 20% of the total amount of exports the nation produces.
The industry has also proven to bring Inward Investment from foreign companies attracted to the access to the United Kingdoms airports and the destinations.
With the advent of aviation the UK has prospered from inward tourism, which contributes to the Gross Domestic Product of the nation of £13 billion a year, which contributes to 1.5% of GDP.
The benefits of aviation have been highlighted, it can only be assumed that if the industry grows then industries associated with aviation and air travel will grow to contributing to the total economy, which can only be good for jobs, and the UK economy.
CHAPTER THREE: Government Policy
The government recognises the importance of aviation to the UK and also that such an industry impacts on the environment. Alistair Darling states, “Air travel is crucial to our expanding economy and we need to expand further in future”
The industry in the UK has reached breaking point where growth is becoming saturated due to lack of capacity. And those airports with spare capacity are due to be constrained in a matter of years.
The UK is heavily reliant on the South East of England where the majority of passengers travel. This is predominantly because of the market forces in place where the population of the UK is heavily concentrated in this area but also because prices are regulated at the airport which allow airlines to operate from the airports in the region cheaper than operating out of relatively more expensive Regional airports. This reaps huge rewards for the airport operator BAA owning London Heathrow and Gatwick.
3.1 Sustainable Development
Government policy today now states that the industry should be attributed to sustainable development. Meaning that the following are now important considerations in sustainable development of the aviation industry:
- Social Progress that recognises the needs of everyone
- Effective protection of the environment
- Prudent use of natural resources
- Maintaining high and stable levels of economic growth and employment
Source: Paul Upham (2002)
This policy by the government indicates a move towards balancing the economic benefits against the negative externalities being the environmental implications.
3.2 Environmental Impacts of Aviation
It is acknowledged that aviation affects the environment through emissions from aircraft, noise and taking up land space. The government now accepts that “ Aviation should meet the external costs, including environmental costs, which it imposes” The Transport White Paper, 1998. The industry in the UK is also subject to EC commission’s regulation, which also supports imposing levies on aviation.
It is important to recognise that air travel affects communities at a Local and Regional level where authorities are able to impose regulations on the airport for constraint of noise and flight operational hours and at a global international scale contributing to climate change and the release of damaging emissions into the atmosphere which effect the health of human beings.
Currently aviation in the UK only pays a tax in the form of APD air passenger duty collected by the government, which contributes, to the exchequer. It is estimated at 0.9 billion which falls short of the estimated effect of aviation to the environment.
Environmental groups have stated that if such measures were but in place appropriately then the decision to build new runways and meet potential growth and demand would not be necessary. This is because higher prices would have to be paid by the consumer, which they will be unwilling to do.
However it is achieved the UK needs to reduce its emissions levels of CO2 the most damaging pollutant to the atmosphere. With current agreements to reduce greenhouse gas emissions by 12.5% by 2012 set by the Kyoto agreement as well as setting its own goals to reduce CO2 emissions by 20%.
3.3 Fiscal Measures to Constrain Growth
Environmental groups highlight that the car user will pay for the use of there private car through tax on fuel and road usage, the air traveller on the other hand contributes little towards the external costs of air travel which effects the environment though noise and pollution. However is the most obvious way in which to reduce demand would be to introduce taxes on aviation.
It is argued that the use of aviation by consumers is not in line with the price the user pays and in fact is relatively cheap compared to other industries with the absence of taxes and other fiscal measures. The government states in the recent The Future of Aviation Consultation “ The government is particular keen to develop the use of economic instruments to reduce the environmental affects of emissions” DFT (2003) other organisations also now support such measures including the European Commission and ICAO (International Civil Aviation Organisation).
3.3.1 Taxation of fuel
Compared to the use of the motor vehicle, aircraft use of non-renewable fuel resources is low as stated by ATAG “ the whole transportation sector uses 20-25% of all fossil fuel consumption” Aviation and the Environment, 2002. Of this though aviation only uses 12% and road transport consumes 75%.
Although environmental groups will state that the car user pays for the external costs it incurs and aviation doesn’t. If such a measure were to be introduced into the aviation industry in the UK Government calculations show that such a tax would raise £5 billion a year. Appendix 3 shows the distribution of income through taxing aviation. However this faces certain opposition and in particular is illegal according to the Chicago Convention of 1944. Such a measure would be needed to implemented at a European or even Global scale.
If such a tax were introduced according to the EU commission then demand would reduce by 7.5% and CO2 emissions by 15 million tonnes a year.
3.3.2 Noise Charges
Aircraft noise is probably the most fundamental disturbance that the population notices. While constant technology updates have allowed aircraft noise to be reduced the public has now become more aware and now believes it to be unacceptable to their surroundings.
The position of the UK airports and in particular those in the South- East are surrounded by residential areas. Overtime less people have been disturbed by aircraft noise this is mainly due to quieter engines that now exist on Chapter 3 aircraft where as previously Chapter 2 aircraft were seen as a noise nuisance. This is proven where the amount of people affected around Heathrow airport by noise in the 57 Leq contour is now 331,600 where as in 1979 it was 1.5 million.
3.3.3 VAT and Duty Free
The industry does not pay the 17.5% Value added tax that the government had set up for all goods and services that are not essential. It is openly stated that VAT tax should be added on the ticket price of a flight which then will set up a chain of VAT on all other components of the industry effectively raising costs to the industry.
Duty free is another form of taxation where goods bought at an airport are not subject to duty in particular alcohol and tobacco products. This duty has now been imposed on all flights within the EU but not on International flights. It is seen that duty should be applied to all goods despite there intended destination, when duty free was abolished on EU flights it was though aviation would lose revenue from lack of spending duty to such an extra cost being imposed. This proved not be the case in the end and airport operators were allowed to increase aeronautical charges to compensate.
The abolishment of duty on international flights would then be another source of revenue for the government at little cost to the industry with airport operators raising the charges imposed on airlines to compensate. Airport operators here may suffer from the lack of main stream retail stores selling branded clothing sporting goods and electronics where passengers were perceived to gain value for money as such goods bought at the airport were cheaper than on the High Street. This would revert the airport to attracting specialist-retailing stores necessary for travel like consumer essentials these such stores do not have as higher turnover as goods as clothing and branded merchandise so revenues may be affected.
3.3.4 Emissions Trading
The emission trading scheme proposed by the government seems to be an acceptable way of reducing emissions as the nation as a whole will be encompassed in reducing its total some of pollutants without the need for taxing aviation.
The system would involve the auctioning off permits to trade emission levels with other industry sectors. This would encourage a worldwide global approach to reducing emissions from all industries that pollute the environment.
3.3.5 Slot Allocation
The government at present supports a more market driven approach to slot allocation at airports in affect charging more for certain slots at different times of the day. This will alleviate congested airports where flights at peak hours of the day would pay more, in essence unless a good return on investment was achieved then the flight would be reduced or transferred to another airport promoting alternative use of under utilised airports. This is particularly importance to the airport operator BAA and their two airports of London Heathrow and London Gatwick, which are the most congested airports in the world due to the low landing fees charged.
3.3.6 Air Traffic Management
If growth was to continue at an unprecedented rate according to the benefits outlined then the revision of air traffic and airport operations will be needed in order to cope with demand as well as taking into account the disruption this may cause. Such measures will involve new technologies being invested in to maximise runways and taxiway use at airports that allow for reduced separation and taxi times.
CHAPTER FOUR: Impact on Airport Operators
It is important to realise that airport operators are on the “frontline” when it comes to any polices that involve greater demand and growth as well as any constraints that may be imposed.
Airport operators are in the business to be profitable after being privatised by the UK government. The “knock on” effect of meeting demand will be attractive to such developers not only through increased aeronautical activity but also through onsite developments of shopping centres, warehousing, maintenance companies and off site business and technology parks.
4.1 Airport Expansion
One factor that needs to be taken into account when considering growth in the industry are the effects on the environment. Such expansion of airport facilities takes up a lot of land space especially runways and terminal facilities the location of this infrastructure to residential areas will devalue the area and become a nuisance to the local community. When plans are drawn up airport planners will need to work closely with the local community to cause the least disturbance possible.
The airport operator BAA has long been involved in the planning of meeting the demand for aviation with the development of London Stansted and the Terminal 5 project at London Heathrow both of these developments have involved a long planning process.
Stansted Airport was subject to a major public enquiry in 1979 when it applied for planning permission to expand. Between 1980 and 1985 the options were discussed and the impacts assessed and following the governments 1985 white paper BAA was granted permission by the government to accommodate 15 million passengers a year, today phase 2 of this development is underway 20 years since the planning process was initiated. Airport operators are affected by this long process, which costs time and money while not solving the problem in the long run. More efficient measures to speed up this process would be welcomed by the industry taking all factors into account and making a decision.
4.2 Constraining Demand
If demand was to be significantly constrained airports will need to invest to accommodating larger aircraft, this not only requires the physical infrastructure requirements to allow an aircraft to fit on taxiways and aprons but also the needs of terminal design to accommodate multiple aircraft carrying 300-500 passengers at any one time. This at present contradicts current airline operations focusing on hub and spoke networks with smaller aircraft being utilised on a frequent basis.
This would have a huge impact on short haul services where predominantly aircraft are regional jets and small jet liners operating European and domestic routes with the key focus on frequency. In essence capacity constraints may lead to less frequency and focus on capacity with fuller aircraft, ”demand management measures could include frequency caps on certain routes to restrict the airlines making inefficient use of scarce airport capacity” Humphrey’s 2001. Such a measure imposed by the government may not be liked by airport operators where lucrative routes are reduced.
4.2.1 Aircraft Size
It can be shown from the following data in Figure 1 The existing Hubs of London Heathrow and Frankfurt show that aircraft size is comparably small. It can be seen that the majority of aircraft serving the aircraft are in the 100-180-seat range encompassing the Airbus A320 family and Boeing 737’s. If constraints were enforced airlines would have to adopt and possibly switch to aircraft holding more capacity in order to gain economies of scale due to increased airport charges.
Figure 1
Source: ATI (2003)
4.2.2 Increase in Ticket Prices
Imposing such constraints through fiscal measures as mentioned would reduce demand, which in return will reduce the amount of flights at congested airports and affect aeronautical charges. Airport operators maybe affected by another factor if such implications were imposed and that is the revenue through commercialisation. It has been estimated that imposing taxation will account for £33 per flight according to Sewill (2003). This will raise ticket prices including airport charges the passenger pays for, affecting the amount of disposable spending by passengers in the commercial opportunities an airport operator provides.
In particular low cost airlines will be affected by such an opposed charge increasing there ticket prices to the extent they may not seem as attractive to the consumer. In particular airports that offer concessions to low cost airlines will be at a disadvantage where the amount of income they receive depends on the amount of passengers that pass through the airport and they’re discretionary spending. easyjet has argued this point stating” Many aspects of the low cost business model – such as flying high load factors and serving non-congested airports – already act to mitigate environmental impact”
Such a constraint will shift the balance back between the network carriers and low cost airlines and be detrimental to those airports that have succeeded through attracting such low cost carriers.
4.3 Subject to Noise Constraints
Airports have significantly been affected by noise restrictions that have been put in place to not only accept aircraft that are Chapter 3 standard but are also subject to the open times of the airport. In particular night flight restrictions. Airports in Europe have adopted charges on aircraft depending on the amount of noise created this is the case for Both Zurich, Brussels and Amsterdam airports. In particular Brussels airport hosts DHL’s European Air Logistics Hub operating Boeing 727 and 757 aircraft. It was deemed by the Belgian authorities that the use of Boeing 727 aircraft was too noisy to operate at the airport being only Chapter 2 Compliant. This meant DHL had to cut its operations at the airport and rerouted traffic to other airports where Sub Hubs where set up. In essence Brussels airport is lost revenue from less aircraft using the airport and DHL’s operations had to be scaled down which required a reduction in workforce.
If growth is to continue then the revision of flight routings will need to be taken into account. Airports will need to work closely with the local community to provide the least disruption as possible. Where such flights are necessary particularly in the airfreight and cargo industry the possibility of utilising airports that are remote from resident areas should be practised. In particular East Midlands airport has been successful in attracting traffic over night as no restrictions are imposed. While opposition is against growth in aviation and expansion of airports, the development of old RAF bases into commercial airports maybe an attractive investment that meets the requirements of the industry and the lobbyists. RAF Finningley in South Yorkshire is a remote airfield currently not used by the Military, opportunities here exist due to its remoteness from local communities and that the infrastructure already exists.
4.4 Regional Airport Operators
Currently secondary airports are being under utilised in the UK, although the low cost airlines have established a presence at these airports there is stillroom for traffic in the scheduled airline market where often the majority of flights at these airports are charter traffic. The Government particularly encourages the use of regional airports as alternatives to the heavily constrained airports. If capacity were constrained at the London airports then regional air services will be the only other choice for airline operators, which would in turn reduce the amount of surface mileage passengers, would need to travel reducing the environmental impact.
Government policy would indicate that secondary airports will continue to develop there route structure and grow due to constrained capacity in the South east region incorporating the London airports. More effective use of such regional airports would allow for continued growth. This in affect will create more of a point-to-point route structure rather than using heavily congested hub airports.
4.5 Integrated Transport
Those airports where large passenger throughput is evident need to pursue the governments polices on integrated transport for both employees and passengers. Currently the majority of travel to and from the airport is by motor vehicle. The motor vehicle is not a sustainable form of transport and is a heavy pollutant. If better infrastructure were in place to support the greater use of public transport one element of pollution to the environment would be reduced.
Both BAA and Manchester airport have taken part in such integrated schemes. BAA has invested heavily in the Heathrow Express and Manchester airport has invested in an inter-modal hub with the transpennine express, the Manchester metro tramway and several coach and bus companies. Airport operators need to continue promoting and investing in such forms of transport in order to reach the airport. Such a step would reduce a significant amount of pollution to the environment although it is a hard task due to the requirements of an air traveller with luggage will be to use the motor vehicle. One way around this maybe to offer discounts on public transport that are advantageous to paying substantial amounts of money on car parking. Another possibility would be to introduce road tolls on approaches to the airport which would again be a direct tax in order to discourage use.
4.6 Substitutes to Air Travel
The global position of the UK requires the use of air travel for both passengers and freight movements. While there is no substitute for long haul travel across continents to Asia and America there can be seen to be equivalent alternatives in the UK for travel domestically and in Europe Itself. It has been proven that short haul flights are more polluting than long haul flights. If such flights would be reduced this would significantly reduce such emissions, alternatives could be used through the use of the Eurostar train service to Brussels and Paris where very good High Speed train connections are available.
4.7 Summary
- Constraining demand will force airlines to operate larger aircraft, which will directly affect the airport operator’s infrastructure in terms of capacity but will also influence aeronautical and commercial revenues.
- Airport operators are already affected by constraints from government through planning and operational restrictions.
- Regional airport operators will be benefit from sustainable aviation policy where the needs of the industry need to be balanced out.
CHAPTER FIVE: Conclusion
5.1 Recommendations
The report has highlighted the possible affects that may influence the aviation industry in the future. It is clear that there needs to be a balance in addressing the needs of the United Kingdom in relation to Air Travel. Both arguments for growth and environmental impacts need to be balanced out it is not possible to eliminate the environmental impacts 100% but nor is it possible to use the “predict and provide” model previously used in order to meet growth.
Recommendations that need to be considered more extensively are:
- The use of Regional airports is an important element to government policy, which attracts inward investment as well as offering the air traveller access to holiday destinations through charter airlines. The lack of scheduled airlines operating significant services from these airports is not offering the consumer choice. If regional airports were able to develop more significant services then this would alleviate some space in the congested South East as well as reducing the amount of passengers from a region other than the South East travelling by car and polluting through surface transport. Such Regional airports are in place to respond to growth due to the development of low cost airlines and their passenger throughputs.
- The promotion of substitutes forms of air travel in the UK for short haul domestic and European Travel.
- Airports need to work closely with the community to ensure that the least disturbance as possible is achieved. The building on Infrastructure away from residential areas should be enforced where possible and the introduction of noise preventive measures could be installed like double-glazing windows and sound barriers and deflectors. However airports will need to recoup the costs of such measures.
- The use of taxes to pay for the external costs of aviation would allow aviation to grow in a sustained manner and become more acceptable to environmental groups.
5.2 Conclusion
This report has examined the situation airport planners face when trying to plan for the future. While airport operators although privatised would like to build new runways and promote the use of aviation it is widely accepted that this may not be in the public interest in terms of the environmental impacts. The airport operators association states that “provided that air travel meets its environmental costs, demand should not be artificially constrained” This would lead to the development of the concept as long as aviation paid for its negative externalities then air travel may grow as much as it likes and airport operators would meet demand as necessary.
However this is not possible due to the points as outlined when International agreements regulate the industry to reducing emissions and compensating for loss of land, devaluing of property and the noise and visual intrusion.
If taxes were introduced and hypothecated back into the industry to reduce these negative effects through research and development of reduced emissions engines, quiet aircraft and preventive measures then the industry would be free to grow at more substantial rate without the need for constraints and the public consensus of such an industry being a harmful pollute would diminish.
It is certainly the case that meeting demand is costly to the environment but if such demand is not met then the aviation industry in the UK will suffer. Airport operators will be forced to increase commercial and aeronautical charges
If such charges are imposed then the consumer will be paying comparably more the use of air travel. This may in turn affect air travellers spending at airports, which is a significant source of revenue.
Perhaps the promotion of alternatives of travel to Europe via eurostar and High Speed Trains would revert some passengers from using aircraft, the potential advantages are apparent if travelling to and from London to Paris and Brussels when the passenger arrives in the city centre with less hassle associated with parking, checking in and baggage collection at the airport. This may hit airport operators where the potential exists for a European High Speed Rail network, which could significantly reduce air travel passengers flying in Europe. Although in the United Kingdom this is unlikely due to the UK’s isolation from such a network other than the Channel Tunnel.
It is also worth pointing out that the two leading aircraft manufacturers have two different contrasting approaches to the industry in the future with Airbus producing the A380 a 550 seat aircraft and Boeing manufacturing the 7E7 an environmentally friendly aircraft producing less emissions and being more fuel efficient. Both aircraft will be prove to successful in a market where demand is constrained in contrasting ways, the airbus A380 will be able to suit airlines where congested airports have little capacity but an airline requires an aircraft with a large capacity of seating. Such an aircraft due to its size requires investment by airport operators in order to service its needs. On the other hand the 7E7 will be an environmental friendly aircraft capable of reducing emissions and operating into airports highly constrained by noise and emission levels. The industry will continue to grow and be beneficial to the economy while environmental impacts may be a deterrent to this continued growth the industry will adopt through better technology enabling emissions and noise levels to be reduced at the same time as paying for its negative externalises which will allow airport operators to meet continued growth and demand.
5.3 Opportunities for Future Research
- The ability of regional airports to capture the market that currently travels to the heavily constrained South – East of England for travel. This would require more substantial services from airports like Manchester and Birmingham Airports. Such a measure would reduce surface transport and provide for the economic well being of the regional airport and surrounding area.
- If environmental charges were implemented then it would be assumed that the development of commercial and passenger aircraft would become more advanced in reducing emission and noise levels. If this were possible then the ability of aviation to grow would be undeterred by opposition that the industry was damaging the environment.
Appendix One
Future Air Forecasts
Source: The Future of Aviation: The Government's Consultation Document on Air Transport Policy (2000)
Appendix Two
Total Passenger Movements from 1998-2030 showing Forecasts of Passengers Movements Constrained and Unconstrained
Source: Impacts of Future Aviation Growth in the UK, Berkeley Hanover Consulting
Appendix Three
Revenue gained from Taxing Aviation in the UK
Source: Airports Policy- A Flawed Approach (2000)
Appendix Four
Jobs Supported by Aviation 1998
Source: Oxford Economic Forecasting (1999)
References
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Sewill, Brendon. (2000) Airport Policy – A Flawed Approach Aviation Environment Federation
Berkeley Hanover Consulting (December 2000) The Future Impacts of Future Aviation Growth in the UK
Oxford Economic Forecasting (November 1999) The Contribution of the Aviation Industry to the Economy
Counting the Cost (2003). BAA’s response to the HM Treasury and Department for Transport discussion Aviation and the Environment: Using Economic Instruments
Graham, Brian. (1995). Geography and Air Transport, John Wiley and Sons Ltd
The Airport Operators Association (2003). Aviation Policy Response
Department for Transport (2003). The Future of Aviation The Governments Consultation on air transport policy
Learmount, David (May 2001). Air Traffic Management- Sustainable Policy, Flight International
Humphrey’s Ian (2002). Policy Issues and Planning of UK Airports, Journal of Transport Geography Volume 10, Issue 4
- Aviation and the Environment Publication