Written Evidence Submitted by Airlines UK (PEG0191)
Total Page：16
File Type：pdf, Size：1020Kb
Written evidence submitted by Airlines UK (PEG0191) Airlines UK welcomes the opportunity to submit evidence to the BEIS Committee inquiry into Post-Pandemic Economic Growth. Airlines UK is the trade association representing UK-registered airlines. Our members are 2Excel, AirTanker, British Airways, CargoLogicAir, easyJet, Jota Aviation, Jet2.com, Loganair, Norwegian Air UK, Ryanair, TUI Airways, Titan Airways, Virgin Atlantic, and West Atlantic. Airlines UK members employ in excess of 90,000 people, serve over 276 million passengers and carry around 1.2 million tonnes of cargo. Airlines UK response to inquiry questions What core/guiding principles should the Government adopt/prioritise in its recovery package, and why? UK airlines share the vision of a post COVID-19 UK economy that is stronger, more sustainable and more productive, and which works for all the UK’s nations and regions. Aviation will play a key role in this future, connecting us to the world, supporting business and UK exporters, and the hundreds of thousands of jobs that rely upon aviation directly or indirectly, including within our world-leading aerospace or tourism sectors. Any economic recovery package must recognise aviation as a strategic industry for the UK, supporting the third largest aviation network in the world, behind only China and the United States. The sector supports some 4.5% of the UK’s GDP when including the value of foreign tourists arriving by air, translating into 1.6 million jobs across our nations and regions – including in the aerospace & tourism industries1. Around 40%2 of the UK’s non-EU trade by value is transported by air, and AUK’s members transport over 1 million tonnes of air cargo annually. However, this leading status is under threat given the significant impact of the COVID-19 pandemic. It is essential that Government understands the damage caused by the pandemic but also how with the right support, the sector can emerge on the other side with as many jobs and as much infrastructure intact as possible, and with opportunities to support a green economic recovery – and the long term success of the sector - through investment in low carbon aviation technologies. Impact of Covid-19 on aviation Since March flights from the UK have essentially been grounded. The impact for the airline industry has been extremely sharp, because whilst revenue has been all but eliminated during that period, substantial costs have remained beyond those for employees covered by 1 https://www.iata.org/en/iata-repository/publications/economic-reports/united-kingdom--value-of-aviation/ 2 https://airlinesuk.org/wp-content/uploads/2018/10/Assessment-of-the-value-of-air-freight-services-to-the- UK-economy-Final-Report-v22-Oct-2018-b-SENT.pdf the furlough scheme, which has been an essential lifeline. Nearly 44,000 airline staff have been furloughed as a result of the coronavirus pandemic. The timing of the pandemic has also been particularly challenging. The bulk of airlines make their money in the northern summer season. This has been impacted significantly this year, even with the introduction of a limited number of Travel Corridors from 10th July. The introduction of Travel Corridors allowing quarantine-free travel from low risk countries, and concurrent change to FCO travel advice, was a major boost to the sector, allowing a cautious restart of operations to a number of key markets, mainly in Europe. However, we have since seen a number of countries removed from the quarantine exemption list, including Spain and France, hugely popular destinations for UK travellers. Latest figures from IATA indicate that 2020 will see over 154 million fewer passenger journeys from the UK, putting over 700,000 UK-based jobs at risk. Airlines in Europe are set to lose (at least) $21.5 billion in 2020, with passenger demand declining by over half3. The impact on inbound tourism is also huge. An impact assessment on the UK economy by The World Travel and Tourism Council (WTTC) estimates the fall in international tourist numbers to the UK could result in the amount spent dropping by 78%, or £420m a week4. 3 https://www.iata.org/en/pressroom/pr/2020-06-18-01/ 4 https://www.theguardian.com/business/2020/aug/26/drop-in-tourism-could-wipe-22bn-from-uk-economy- says-wttc-covid-19?utm_term=Autofeed&CMP=twt_b- gdnnews&utm_medium=Social&utm_source=Twitter#Echobox=1598433067 The scale of the challenge is highlighted in the graphic above from IATA which shows the extent of the impact on demand and how recovery is expected to be gradual over the coming years with recovery to 2019 levels not expected until 2024. Research5 by York Economics for Airlines UK shows that, in this context, without intervention by the Government UK airports will initially lose around 600 routes as a result of the pandemic before gradually recovering, with 80% of the lost routes in the UK’s regions outside London. UK Government must recognise the scale and impact of this crisis on UK aviation and act accordingly. Lowering the costs for airlines and supporting passenger demand will enhance the capacity and level of connectivity in the next year. This in turn will support the retention of jobs, and the broader aviation infrastructure – including airports and ground handlers. The research undertaken by York highlighted that a 12-month APD waver would: • Save around 45% of routes that would otherwise be lost by summer 2021. • Boost passenger demand by around 21 million; and • potentially save 8,000 jobs and £7 billion in GVA. Moreover, there is an important opportunity to ensure that as the sector begins to recover, no time is lost in safeguarding its sustainable long term future and leveraging the economic opportunities of low-carbon aviation technologies such as sustainable aviation fuels to support a green recovery, benefitting the whole UK. 5 https://airlinesuk.org/emergency-air-passenger-duty-waiver-would-save-45-of-lost-air-routes-and-save- 8000-jobs-study-concludes/ How can the Government borrow and/or invest to help the UK deliver on these principles? In our answer to the next question (measures and support) we set out in detail what UK aviation will need to restart and recover, and rebuild consumer confidence. In answer to this question, we will focus on the significant opportunity for Government to accelerate the progress towards aviation decarbonisation whilst supporting a near-term green recovery, benefitting the whole UK. UK aviation has identified that the greatest opportunity for rapid aviation decarbonisation (as part of a wider package of measures including electrification) is investment in Sustainable Aviation Fuels (SAF) from second generation biofuels6. SAF could cut UK aviation emissions by over 30% by 2050. These are produced using proven technology, meet strict sustainability criteria and use existing supply infrastructure. Around the world, over 200,000 commercial flights using SAF have taken place, generating carbon cycle savings of 70% or more when compared to fossil fuel-derived kerosene. 6 file:///C:/Users/Griggs/Downloads/SustainableAviation_FuelReport_20200205%20(7).pdf. With financial support and a supportive policy environment, by 2035 14 production facilities could be operational in the UK employing around 5,200 people and contributing £742m annually to the UK economy. With export included, this value could grow to 13,600 jobs and £1.9bn. However, investment decisions are being made now, and action is needed in the short term if we are to deliver on the potential of these fuels in the longer term. SAF is an area where UK aviation is already leading the world, with news only last month that Europe’s first waste-to-SAF facility received planning permission in North East Lincolnshire – a project being developed by Velocys in partnership with British Airways and Shell. By creating the right investment climate now, the Government can help ensure the UK is amongst the first countries to commercialise this technology and deliver meaningful capacity and carbon reductions. The most important action that the Government could take to make this a reality is committing £500m of Government funding over five years, matched by industry and commencing in 2020, to close the capex funding gap for the first few schemes, given the challenges of funding first-of-a-kind facilities. What measures and support will businesses need to rebuild consumer confidence and stimulate growth that is sustainable, both economically and environmentally? As outlined above, there is a strong expectation of a substantial reduction in demand and air travel over the winter 2020 and likely into the summer of next year, compounding the impact of the pandemic to date which has seen overall bookings down 82% year-on-year for 2020, compared to the outlook in June 2019. The introduction of Travel Corridors between low risk countries and the UK, replacing the blanket 14-day quarantine of all arrivals, was a big step forward and enabled the restart of flights for many this summer. However, we have now seen quarantine being reintroduced at short notice for a number of key markets like Spain, causing significant disruption to airlines and distress and uncertainty for passengers. UK Government must do everything it can to help UK aviation adapt flexibly to this new normal, where Travel Corridor countries might experience local spikes in infections, whilst other higher risk countries might have lower risk regions or territories. A practical step would be to take the sensible and agreed principles behind Travel Corridors and the UK’s approach to ‘local lockdowns’ and enable quarantine free travel from sub- national regions where infections meet Travel Corridor criteria. These ‘regional Travel Corridors’ might be with mainland regions within Europe, islands even US states, so long as reliable data is available.