8 RTP/14/13 TAYSIDE AND CENTRAL TRANSPORT PARTNERSHIP

17JUNE 2014

DUNDEE AIRPORT

REPORT BY PROJECTS MANAGER

This report outlines the content and recommendations of the Transport Scotland research study “Scoping Study into Potential Development Opportunities for Airport” and informs the Partnership of Tactran Officer participation in an associated Steering Group.

1 RECOMMENDATIONS

1.1 That the Partnership :-

(i) notes and comments on the contents and recommendations of the Transport Scotland research study “Scoping Study into Potential Development Opportunities for ”, as outlined within this report; and

(ii) notes Tactran Officer participation in the Steering Group and agrees to receive a further update at a future meeting.

2 BACKGROUND

2.1 Tactran’s Regional Transport Strategy (RTS) recognises the strategic and economic importance of direct regional air connections to key UK and onward international destinations from Dundee Airport and states that Tactran will seek to enhance the economic prosperity of the region by working with airport authorities and others to promote and improve flights and facilities at Dundee Airport.

2.2 Recognising the importance attached to Dundee Airport within the RTS, the Partnership has on a number of occasions allocated funding to promoting and maintaining air services. At its meeting on 14 December 2010 the Partnership agreed to allocate £50,000 as a contribution to maintaining air services between Dundee and (Report RTP/10/42 refers). At its meeting on 11 September 2012 the Partnership endorsed the allocation of £5,000 as a contribution towards a marketing campaign aimed at promoting Dundee Airport and improving the viability of air services and connections that operate from the airport (Report RTP/12/22 refers).

2.3 In early December 2013 Transport Scotland published the report “Scoping Study into Potential Development Opportunities for Dundee Airport”. In late December 2013 CityJet announced it was withdrawing its London City service at end of March 2014. During February 2014 the Executive Committee approved a revised 2013/14 RTS Revenue Programme that included a £22,000 allocation as a contribution to subsidy requirements for an interim Dundee to London Stansted air service and a £6,000 allocation as a contribution to a marketing campaign to promote this service (Report RTP/14/01 refers). The interim service is in place while a more permanent Public Sector Obligation (PSO) air service to London is achieved by Summer 2014.

1 2.4 At its meeting on 11 March 2014 the Partnership noted the revised 2013/14 RTS Revenue Programme as approved by the Executive Committee during February 2014 (RTP/14/05 refers) and it was agreed that a substantive report on Dundee Airport based on Transport Scotland’s Scoping Study be submitted to the Partnership meeting on 17 June 2014.

3 DISCUSSION

3.1 Dundee Airport is situated on the south side of the city on the shore of the overlooking the Tay Rail Bridge. Dundee Airport first opened in the Riverside area in 1963 with a grass , which has been improved over the years to now provide a 1,400m tarmac runway. The Airport itself has had various owners; Dundee Corporation, Tayside Regional Council and Dundee City Council, until December 2007 when Dundee Airport Limited was established as a wholly owned subsidiary of Highland and Islands Airport Limited (HIAL) and HIAL is now responsible for its operation. HIAL is a public corporation owned by Scottish Ministers and while Dundee City Council retains ownership of the land, it has granted a long lease at peppercorn rent to HIAL for airport use.

3.2 The principal economic function of an airport is to provide connectivity that enables businesses in its catchment area to access domestic, European and wider global markets, suppliers and external expertise quickly and efficiently, whilst also enabling and encouraging inward investment. An airport serves the role of being an international gateway for the economies of the “city region” and has an important role in helping to optimise the competitiveness and wider benefits derived from established markets and new planned investment in its catchment area.

3.3 The Dundee city region has a number of mature markets associated with traditional economic sectors such as manufacturing, financial services (e.g. Alliance Trust, RBS, Aviva), public sector back office activity, Universities and tourism, and is seeking to establish itself in a number of new business sectors (e.g. life sciences, creative industries, digital media and renewable energy servicing) – all of which have above average propensity to fly. The investment being made in the £1 billion Waterfront project, including V&A at Dundee, as well as existing and expanding tourism markets such as golf tourism have potential to generate significant new visitor markets as well as providing new business opportunities.

3.4 However, the airport faces a number of challenges, both financial and operational. The airport has operated at a financial loss of over £2m per annum over recent years and had just under 30,000 passengers using the London City service in 2012. At the time of writing, only one scheduled service – to London Stansted – operates from Dundee Airport. The size of the existing site constrains future expansion of air services and the airport runway is not sufficiently long to accommodate larger aircraft used by low-cost budget airlines. The airport also has to contend with passenger “leakage” to other larger airports, principally , and , which are over an hour’s drive from Dundee.

3.5 With the above in mind and given the uncertainties of maintaining Dundee Airport, Transport Scotland commissioned consultants to undertake a Scoping Study into Potential Development Opportunities for Dundee Airport. The study was published in December 2013 and a copy is available in the Members’ area of www.tactran.gov.uk. This report draws on and summarises the Transport Scotland commissioned Study.

2 Scoping Study into Potential Opportunities for Dundee Airport

3.6 The core objective of the Study was to identify a range of short to medium term measures aimed at securing a financially sustainable airport operation that delivers sustained improvements in air connectivity for Dundee, Angus, Perth & Kinross and North East Fife and a platform for both existing and new aviation related businesses to support employment generation in Dundee and beyond.

3.7 The Study focuses on identifying a range of measures to improve the airport’s short to medium term prospects, rather than to seek to set out options for long term growth. It is considered that until a stable business outlook, making much more intensive use of the airport’s existing infrastructure is achieved, examining a range of options for long term growth requiring substantial additional capital investment is speculative and could distract from the immediate task of securing a financially stable airport operation.

3.8 The scope of the Study was to consider the current operation/infrastructure; undertake stakeholder engagement; consider other regional airport initiatives/models; develop, scope and sift options. The Study report is structured around these requirements.

3.9 It should be noted that during the course of the Study the scheduled services to Birmingham and Belfast were discontinued and immediately following the Study being published CityJet announced it was withdrawing its London City service in March 2014. Subsequently, an interim service to London Stansted is now in operation pending a more permanent London service being provided under a Public Service Obligation (PSO) agreement. A PSO agreement allows the payment of a public subsidy to an airline for a designated service.

Current operations/infrastructure

3.10 Over the years scheduled services have operated to a number of destinations, with London, Manchester, Birmingham and Belfast being the most significant. The most recent permanent service being operated by CityJet/Suckling () offering two flights daily to .

3.11 However, the charges at London City Airport have dramatically increased over recent years and are now approximately three times higher than at other London airports, such as Stansted, resulting in high passenger fares. Between 2000 and 2009 passenger numbers on the London City service varied between 45,000 and 70,000 before dropping off, with CAA figures for 2012 anticipated to be below 40,000 for the first time since the 1990’s.

3.12 In addition to scheduled London Flights, Ramsey Word Travel continues to offer summer charter flights to Jersey.

3.13 However, General Aviation (GA), rather than public scheduled flights are much the largest component of overall air traffic movements from the airport. This comprises:

. Business Aviation, with European destinations being in easy reach from Dundee.

. Rotary Activity with helicopter traffic routinely accepted at Dundee, but with no commercial helicopters currently based there.

3 . Ancillary Activities, such as fixed wing medical flight for nearby ; training flights and Aero Club departures from the airport, many taking form of commercial pilot training.

3.14 , the flight training and aircraft service company located at the airport, delivers high quality flight training from private pilot license level through to full airline commercial pilot’s license, as well as military cadet training on behalf of RAF. It operates a fleet of 16 aircraft maintained at a high quality maintenance hangar located at Dundee Airport. Tayside Flying Club also utilises Tayside Aviation aircraft. Loganair also utilise hanger facilities to maintain their Dornier 328 fleet.

3.15 Dundee Airport’s single runway is 30m wide by 1400m long, of flexible construction, 5m above mean sea level and horizontal with a straight longitudinal profile. There are 5 taxiways at Dundee Airport with the main apron serving the passenger terminal providing three aircraft stands. The current terminal was opened in 1997 and comprises 2 check-in desks, landside retail, security, airside departure lounge, domestic and international arrivals, customs/immigration, an arrivals area and baggage handling. There is also a Rescue and Fire Fighter Service (RFFS) at the Airport.

3.16 The types of aircraft compatible with Dundee Airport depends on a number of complex factors, such as basic runway performance; seating density on aircraft; distance to destination (i.e. fuel load); baggage load; height of runway above sea level; runway flat/horizontal; temperature; obstacles along extended centre-line of runway; category of RFFS.

3.17 It is considered that Dundee Airport is suitable for a range of aircraft (jet and turbo prop) used by regional carriers to serve a number of destinations within a 400 – 500 nautical mile radius. However, the Airport is not suitable for narrow-bodied jets used by Low Cost Carriers, because of its runway length, load bearing and classification. There is little scope for changing this position without extensive land reclamation from the adjacent River Tay at an estimated cost circa £40m to £50m.

3.18 Business aviation can function fairly freely at Dundee, the main restriction being shortage of apron space to permit long stopovers, but that can be remedied by targeted investment.

3.19 As with all small airports with limited passenger traffic, the fixed costs and overheads associated with meeting core safety and security requirements impose a significant financial burden that is not possible to pass on in full commercially at current traffic levels – nearly 80% of the operating budget is taken up by fixed costs such as staffing, security, rates, utilities and insurance. In terms of revenues aeronautical charges make up 63% of income, with nearly three quarters of that (50% of total income) coming from scheduled passenger flights. This reflects the recent passenger number decline.

3.20 Although Dundee Airport has been operating at a loss since 2004, it is considered that further cost cutting will have limited effect and the focus needs to be on revenue generation across a number of markets.

3.21 The market assessment suggests that the core catchment area for Dundee Airport is within a 30min to 40min drive, giving a potential core catchment population of 450,000, drawn from Angus, Dundee, Perth & Kinross and North East Fife. This suggests a potential passenger throughput of over 1m passengers per annum for Dundee Airport. However taking into account relative strength of other airports with a

4 drive time of between 1 and 2 hours from Dundee Airport i.e. Edinburgh, Glasgow and Aberdeen, it is suggested it would be prudent to reduce this by 50%, possibly more.

3.22 The “leakage” of Dundee Airport catchment population to other Airports is illustrated by figures from CAA for 2009, which show capturing two-thirds of Dundee’s core catchment traffic (660,000 passengers/annum) and Glasgow nearly a quarter (240,000 passengers/annum). Overall with Dundee Airport throughput currently less than 50,000 passengers/annum, the “leakage” to other airports is approximately 95%. This indicates that Dundee airport is not currently providing the right commercial offer to passengers. However, the report suggests that in principle there could be a potential medium to long-term passenger market for Dundee Airport of between 250,000 and 500,000 passengers per annum. However, achieving these kinds of figures is very much dependant on the right fare levels, frequency and route structure being developed.

3.23 A high level analysis has been undertaken of estimated market potential using 2009 CAA survey data and taking into account levels of “leakage” likely to be clawed back. Those with the most potential are as follows:

. London: 43,000 to 67,500 passengers per annum (ppa) . Manchester: 28,000 to 35,000 ppa . Birmingham: 20,000 ppa . Belfast: 15,000 ppa . Amsterdam: 42,500 to 45,000ppa . Dublin: 26,500 to 32,500ppa

3.24 Dundee Airport faces the challenge of finding a way of offering services, for which there is clearly a market within its catchment area, at a price the market is willing to pay given the competition offered from Edinburgh Airport in particular. Finding a solution to this is key to finding a long term commercial future for the airport.

Stakeholder Consultation/Engagement

3.25 Stakeholder consultation was undertaken with a range of organisations with a direct interest in the future of Dundee Airport including, Local Authorities, Local Chambers of Commerce, Scottish Enterprise, Tactran, HIAL, Scottish Enterprise, SCDI, Defence Infrastructure Organisation, Tayside Aviation, Perth Airport and some private aircraft owners. In addition 28 organisations that currently use or could potentially use the airport services were consulted including Public Sector organisations, Manufacturing, Financial and Business Services, Higher Education, Transport, Travel Agents, Tourism, Visitor Attraction, Publishing and Energy companies.

3.26 A number of required destinations were identified by the organisations consulted, with London being the main point to point destination and Birmingham being the main UK regional airport, followed by Manchester and a small number of responses for Belfast, Cardiff and Southampton. Although a significant number of organisations make international flights, the numbers of flights are small. The most common destinations were various USA, Paris, Dublin, Cork and India, with Amsterdam dominating the responses in relation to a hub airport.

5 3.27 Organisations are making flights to London from Edinburgh rather than Dundee, with the main reason being cost outweighing convenience. The second reason is poor timing of Dundee – London City services. Although the Universities expect to see an increase in their overseas flights, a number of organisations are considering more use of rail for longer journeys.

3.28 A number of businesses, but not a majority, see an advantage flying to London City airport, but if another airport was to be considered the top preference was Gatwick followed by Stansted, Luton, Heathrow and Southend in descending order of preference.

3.29 In terms of a premium respondents would be willing to pay to fly from Dundee rather than another Scottish Airport, from the responses received a £60 - £80 premium is seen as a sensible assumption.

Consideration of other regional airport initiatives/models

3.30 Within the UK many small regional airports are grappling with the same challenges of scaling activity to a level where the minimum fixed costs of operating an airport safely and securely can be covered at a price which the market is willing to bear, or of finding other ways of cross subsidising those core requirements.

3.31 Some small airports have not survived, such as Plymouth, Sheffield and Swansea. Others such as Newquay and Cardiff have survived with support from the Local Council and the Welsh Government respectively, in a similar fashion as at Dundee through HIAL and Scottish Government support. In a number of cases, there appears to be recognition among public authorities in peripheral regions of the importance of maintaining air services to connect them to national and international markets.

3.32 The worst affected small airports are those that have been in competition with larger airports close-by, as the trend has seen medium to large sized airports increase their regional market share in line with consolidation in the air industry. The exception to this general rule offering some stability are “island airports” where there are no competitors; airports with strong catchment areas and airports which are bases for key regional airlines (such as Inverness with /Loganair).

3.33 Dundee does not have these “stability” factors, but a stabilising factor in its favour is its remoteness from London and the lack of a competitive day return London rail service.

3.34 Small airports that have a diversity of income are faring better in the current climate than those that do not, be this property portfolio generating rent, other sources of aeronautical income (Business Aviation/General Aviation, offshore activity etc.), or the airport acting as a focal point of associated local businesses. Dundee currently falls into the category that doesn’t have a diversity of income and positive action is required to address this, as it currently has a high level of subsidy per passenger.

6 3.35 There are, however, business models that Dundee Airport should take cognisance of that appear to work by taking pro-active measures to reduce their exposure to declining passenger numbers and create new sources of revenue by combining:

. Strong cost controls. . Provision of a competitive passenger offering (local, convenient, simple, efficient, cost effective) that allows airlines to attract traffic volumes that can sustain the cost and operation of core infrastructure. . Marketing that offer strongly to the local catchment area so that there are high levels of awareness. . Capital investment, usually with public sector support, to diversify income streams (aeronautical or property related). . Securing buy-in to a clear business plan and pro-active support from a wide range of strategic stakeholders, both public and private.

3.36 Opportunities to diversify and improve business at Dundee Airport include:

. Maintenance Repair and Overhaul: Continuing or expanding maintenance works undertaken by Loganair and Tayside Aviation . Business Aviation Market . General Aircraft/Flight Training: Fight movements associated with Tayside Aviation’s flight school operation and Tayside Flying Club, with Tayside Aviation’s aspirations for expansion at Dundee Airport. . Offshore Activity: Dundee’s position suggests it could provide a very attractive base for this kind of helicopter activity. . Property Development: Former Water Board building on the eastern end of the airport site offers only real opportunity of any significance.

Development, Scope and Sifting of Options

3.37 The study identifies whether there are any development opportunities that are realisable at acceptable cost, that can help improve Dundee Airport’s financial position, in the short-medium term, either by reducing or sharing costs, securing additional revenue or some combination of the two. Complementary objectives are to maintain or increase the Airport’s contribution to the local economy and improve existing connectivity to other parts of the UK and the wider world.

3.38 The Study considers the first challenge must be to maintain an existing London service to allow time to have a long-term replacement which can take advantage of the airport’s potential eligibility for PSO funding from the UK Government. Thereafter the challenge is to set about realising current known opportunities to capture additional activity, while developing a more detailed and coherent long-term strategy and 5 year business plan to make targeted investments to turn the Airport round. Analysis indicates that a financial breakeven point is likely to require between 360,000 and 500,000 passengers per annum at Dundee Airport.

3.39 Due to the physical constraints of the airport site investment in non-passenger based commercial activities will only ever make a modest contribution. Therefore a commercially sustainable solution will need to be focussed on attracting new routes and additional passenger volumes.

3.40 Although the Study considers in detail potential development opportunities for Dundee Airport, the Study also includes a high level qualitative appraisal of 4 Scenarios according to Scottish Transport Appraisal Guidance (STAG) principles:

7 A. Full Closure of Dundee Airport

Two separate options are considered:

. A1: General and Business Aviation activity transferred to Perth/Fife Airports

. A3: Commercial, General and Business Aviation activity developed at Perth Airport

Another option involving Leuchars Airport (A2) was considered to be outwith the scope of the Study.

For the A3 option there are a few issues that would need to be considered: its location is less optimal to serve the catchment and closer to Edinburgh; surface transport links would need improving; it is 385m above sea level and more vulnerable to cloud; an extension of the runway would require significant filling to ensure it is horizontal. These issues raise significant question marks regarding Perth Airport suitability for Commercial traffic (A3) but much less of an issue for General and Business traffic (A1).

B. Dundee Airport Closes to Commercial Scheduled Traffic

This scenario considers the airport remaining open to General and Business Air traffic only, permitting fire cover and security to be significantly downgraded and other cost savings. The terminal building would provide improved facilities for General and Business Aviation and for this type of activity to be significantly increased.

C. Maintain the Status Quo (Do Minimum)

The do-minimum option would maintain air passenger levels at around 30,000 to 70,000 per annum with Scottish Government continuing to subsidise the airport’s operating losses, but investing little.

D. Grow Dundee Airport

Two options are considered based on level of investment required:

. D1: Achieve up to 150,000 passengers and increase ancillary activity

. D2: Achieve more than 150,000 passengers and optimise ancillary activity

As the terminal building is capable of handling 150,000 passengers per annum without major investment, option D1 considers limited investment to bring land and buildings into commercial use with the primary focus on airside infrastructure enhancements at an estimated cost of £350,000 to £700,000. Option D2 considers a more ambitious optimisation of the airport estate to maximise revenues requiring reconfiguration of the terminal building and significant investment in car parking, apron, hangar and RFFS facilities at a cost of just under £4m.

8 3.41 The results of the appraisal indicate that retaining a passenger airport at Dundee appears to be a better option than closing it altogether, letting it become a GA airport or relying on Perth or Fife Airports to pick up the slack on GA traffic. This is certainly the case in the short to medium term while options for improving traffic volumes and reducing current levels of operating loss are explored.

3.42 Dundee Airport is well placed in the catchment area, has existing passenger facilities that can be expanded at more modest cost than is likely at Perth to achieve the same service standards. Dundee Airport’s principal downsides are that without increases in passenger numbers well beyond the short run target of utilising the existing terminal to the full, the current cost of subsidising the airport’s operation will only ameliorate a little and indeed could increase without some targeted capital expenditure.

3.43 Given that passenger related revenues form a higher proportion of total income at Dundee compared to many other small regional airports of its kind (primarily because of its location and size constraints), the turn-key issues moving forward are likely to be whether the potential market for air services from Dundee can be realised, the impact this will have on operating losses and what the capital costs and economic benefits associated with higher passenger volumes are in comparison to the ”Do Minimum” scenario.

3.44 Developing a sufficiently detailed understanding of these issues to allow properly informed decisions to be made requires further work to be done on marketing, facilities planning and costing and business planning so that the capital cost and risk of delivering lower revenue subsidies can be properly profiled. The appraisals and these considerations point to taking forward options D1 and D2 to the next stage of assessment against the “Do Minimum” baseline.

Conclusions and Recommendations

3.45 High level analysis of the airport’s catchment and demand profile suggests there potentially is sufficient demand to support a modest network of scheduled and charter services from the airport and that there are a number of carriers that have the equipment to operate those services within the airport’s operational constraints. However, persuading them to enter into commercially sustainable contracts is likely to be time-consuming and require substantive investment in the form of marketing resource and monetary support.

3.46 The highest priority should be to put an effective, well-timed and cost effective London service on a stable footing (through the use of a PSO, if required), then to set about securing other scheduled routes where there is clear evidence of sufficient business or leisure/Visiting Friends and Relatives (VFR) orientated market demand. From a scheduled passenger network point of view, it is considered that with the right financial support, the short-medium term actions could encompass a number of domestic routes (in addition to London), possibly an international link (e.g. to Amsterdam) and a range of longer distance charter destinations. Capturing these services would substantially improve the prospects for reducing the level of subsidy the airport requires over time.

3.47 Concurrently, HIAL should also be looking to exploit other short term commercial opportunities, (e.g. letting the ex-Scottish Water Board building and working with Tayside Aviation) while putting in place a coherent 5 year development strategy and 3 year business plan, which will utilise much of the existing terminal capacity and turn the airport around commercially.

9 3.48 Scope also exists to generate additional revenues from Business Aviation, Helicopter and GA traffic and also from aviation related property development to service their needs as they grow. Some modest capital investment may be needed in relation to the latter, particularly if the use of the available land at the Airport is to be optimised.

3.49 With the possible exception of additional aircraft stands, the terminal and airside infrastructure and operating cost base exist already to handle up to 150,000 passengers per annum and should not need to be increased until passenger volumes materially exceed that figure. The Study considers a financial breakeven could be achieved at around 360,000 to 500,000 passengers per annum, perhaps less if other income streams are obtained.

3.50 These circumstances put a premium on:

. Marketing the airport heavily to the right carriers so that services can be provided at a price and frequency which will prove attractive to the catchment area. . Offering an airport environment that is attractive both to airlines (in terms of charges and route development support), and to customers (as a result of speedy processing, good local accessibility, competitive car parking prices and an attractive terminal environment). . Securing the support of key local businesses and other stakeholders. . Raising the level of awareness within the catchment area. . Addressing wherever possible any infrastructure constraints to optimise operational flexibility for as many carriers and aircraft types as possible. . Maintaining a high quality service that attracts repeat users and local pride and commitment to look to Dundee Airport first for their air travel and only thereafter look elsewhere.

3.51 With the foregoing in mind, the study draws a number of conclusions and recommends a number of short, medium term and strategic development options to be pursued, as set out in Appendix A.

Steering Group

3.52 The Study recommends that a Steering Group of relevant strategic partners is formed to take forward the recommendations of the study, with cognisance of resources and timescales involved. Tactran’s RTS states that Tactran will work with airport authorities and others to promote and improve flights and facilities at Dundee Airport and as such Tactran has been identified within the Study as a strategic partner.

3.53 A Steering Group with representatives from Transport Scotland, HIAL, Dundee City Council, Scottish Enterprise and Tactran has subsequently been formed, with the group initially focusing on the short term actions set out in Appendix A; in particular focusing on the interim Flybe (Loganair) service to London Stansted and its marketing, as well as taking forward proposals for a more permanent London service through PSO arrangements to commence in Summer 2014.

3.54 Dundee City Council’s Policy & Resources Committee agreed on Monday 9 June 2014 to award a PSO contract to Loganair Ltd to operate a Dundee to London Stansted air service over a 2 year period commencing 1 July 2014, with the option of a 2 year extension. The service will consist of 2 return flights daily Monday to Friday and one return flight on Sunday. PSO funding of £2.85m for the service will be provided by UK Department for Transport (DfT) through their fund to support access

10 to London from UK regions, with Transport Scotland and Dundee City Council providing just under £200,000 each.

3.55 Other recommendations currently being progressed include development strategies for other routes as identified in the Scoping Study; an airport marketing plan and exploring other commercial opportunities.

4 CONSULTATIONS

4.1 This report has been developed in consultation with the Transport Officers Liaison Group and Chief Officers Liaison Group, who are in agreement with the proposals.

5 RESOURCE IMPLICATIONS

5.1 There are no additional resource implications arising from this report. Tactran provided finance in 2013/14 to support the interim London Stansted service as outlined in Section 2 of this report.

6 EQUALITIES IMPLICATIONS

6.1 This report has been screened for any policy implications in respect of Equality Impact Assessment and no major issues have been identified.

Niall Gardiner Projects Manager

Report prepared by Niall Gardiner. For further information contact email [email protected] or telephone 01738 475764.

NOTE

The following background papers, as defined by Section 50D of the Local Government (Scotland) Act 1973 (and not containing confidential or exempt information) were relied on to a material extent in preparing this Report.

Report to Partnership RTP/10/42, 2010/11 Revenue Monitoring and Programme, 14 December 2010

Report to Partnership RTP/12/22, 2012/13 Revenue Monitoring, 11 September 2012

Scoping Study into Potential Development Opportunities for Dundee Airport, Social Research, Transport Scotland, December 2013.

Confidential Report to Executive Committee RTP/14/01, Revenue Programme: Proposed Revisions, 12 February 2014

Report to Partnership RTP/14/05 2013/14 Revenue Programme and Monitoring, 11 March 2014

11 Appendix A

Scoping Study into Potential Development Opportunities for Dundee Airport

Short, Medium Term and Strategic Development Options

Short Term Initiatives

Transport Scotland, in conjunction with relevant strategic partners (e.g. HIAL, Dundee City Council, Scottish Enterprise, Visit Scotland and Tactran) - should consider implementing over the next 12-18 months a programme of short term initiatives aimed at stabilising and then turning round passenger throughput at the airport whilst optimising as far as possible other existing commercial opportunities.

These should include:

. Find a replacement carrier for the Cityjet service to London City to serve the London market. . Build-up an in-depth understanding of the Dundee to London market and the economics of maintaining such a service given the constraints the airport imposes on the aircraft that could operate it. . Pursue the potential to support the service, if required, through use of a PSO or the Government’s recently announced £10m Route Development Fund. . Undertake a survey of potential demand for air services within the core catchment area, using a combination of survey monkey style techniques supported by the local media and follow up discussions with key local companies and the wider business community to provide evidence to support the CAA based analysis and hard market data for presentations to airlines. . Draw-up a wider route development strategy (i.e. beyond the core London service) and identify the likely financial implications of implementing it. . Develop an airport marketing plan to raise the profile of the airport within its core catchment area and engage pro-actively with a range of market segments (i.e. business fliers, in and out-bound leisure travellers, tertiary education, VFR passengers and the offshore sector) and the local community using a variety of marketing techniques including social media in particular. . Seek third party advocates in the form of high profile champions, ideally with a strong connection to Dundee, to help build public awareness and support for the airport. . Develop a commercial offer, not just in the form of pricing but also convenience and customer experience that will make the airport a preferred choice for travellers within its catchment area. . Prepare a prospectus to market the airport as a base for offshore, but particularly, renewables related helicopter operations, and market it pro-actively. . Engage with Tayside Aviation in negotiations on a joint plan to develop their flying school and maintenance businesses, increase apprenticeships, jobs and long-term rental income. . Secure a productive use for the Ex Scottish Water Board building that generates rental income now without foreclosing the potential for attracting a blue chip use down the line. . Draw-up designs, cost and an associated business case for additional aircraft stands for commercial or business aviation use.

1 Medium Term Strategy

. Provide additional dedicated resource for HIAL to support existing Commercial and Marketing Manager in taking forward the Airport’s business development; . An on-going commitment to social media based surveys of the local population regarding: views on the Airport; pricing they would respond positively to on which routes; and feedback on how the Airport is doing to optimise the service offering; . HIAL supported by Transport Scotland, VisitScotland and the City Council, as required, should commit to attending key networking conferences (such as Routes Europe) in addition to bilateral meetings with airlines; . Engage proactively with the offshore renewables industry to position Dundee as a construction and servicing base for wind turbines; . Ensure that all the airport’s existing property assets are being let, even if only for short- term tenancies; . Rationalising and optimising the development of the Airport estate including where appropriate, acquiring developable land adjacent to the Airport; . Increase commercial focus looking at aspects such as car parking reconfiguration, Airport Development Fee, sponsor naming rights;

It is recommended that these actions and more should to be covered in a strategic 5 year development plan.

Strategic Development Options

Having examined a range of development options for Dundee Airport based on a number of core strategic scenarios and then subjected them to appraisal in line with STAG Stage1 requirements, the Study analysis points to the following generic conclusions:

. The airport is well located within its catchment area, has existing passenger facilities that can be expanded at more modest cost than is likely to be possible at Perth and is potentially capable of generating material economic benefits for its sub region. . Retaining a passenger airport at Dundee, at least in the short/medium term, would be a better option than closing it altogether as long as there are commercial services using it, it is affordable and represents value for money in terms of economic benefits retained or secured. . Accordingly, further work should be done on exploring Dundee Airport growth options alongside the Do Minimum to allow the next stage of the assessment to be undertaken. . It may, therefore, be prudent to delay closing the airport to commercial services until the extent of the market for air services from Dundee is more definitively understood and all avenues to attract carriers have been exhausted. . Similarly, the relative merits of operating a joint-operational facility at Leuchars may be something that Transport Scotland could explore privately with the MoD while these other short-medium term initiatives are being implemented, to see if this would result in material cost savings relative to the anticipated ongoing levels of subsidy required at Dundee. . The costs of mothballing commercial operations should be examined carefully so that if the London services are lost, the relative costs of temporary closure or maintaining a functioning facility are understood. . In parallel it would be pragmatic for alternative uses for the site to be evaluated, so that in the event that the airport does need to close, the value and benefits it might generate in non-airport use are also clearly understood.

2