Airport Regulation Working Group
Over time, the EU and national government and their aviation industry regulators have gradually increased the obligatory regulatory requirements and standards to which U.K. airports have to comply, whilst passing on more and more of the associated costs. The burden of compliance has steadily increased as a proportion of airport capital and operating costs with little opportunity to pass on those costs to airlines and passengers because of external income and spending constraints, competitive pressures and rising levels of taxation – particularly in the form of APD.
The impact of rising regulatory costs (e.g. those associated with ATC, RFFS, security, policing and border controls) affect smaller regional passenger and business aviation airports disproportionately; this is because of their lower turnover and the greater ‘fixed’ element within their cost base. For many small airports, with relatively modest levels of commercial passenger throughput, their ability to raise revenue or cut costs elsewhere to pay for these externally imposed (as opposed to directly business orientated) requirements are limited. And in the UK, unlike in most other parts of Europe, most compliance costs are the responsibility of the individual airport not the various manifestations of the state that impose them. This puts UK airports at a substantive disadvantage to their competitors in Europe in what is supposed to be a level playing field created by the aviation single market.
Hitherto, the discriminatory impacts and significant market distortions caused by regulatory compliance costs have been overlooked as a material issue, due to the intense safety led culture within the industry, the need to respond in security terms to increasing threats post 9/11 and the high levels of growth being achieved in the mid 2000’s by smaller regional airports. The 2008 recession and associated consolidation in the airline sector has brought this into sharp repose as many smaller airports, whether privately or publicly owned, have found it difficult to cover operating costs let alone make provision for regular maintenance or finance new investment. Added to this, in its revised regional airport ‘guidelines’ the EU made clear its aspiration to phase out state aid support to airports over a 7-10 year period.
Despite these external pressures there has, however, been no systematic or in-depth review of impacts on the smaller airport sector by Government policy makers, regulators or indeed the industry collectively of these issues in the UK. Reports on the regional airport sector in 2005 and 2007 by the CAA did not focus on the smaller airports (i.e. less than 3-5mppa) and were designed with a different agenda in mind.
Business Aviation Working Group
Business Aviation airports is the term used to distinguish facilities where the following types of ‘non-scheduled’ aviation activity are in the majority:
- Corporate, chartered and privately owned or leased business jets;
- Air taxis;
- Commercial pilot training;
- Aircraft servicing;
- Emergency service flying;
- Military movements;
- Offshore-related operations;
As opposed to those where:
either (a) scheduled flying is the principal activity or revenue earner and non-scheduled flying is simply a secondary or tertiary activity – these are usually termed small regional airports;
or (b) where private and leisure flying and activities such as gliding, parachuting, micro-lighting predominate – usually referred to as General Aviation aerodromes or airfields.
This distinction is important because the latter group of airports has already benefited from a Challenge Panel Report in June 2014 and the establishment of a dedicated GA Unit within the CAA, but lack the scale or wider economic significance to attract the interest of mainstream policy makers, whereas the former tend to have a specific geographical focus and support and are the subject of several streams of RABA’s core campaigning themes.
In recent years
- APD on Business Aviation has been increased substantially;
- Border Force response and Transec requirements have become increasingly inflexible;
- JSP360 (Use of Military Airfields by British and Foreign Civil Aircraft (April 2014)) has been introduced, incentivising competition from operational military airfields, with Business Aviation a particular target;
- the green light has effectively been given to local authorities to see airfields as potential brownfield housing site (Chancellor Announces a Major Plan to Get Britain Building (Oct 2015))
The Business Aviation Sub-Group endeavours to articulate some of the needs of this oft overlooked sector.
Employment Clusters and Non Aeronautical Income Working Group
RABA Group is keen to review how its member airports are managing their current non-aeronautical activities and also to identify opportunities based on the individual characteristics of each airport.
We suggest that government should introduce a presumption in favour of airports being allowed to develop their estate and roll out a package of incentives to encourage the creation of employment clusters that can diversify their income streams so they can become less exposed to the vagaries of the aviation cycle on income.
The Newquay Aerohub Enterprise Zone is held up as an example that could be replicated and encouraged across the country.
There are examples of small airports (e.g. Gloucestershire Airport, that manage to cover their operating costs and yet have minimal scheduled passenger throughput). Glasgow Prestwick Airport hosts an important employment cluster (2300 jobs) on the site as does Coventry Airport. Airports such as Inverness and Exeter have long term plans to develop substantial airport business parks.
With carefully tailored public sector support this process could be facilitated.
The Crown Dependencies are the Isle of Man and the Bailiwicks of Jersey and Guernsey in the English Channel and the Isle of Man, Jersey, Guernsey and Alderney Airports are all RABA Group members.
The Crown Dependencies are independently administered jurisdictions, are technically not part of the United Kingdom or overseas territories of the United Kingdom. They are self-governing possessions of the Crown (defined uniquely in each jurisdiction). They are not member states of the Commonwealth of Nations, nor, save for a limited extent, a part of the European Union. However, they do have a relationship with the Commonwealth, EU, and other international organisations and are members of the British–Irish Council.
Internationally, the dependencies are recognised as "territories for which the United Kingdom is responsible". Being islands air links are critically important for them, and yet their connectivity needs seldom enter UK government deliberations.
Certain aspects of membership of the European Union apply to the Crown dependencies, by association with the United Kingdom's membership, but there are intricacies that may require their aviation needs are protected by different policy responses to the rest of the RABA Group membership.
Air Route Development
There are two main EU state aid approved mechanisms for using state resources for air route development and air route sustenance.
Public Service Obligations
Public Service Obligations (PSO) are regulated under EU provisions monitored by DG-MOVE. The main use of PSOs are to connect remote locations requiring life-line services, such as islands, or isolated locations. Additionally to underpin regional connectivity, usually to the capital, but sometimes between two different regions of the same country, and a third lesser used option, is an international PSO between a location and neighbouring ‘hub’.
The country must demonstrate how the supported route is vital for the economic and social development of the benefitting region, and cognisance of other transport options come into the equation (nearby airports and terrestrial travel options).
The ‘Obligation’ imposed may be an intervention to improve (or protect) timetabling or frequency, provide for a minimum size of aircraft (capacity) or deliver an affordable fare where it is demonstrable that the open market is failing to do so. It is usual, although not universal, that subsidies are paid for such air routes. The operator usually then benefits from protection from competition on the route whilst the PSO is in place (typically 4 years)
This form of support tends to be long term, although it has to be re-justified ever four years, and the route has to be tendered in an open (to all EEA AOC holders) and non-discriminatory manner, some details of which are specified in the regulations.
Route Development Fund
The other option is to develop a Route Development Fund (RDF) that again needs to be ‘approved’ by Brussels. This public support is time limited to 2/3 years and the maximum percentage of support is curtailed; the essence being that the support is only covering the start-up phase of a route that will eventually become self-sustaining and any support/risk is matched approximately equally by the air operator. Usually the support is fed in via the airport(s) concerned. The Fund once again must have rules that make it open and non-discriminatory for the air operators that might bid to benefit, and if public funds are begin used it must surely be serving some national strategic interest.
Both of these approaches are conceived as mechanisms for developing intra-EEA air links, and links to non EEA destinations would not come under these provisions.
The UK Government has local interpretations and adaptions of both these tools, and RABA Group is keen to ensure that they are optimally apdated to support route development at the UK's regional airports of less than 3 million passengers per year.