Heathrow Airport: What is not being said

The announcement of the UK government’s approval for a third runway at Heathrow last month was welcomed in a strangely subdued way. You would think that a decision that big, and that long in the making might have received more fanfare. But there are many hurdles to go through before the bulldozers can move in. Local residents, for one, will be doing everything they can to stop the expansion going ahead.

The airlines are nervous, judging by the press releases that followed the announcement. Indeed they did not really welcome the decision at all. One of their concerns is the cost – expected to be in the region of £16 billion, more than doubling the value of the airport’s current asset base – and who is going to pay. The expectation is that the cost of building the new runway will be recovered through landing fees. However it is still up for debate how much these charges will be and how exactly they will be distributed across airlines.

Amongst the main concerns of the airlines when it comings to funding the new runway is the issue of pre-funding. This would allow Heathrow to recover at least some of the cost of building the new runway prior to it becoming operational. For the airlines, that is the worst of all worlds.

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Are taxes on airline passengers appropriate?

The aviation industry has a reputation as one of the least-taxed industries. There are practical historic reasons for this (such as the exemption for duty on international aviation fuel). It is also a sign of successful lobbying by the industry (such as the general exemption from any form of environmental taxes), which is convinced that the world would fall apart should anything stand in the way of aviation growth.

Aviation also has a reputation as one of the most whingey industries when it comes to taxation. It issues multiple papers each year, criticising governments for their tax policies and for failing to understand the true impact their fiscal budget is having on passengers and the wider economy. More importantly (but oddly less prominent in these papers) is the fact that taxation also results in higher fares for passengers, and therefore – so the argument runs – subdued demand and thus lower airline profits.

Take taxes on air passengers, the scourge of the aviation industry. The mere mention of it is sufficient of increase the blood pressure of any airline CEO by several points. A recent press release from A4E referred to the UK’s air passenger duty (APD) as ‘fleecing’ passengers and punishing businesses and consumers. That’s the kind of rhetoric we’re dealing with here.

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Sssshhh. Let’s talk about passenger compensation

September’s Aviation Intelligence Reporter discusses how some issues can still bring the airline industry together, despite their many rivalries and disagreements. Time to add to that list the issue of passenger compensation.

June saw the publication of the European Commission’s latest interpretive guidelines for Regulation 261/2004. More commonly, this is known as the legislation that entitles air passengers to compensation and assistance in the event of a delayed or cancelled flight. It was followed shortly after by the response of the collective will of Europe’s airlines.

Despite the clarifications provided, IATA remains scathing of the regulation. IATA, like its other airline association colleagues, believes that many of the rules are unnecessarily harsh for airlines. So we are stuck, as ever, in a war of words.

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Imitation is the sincerest form of flattery

From the beginning of 2016 we have seen a huge influx in reports of ‘bad’ drones. These are those drones that threaten to hit airliners, fly over nuclear facilities, cross borders and have generally become bolder, thus posing a risk. Barely a week goes by without the European Cockpit Association (ECA) releasing yet another fear-mongering statement that starts ‘Barely a week goes by…’

If the ECA and the established aviation industry were actually interested in the truth, they might choose to look not to more of the same established means of compliance, complete with ponderous rules that govern aviation generally; they would actually talk to the drone industry. Dialogue, genuine exchanges of views to learn things and changing their opinion accordingly are not really pilots’ strong suits, so do not hold your breath waiting for that to happen.

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Could ATM make you rich?

Would you invest in an Air Navigation Service Provider (ANSP)? Their reputation for inefficiency, government influence and resistance to change would suggest your money might do better stored under the mattress. However, the successful flotation of Italy’s ANSP, ENAV, indicates that many investors see some potential in air traffic management (ATM).

In July, the Italian government offered up 47% of ENAV to potential investors. 10% of these shares were reserved for ENAV employees and individual investors, with the remainder offered to large investors such as hedge funds, banks and pension funds. The Italian government maintains its influence, however, through its majority stake.

ENAV shares have proved to be a popular investment. At the time of flotation, demand for ENAV shares outstripped supply eight times. Since then, the share price has remained above the initial offering of €3.30 a share.

While it is still early days, ENAV could provide a useful case study for other governments, especially those with large public debts.

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Is there an opportunity to de-regulate European ANSPs?

A recent article in Eurocontrol’s Skyway magazine provides further evidence that competition is starting to emerge between ANSPs. Air traffic flow managers at Maastricht Upper Airspace Centre (MUAC) have noticed a changing in routings through their airspace, as airlines avoid neighbouring expensive airspace. Even though the resulting routes are longer, once the cost of fuel is taken into account, the total cost can be lower. Just don’t tell the environmentalists.

MUAC point to a 5% increase in 2015 in the proportion of aircraft flying on routes through their airspace that limit travel in the more expensive German and British airspace. This change comes at a time when both the German and UK ANSPs increased their route charges, the Belgian ANSP reduced theirs, and the average price of jet fuel fell by almost 30%. The perfect recipe for airlines to re-think their flight plans.

Unfortunately, given the current regulatory set-up in Europe, any such change in airspace patterns is all too quickly posed as a challenge to ANSPs, not an opportunity.

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Finally, an answer to the Heathrow problem?

Is a foreign holiday a luxury, only for those who can afford them? Or a necessity that should be available to everyone regardless of income? According to the Campaign for Better Transport (CBT), it is the latter. At least if you are British.

The CBT is up in arms at proposals to deal with increasing aviation emissions by introducing some sort of carbon tax. According to the CBT, this approach will mean foreign holidays are no longer affordable for many people. A problem that, in its view, will only be exacerbated by the Airport Commission’s recommendation to expand capacity (and therefore emissions) at Heathrow Airport.

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What Europe and the US could learn from Africa about drones

This week Amazon announced that it would be partnering up with the UK Civil Aviation Authority (CAA) to test its Prime Air delivery service. Amazon’s tests would involve flying beyond visual line of sight (BVLOS), the use of sensors for avoiding obstacles, as well as the possibility of multiple drones controlled by a single operator.

The CAA has been lauded for its part in allowing these tests. Paul Misener, Amazon’s VP of Global Innovation Policy and Communications, has gone as far as claiming that ‘the UK is a leader in enabling drone innovation’.

Misener’s statement served as a not-so-subtle jab at the US Federal Aviation Authority (FAA), who released their own drone regulations last month.

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There are no facts, only interpretations

You may remember a report from A4E earlier this year claiming that its members are paying 80% more in airport charges in 2014 than they were back in 2005. Europe’s 21 largest airports – which account for 50% of passengers – were accused of increasing their charges by up to 255%.

This report was cited as evidence that airports were abusing their market power and that further regulation is necessary. A4E were also at pains to point out that, in contrast, airlines had reduced their airfares by 20% over the same period.

It’s a modern day tale of good versus evil.

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Space traffic management: Stratospheric thinking

You might be excused for not paying too much attention to space matters. It has been a sleepy hollow for many years, away from the cut and thrust of ATM reform, unfair subsidies and consumer rights. When space makes the news it is because some very rich person has decided to tackle the last frontier for reasons that seem to be as connected to ego as commerce.

But that image is wrong. In May, US House of Representative appropriators approved an amendment to a bill that will raise the FAA’s Office of Commercial Space Transportation’s FY2017 budget by $1 million.

The budget increase, amongst other signs, portend further expansion of the Office of Commercial Space Transportation.

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