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After three years, the Government has received the final recommendation of the independent commission established to recommend an option for expanding aviation capacity in the South East of England.

Established under the previous Coalition Government, the Airports Commission, chaired by Sir Howard Davies, was charged with producing a recommendation from among three shortlisted options: building a third runway at Heathrow; lengthening an existing Heathrow runway; or building a second runway at Gatwick. Set up to reach cross-party consensus on the issue, the timing of the Commission’s final report was designed to skip the politically sensitive General Election period.

The new Conservative Government faces the tricky challenge of responding to the final option recommended by the Commission. Ministers have repeatedly refused to be drawn on the subject, insisting on the need to preserve the integrity of the process – whilst the Conservative manifesto simply committed the party to responding to the final outcome.

On 10 June, the Financial Times reported that the Government would not be rushing to respond until the end of the year. Government sources subsequently told the BBC that there would be “no quick decision” on its response.

Ministers face making a decision that will have profound implications on the 2016 Mayoral elections, a contest with a history of drawing outspoken candidates. The party also has new MPs in West and South West London who may seek to sway its view.

Meanwhile, Labour is seeking to regain national momentum by taking the consolation prize of strong London gains at the General Election.

An issue with national, international and local concerns, the Government’s response to the Davies Commission will have profound implications for decades to come. In this briefing, DeHavilland examines the factors, personalities and policy decisions that will affect how ministers address the vital question of the UK’s future airport capacity.

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In December 2013, the Airports Commission released its Interim Report. In addition to setting out the nature, scale and timing of airports expansion, the report was tasked with making recommendations for better use of the UK’s existing runway capacity over the next five years.

In the report, the Commission laid out the motivations behind the need for airport expansion in the South East, highlighting how close the largest international airports had come to reaching maximum operational capacity. Heathrow was “now effectively full” and Gatwick was operating at more than 85 per cent of its maximum capacity. The Commission argued that whilst smaller airports had been successful at attracting some forms of traffic away from larger hub airports, many services – particularly long haul flights – required the infrastructure that only exists at larger airports. Failure to address these problems, the Commission argued, was projected to cost £18-20bn to users and providers of airport infrastructure and an additional £30-45bn to the wider economy.

The Commission contended that redistributing excess demand away from airports in the London and the South East was “not a credible option” and thus concluded that a “clear case” existed for building one additional runway to come into operation by 2030. Further forecasts predicted the need for a second additional runway to be in operation by 2050.

Sir Howard Davies wrote to the Chancellor in November 2013, prior to the Interim Report, to outline a package of surface transport improvements designed to provide some alleviation of capacity issues in the short term. Included in the proposals were enhancements to Gatwick’s rail and road access; improved rail links between London and Stansted airport; and the provision of smart ticketing facilities at all London airport stations. Chancellor George Osborne included these proposals in the December 2013 National Infrastructure Plan.

Further to short-term fixes, the Interim Report picked Gatwick and Heathrow as the two potential sites for the new runway. Whilst Mayor of London ’s Thames Estuary option faced initial dismissal on commercial and environmental grounds, the Interim Report did allow for additional analysis to continue over the next year to reassess its credibility.

In its Final Report, the Commission contended that the proposal for a new northwest runway at Heathrow Airport was the most credible of the three shortlisted options. The proposal came with several caveats in order to mitigate the environmental and community impacts of the new runway.

The Commission argued that the third runway option offered the “greatest strategic and economic benefits”, providing capacity for nearly 40 new destinations and creating more than 70,000 new jobs by 2050.

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Both the Commission and Heathrow have argued that the proposed runway is dramatically different from previous expansion proposals put forward by the airport. When questioned on whether David Cameron’s previous vow to block Heathrow expansion prior to the 2010 elections would pose a challenge to the implementation of the Commission’s recommendations, Heathrow Chief Executive Officer John Holland-Kaye told the BBC that “we have U-turned so he doesn’t have to”, remarking that the new proposed runway was markedly different to previous expansion attempts.

Sir Howard Davies has included strong measures to limit the impacts of the new runway on the area in an attempt to make Heathrow a “better neighbour”. These include:

 A ban on all scheduled night flights between 11:30pm and 6am  No potential for a fourth runway in the future  Legally binding noise limits and a noise levy to fund mitigation projects for the local area  A legal commitment on air quality compliant with EU limits  The creation of an independent aviation noise authority with a statutory right to be consulted on flight paths  A commitment from Heathrow Airport Ltd to spend more than £1bn on community compensation, with compensation of full market value plus an additional 25 per cent, and reasonable costs, to those who would lose their homes

In the report’s strategic fit assessment, the Commission outlined the economic benefits of a third runway at Heathrow. It argued that without additional capacity, the airport’s ability to function as a hub would be substantially diminished, damaging its competitiveness in the long-haul market. This connectivity could not be offset by growth elsewhere, resulting in a loss to the UK market. Gatwick, the Commission argued, was more heavily focused on the short-haul market – a something which would be enhanced by expansion, but would more slowly result in the addition of more long-haul flights.

The Commission also found Heathrow to be the better expansion option for the freight industry. Its central position on the strategic road network and its existing cargo handling facilities were described as making it a superior option to Gatwick, which would require a “significant investment by third parties” to develop freight-handling capabilities. It was also seen as the best option for connectivity to London and the rest of the country.

In its environmental impact assessment, the Commission conceded that Gatwick’s public impact as regards noise pollution was less severe than Heathrow’s due to its more rural location. Subsequently, it identified effective mitigations, such as a ban on night flights, to justify the increase in noise pollution caused by the Heathrow expansion option. In an assessment of increases in carbon emissions the Gatwick Airport Second Runway and the Extended Northern Runway at Heathrow, both performed better than the chosen Heathrow expansion option.

Gatwick, however, would require a greater direct land take than the other shortlisted schemes and would entail the destruction of several pieces of ancient woodland. The Commission also looked at the general public effect of airport expansion, taking into consideration noise levels, health effects and general happiness in addition to the necessary loss of homes expansion would involve. In terms of the objectives to manage and reduce the effects of housing loss on local communities and maintain quality for local residents, it was deemed that both the Gatwick Second Runway and Heathrow Extended Northern Runway scheme were superior options.

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Following deliberations, the Commission unanimously concluded that the proposal for a new Northwest Runway at Heathrow Airport, if presented with a “significant package of measures to address its environmental and community impacts”, represented the strongest option to maintain the UK’s position as a global hub for aviation.

DeHavilland attended the press conference for the launch of the Final Report. Click here to read our summary.

Patrick McLoughlin is the Cabinet minister tasked with delivering the Government’s response to the Airports Commission.

An MP since 1986 for a Derbyshire constituency, Mr McLoughlin served as Aviation and Shipping Minister in Margaret Thatcher’s Government. A large part of his parliamentary career has been spent behind the scenes in the Conservative Whips’ Office. Mr McLoughlin served as Opposition Chief Whip between 2005 and 2010, and as Government Chief Whip between 2010 and 2012.

Appointed Transport Secretary in 2012, Mr McLoughlin has been tasked with overseeing the largest capital budget in Whitehall and delivering sensitive infrastructure projects such as High Speed 2. He has also dealt with numerous problems, including overhauling the process of rail franchising and, more recently, addressing Network Rail’s poor financial management.

Reappointed following the Conservatives’ General Election victory, one of the first items in Mr McLoughlin’s in-tray is the response to Davies Commission.

Like his boss, Robert Goodwill is a veteran of the Whips Office, having been appointed there only year after first being elected to Parliament in 2005. Also in common with Mr McLoughlin, he is a northern Conservative.

Mr Goodwill has served both the Transport Select Committee and as a Shadow Transport Minister. Both of these roles amply prepared him for appointment as a Transport Minister in 2013 with a remit including aviation policy.

He was reappointed to the Department following the General Election, making him the second-longest serving minister at DfT. Considered to be a solid, reliable operator, Mr Goodwill be providing a steady hand on the tiller as the Government mulls its response to the Davies Commission.

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Now into his fourth year as the most senior civil servant at the Department for Transport, Philip Rutnam has overseen the Department’s responses to some pressing issues. From helping steer his Secretary of State, Patrick McLoughlin, through a tempestuous first few weeks dealing with the fallout from the West Coast Main Line franchise, Mr Rutnam has maintained a visible presence in the role, regularly appearing before Select Committees.

Prior to joining the DfT in 2010, he was Director-General for Business and Skills at the Department for Business, Innovation and Skills. During the 1990s, Mr Rutnam spearheaded the Treasury’s interest in transport privatisation and private finance.

Under Mr Rutnam’s leadership, the DfT has bolstered its expertise in areas such as rail franchising and high speed rail. His team of civil servants must now formulate how to deliver whichever outcome their ministerial masters settle on.

Patricia ‘Tricia’ Hayes was appointed Director of Aviation (DCGA) in August 2013 and is charged with overseeing all aspects of UK domestic and international aviation policy. Ms Hayes has worked within the DfT for the majority of her career, becoming Director of Roads in 2007. She was also an Aviation Attaché in the British Embassy in Washington DC in the late 1990s.

Ms Hayes has met with many key stakeholders whilst awaiting the Airport Commission’s recommendations, including holding a meeting with the British Air Transport Association and taking a tour of Gatwick Airport.

Throughout the three-year time span of the Airports Commission process, Labour has had three different Shadow Transport Secretaries. It falls to Michael Dugher, in post since November 2014, to lead the party’s response to the process.

In article for the Huffington Post published on 30 June, the day before the Commission delivered its report, Mr Dugher declared Labour would be ready to back the decision in the long-term interests of the country.

The Shadow Transport Secretary said that any option backed by Labour would have to be accompanied by robust and convincing evidence. Moreover, any expansion would have to go hand- in-hand with a reduction in carbon dioxide emissions to ensure the UK could meet its international climate change obligations. There should also be steps to reduce noise and environmental impacts, and the benefits of expansion should be felt in every part of the country.

With a number of high-profile Conservatives having spoken out on aviation expansion, ministers will need to guarantee cross-party support for the final recommendation.

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Governments led by Prime Minister David Cameron have not treated the subject of aviation expansion lightly. The question remains one which ministers recognise as economically essential, but also politically fraught.

Labour London Mayoral candidate Tessa Jowell claimed in June 2015 that any decision on a third runway in the South East of England would be “deadlocked” in Cabinet. Many will have noted that there are drastically differing opinions at the highest levels of Government.

The Daily Telegraph reported on 28 June that the Commission would “fudge” its final response to allow senior Conservatives to oppose expansion at Heathrow. According to the paper, at least five Cabinet ministers hold seats that would be affected by expanding the airport, including Home Secretary Theresa May, Defence Secretary Philip Hammond, Chief Treasury Secretary Greg Hands, International Development Secretary Justine Greening and Northern Ireland Secretary .

Cabinet Secretary Sir Jeremy Heywood rejected the notion of excluding any ministers opposed to expansion from the third runway decision on 30 June. Mr Cameron will need to carry his entire Cabinet with him or risk resignations.

The position of London Mayor Boris Johnson will also prove critical, given his public profile and popularity within the party. His appointment to the political cabinet, as opposed to being a full member, was interpreted providing both Downing Street and City Hall with wiggle room on a possible clash over a third runway.

In addition, the speed of response will be an integral part of any consideration, as any delay opens up the likelihood of ministers and advisers being heavily lobbied by both Heathrow and Gatwick, and also leaves the Government open to accusations of fudging the issue.

Delivering a statement to the House of Commons on the Davies Commission Final Report on 1 July 2015, Transport Secretary Patrick McLoughlin outlined the Commission’s progress since it had been appointed in September 2012 with a remit to maintain the UK’s position as a leading aviation hub.

The Transport Secretary said there were strong opinions on the issue and he felt ministers had to balance local interests against long-term interests of the UK.

Three schemes had been shortlisted – two at Heathrow and one at Gatwick – alongside improvements to the UK’s airport infrastructure, he told the House. He pointed to the wide-ranging consultation by the Commission and work being done to improve surface connectivity to Gatwick.

In addition, Crossrail would bring new connectivity to Heathrow upon its completion.

Mr McLoughlin also underlined the benefits of having strong regional airports, such as Manchester and Birmingham.

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The Commission had found merit in all three shortlisted schemes, but believed a third Heathrow runway to be the strongest, he said.

He outlined the Government’s response to the report, which would include studying the Commission’s accompanying evidence and examining the best option for obtaining planning consent.

“We will come back to Parliament in autumn to provide a clear direction [on runway expansion]”, Mr McLoughlin pledged.

He affirmed that the Government would act on what it believed was a “clear and considered” report.

In response, Shadow Transport Secretary Michael Dugher noted that the Davies Report was “substantial”, and had proceeded in a measured manner to produce a “clear” recommendation for a new runway at Heathrow.

He acknowledged that the proposal it was supporting offered fresh benefits not found in previous recommendations along similar lines.

Continuing, he said that Labour would take appropriate time to scrutinise the findings.

He urged the Government to take a swift decision to proceed, provided that robust evidence was offered to show that the increased capacity required would be delivered; that emissions could be reduced in line with legal obligations; that local noise and environmental impacts would be minimised; and that the whole country could benefit from the new assets – including regional airports.

Mr Dugher urged the Government not to kick the matter into the long grass, despite what he suggested were internal conflicts over the interests of the Conservative Party.

If Labour’s key tests were met, it would back the conclusions of the Airports Commission, the Shadow Transport Secretary said.

Also contributing, Mayor of London Boris Johnson said that a new runway at Heathrow is “not going to happen”, adding that he was disappointed with the proposal arguing that it “compounds not solves [the] issue”.

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John Holland-Kaye, Chief Executive of Heathrow Airport, said:

“This debate has never been about a runway, it’s been about the future we want for Britain. Expanding Heathrow will keep Britain as one of the world’s great trading nations, right at the heart of the global economy.

Our new plans have been designed around the needs of local communities and will meet carbon, air quality and noise targets, and provides the greatest benefit to the UK’s connectivity and its long term economic growth.

We will create the world’s best connected, most efficient and most environmentally responsible hub airport at the heart of an integrated transport system.

The Commission has backed a positive and ambitious vision for Britain. We will now work with Government to deliver it”.

Gatwick Airport CEO Stewart Wingate said:

“Gatwick is still very much in the race. The Commission’s report makes clear that expansion at Gatwick is deliverable.

“It is for the Commission to make a recommendation but it is of course for the Government to decide. So we now enter the most important stage of the process.

“We are confident that when the Government makes that decision they will choose Gatwick as the only deliverable option. For instance, this report highlights the very significant environmental challenges at Heathrow such as air quality and noise impact.

“Gatwick will give the country the economic benefits it needs and at the same time impact far less people. It is quicker simpler and quieter. Above all - after decades of delay - it can actually happen”.

John Cridland, CBI Director-General, said:

“Now that Sir Howard’s Commission has made its recommendation, the Government must commit to the decision now, and get diggers in the ground at Heathrow swiftly by 2020.

“Growing airport capacity in the South East is absolutely critical to the whole of the UK’s economic future - it simply isn’t an optional “nice to do”. Each day the Government delays taking the decision, the UK loses out as our competitors reap the rewards and strengthen their trade links”.

Mark Tanzer, Association of British Travel Agents Chief Executive, said:

“Today’s announcement is the first step towards the delivery of urgently needed capacity at the UK’s hub airport and we now look forward to the Government’s response. We call on Government to work across party boundaries and create a robust political consensus which will deliver this

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recommendation for UK businesses, and passengers. ABTA will be working with the Government, as well as the opposition front benches to help build consensus”.

Gavin Hayes, Director of Let Britain Fly, said:

“First and foremost it’s now time UK political leaders put the long-term national interest over short- term political needs.

It’s obvious from the Commission’s Final Report that an expanded Heathrow was the clear winner in terms of jobs and growth with up to £147bn in economic benefit and 70,000 new jobs. Britain’s only international hub airport is also better placed to boost the UK’s connectivity with key growth markets such as Brazil and China.

“We also support the Commission’s view that the Government should establish an independent Aircraft Noise Authority to help address the concerns of local people”.

Birmingham Airport CEO Paul Kehoe said in reaction:

“Given the significant levels of growth we have seen at Birmingham Airport within this period, especially in long-haul routes, we urge the Government to move ahead with caution so as not to damage the ability of regional airports to grow.

“The Midlands is a powerful engine of growth at the heart of our country and needs direct aviation to succeed…Whilst the Government continues to review all the evidence before it, Birmingham Airport looks forward to continuing the expansion of our long-haul offering in support of the region’s economy”.

Charles Cornish, Chief Executive of Manchester Airports Group, commented:

“With runways at both Heathrow and Gatwick already full, an immediate priority for Government must be to improve rail access to Stansted and Manchester. Aviation policy should also provide strong support for the relaxation of Stansted’s planning caps at the appropriate time so that it can make a full contribution to meeting capacity needs in the short to medium term.

The Commission’s report highlights the challenges that still need to be overcome before a new runway can be built, not least the need to meet stringent environmental conditions and deliver new capacity in a way that achieves the best outcome for consumers”.

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The decision on expanding runway capacity in the South East takes place against the run-up to the London Mayoral elections in 2016. Whilst the final response to the Airports Commission rests with the Westminster Government, the actions of incumbent Mayor Boris Johnson over the last few years have proven that the office affords its holder a platform to air their views on the issue.

Any prospective Mayor will need to woo voters from across a city where the need for economic advancement has to be balanced against the concerns of residents who will face disruption and those fearing the wider environmental impact.

As such the question of where, and indeed if, a new runway should be built is at the heart of the coming Mayoral election. The successful candidate could be a powerful ally or opponent of the course the Government chooses to pursue.

Candidate Party Heathrow Gatwick

Tessa Jowell Labour Yes Yes

Sadiq Khan Labour No Yes

Gareth Thomas Labour Yes Yes

David Lammy Labour Yes Yes

Diane Abbott Labour No Yes

Christian Wolmar Labour No No

Zac Goldsmith Conservative No Yes

Andrew Boff Conservative No No

Sol Campbell Conservative ? ?

Stephen Greenhalgh Conservative No ?

Ivan Massov Conservative Yes Yes*

Syed Kamall Conservative Yes* Yes

*Has expressed a preference for expanding runway capacity at this airport.

Preference for the site of expansion has been split across the field of candidates for next year’s Mayoral contest, with no explicit party line. Whilst many mayoral hopefuls committed to waiting for the Airport Commission’s final report, several have come out as outspoken forces for either side of the campaign.

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At the #LondonMayor hustings in June, Tooting MP and Labour hopeful Sadiq Khan reiterated his opposition to a third runway at Heathrow on air quality grounds, instead calling for a “better Heathrow, not a bigger one”. Tottenham MP David Lammy questioned Mr Khan’s motivations, arguing that his opposition to Heathrow expansion was an attempt to outmanoeuvre Conservative rival .

Mr Lammy argued: “Zac Goldsmith has announced he's running and suddenly Sadiq is against it", accusing him of "playing the same Ed Miliband politics that got us nowhere".

Mr Goldsmith has been a consistent challenger to Heathrow expansion and plans to confront the Commission should its back Heathrow: “If Howard Davies recommends Heathrow expansion, I would waste no time in launching an unprecedented campaign of opposition, and I am convinced we would win”.

Labour hopeful Diane Abbott has similarly backed Gatwick expansion over Heathrow.

Irrespective of the differences between candidates, any candidate seeking to become Mayor of London will face a difficult task once in office to keep all Londoners happy in the debate on aviation expansion.

Speaking to the BBC, Conservative contender Zac Goldsmith commented that politically speaking Heathrow expansion “is not deliverable”, adding that it was not “legally deliverable either”. In his official response, Mr Goldsmith wrote that “against all the available evidence, [Sir Howard] is effectively proposing that we spend vast sums of taxpayer money subsidising the creation of a huge foreign-owned monopoly. It is hugely disappointing that he has ignored the key evidence he received in the course of his work. On every level, Heathrow expansion is the wrong answer".

Labour’s Christian Wolmar echoed Mr Goldsmith’s comments, arguing: “The third runway at Heathrow, as recommended by the report, will never happen... the cost to the public purse is too high and the environmental damage too great. Financially, the Heathrow proposal does not stack up”.

David Lammy tweeted: “Heathrow expansion is good for London and for Londoners, but can't be a blank cheque: key that noise, pollution and jobs conditions are met”.

Rival Sadiq Khan tweeted that he was “disappointed with [the] decision to expand Heathrow. If I’m elected Mayor I will do everything in my power to stop this”.

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DeHavilland EU’s Policy Analyst James Sibley takes a closer look at developments in the wider EU context

The view in the wider European aviation industry is one of concern. The debate surrounding the eventual recommendations of the Airports Commission has been closely followed in , and it has fed into a wide-ranging discussion at the European level concerning the competitiveness of the EU aviation sector.

Increased demand for air services

Demand for air services in Europe is expected to double by 2030. However, despite €120bn committed to new infrastructure and facilities by European airports between 2000 and 2015, foreseen to increase capacity by 41 per cent by 2030, projections from ATM organisation EUROCONTROL suggest that 11 to 25 per cent of demand for air services will not be accommodated.

In the context of this capacity shortage, European industry stakeholders and EU policymakers have been acutely aware of the long delay in the decisionmaking process concerning airport expansion in the southeast of the UK. This is something reinforced further by the massive airport expansion projects undertaken in China, the Persian Gulf – where Dubai has overtaken Heathrow in terms of volume of international passenger traffic – and in Istanbul, where a new six runway airport will be opened in 2018.

Expected initiatives from Brussels

The EU has signalled that it will attempt to address some of the competitiveness issues confronting the European aviation industry, illustrated best by the announcement of a new Aviation Package last December in the Commission Work Programme for 2015. The Package is due to be published by the European Commission in December this year, and is likely to include:

 A Communication on aviation competitiveness  New proposals on aviation safety, and  Attempts to address alleged uncompetitive practices by non-EU airlines and airports.

There may also be movement from the EU on the specific issue of airport expansion. The recent adoption of the €315bn European Fund for Strategic Investments (EFSI) – also known as the “Juncker Plan” – should see funding begin to be distributed as early as September 2015. Infrastructure projects such as airports, and regional airports in particular, are seen as potential beneficiaries. In this area the EU can be expected to be cautious, however, with Brussels still reeling from the results of the December 2014 European Court of Auditors “ghost airports” report, which found that €255m had been driven into “unnecessary expansion projects.”

Aside from these new initiatives, industry stakeholders continue to press for further work on the Slots Regulation, which governs airport slot allocation, and on the implementation of the Single European Sky (SES), which could potentially increase capacity through more efficient air traffic management. A Commission proposal on the implementation of SES (SESII+) is currently stalled owing to a dispute between Spain and the UK over Gibraltar Airport, but stakeholders remain hopeful. The Spanish general elections expected this year may provide the key to unlock the impasse.

Thus, it seems that the next six months will be of vast importance to the aviation sector both in the UK and throughout Europe. The step up in advocacy efforts in the UK following the publication of the Airports Commission’s recommendations will be closely mirrored in Brussels, where EU stakeholders will be jostling for position and attempting to put forward their views on the focus of the forthcoming Aviation Package. All will hope that the outcome will see the boost to EU aviation competitiveness that everyone in the sector desires.

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