Appendix 1 Transport Committee - 13 February 2013 Transcript of Item 6: Airport Capacity in London

Caroline Pidgeon MBE (Chair): Let us move back then to our main item, which is our review of airport capacity in London. We have a wide range of guests before us this morning. Daniel Moylan is the Mayor's Aviation Adviser and Richard de Cani is here on behalf of Transport for London. Michèle Dix has given her apologies but Richard is very knowledgeable on this so you are very welcome today, Richard. Paul Harwood from Network Rail is here to talk to us about the links to the various airports. Nigel Milton is from Heathrow Airport. Stewart Wingate is from Gatwick Airport. Nick Barton is from Stansted Airport. Iain Osborne is from the Civil Aviation Authority and Hugh Aitken is from easyJet. Virgin Airlines came to our last one and Hugh you were not able to attend that one but you are also very welcome today.

Do feel free, as we ask questions, to indicate if there is something you particularly want to come in on or if somebody is saying something you want to perhaps contradict. We do want to make sure that the conversation goes all ways.

If I can kick off our questioning this morning, what I want to look at is the issue of demand. A lot of this debate assumes that there is going to be a need for an increase in airport capacity because of demand. If you look at the various forecasts, the Department for Transport’s (DfT) forecast is about 2.5% per year increase in air travel they think, various other forecasts suggested it could be up to 5.7%, but then others say that actually there are other things you could do to reduce that increase in demand.

Also, given the economic climate we are in, how robust really are these forecasts and are we really going to see that amount of growth? I am wondering what you think in terms of whether there really is going to be a huge need to expand airports because of your projected demand, or whether the forecasts might not be so reliable. Maybe we could start with the airport operators. Nigel, do you want to start?

Nigel Milton (Director of Policy, Heathrow Airport Ltd): I would be very happy to and thank you for the invitation to appear before you all this morning. Chair, I think you are correct to say that the recent forecasts issued by the DfT have shown a discrepancy and a reduction from the ones they had produced previously. However, as far as Heathrow is concerned what they show is that Heathrow was full in 2011 and in all of their various scenarios Heathrow will remain full as long as it remains a two runway airport.

I am sure Members are aware that the argument Heathrow is making is that what London and the UK needs is additional hub capacity. We have sufficient airport capacity but what we need is more hub capacity, and Heathrow as currently the only hub is full and will remain full according to all the scenarios forecast for the future. Therefore what we need is additional hub capacity. Under all the scenarios that the DfT have identified, there is a need for additional hub capacity as of 2011.

Caroline Pidgeon MBE (Chair): We are going to come on to talk about the hub a bit later. Are you saying that you still think the forecasts are correct and that there is going to be a significant increase despite the economic climate?

Nigel Milton (Director of Policy, Heathrow Airport Ltd): Well there already is a lack of hub capacity as of 2011, so for two years now we have had no hub capacity available and as a result of that, flights and demand that should be coming to the UK are not.

Caroline Pidgeon MBE (Chair): You are not answering my question, Nigel. Are you predicting that passenger numbers are going to go up therefore you are going to have to grow airport capacity?

Nigel Milton (Director of Policy, Heathrow Airport Ltd): There is already unsatisfied demand as of today and that is going to continue to increase.

Stewart Wingate (Chief Executive, Gatwick Airport Ltd): When we look at it we have taken note of the recent forecasts and reduction forecasts and I think they do take into account the economic headwinds that not only the airports are facing but the broader economy as well. In terms of capacity we actually look at the London system today and we see an awful lot of spare capacity that is not effectively used. If you look at, for example, Gatwick, today we will do about 34 million passengers this year but we have capacity for 45 million passengers. If you look at Stansted, I am sure Nick [Barton] will talk more articulately about it than I can, but they will do about 17 million to 18 million passengers this year yet have a capacity of somewhere between 35 million to 40 million passengers. We actually do not see there being a crisis today in terms of capacity. There is a lot of spare capacity in Stansted and Gatwick, as well as plans to introduce new capacity at the likes of Luton and, indeed, Southend.

Having said all of that when we look at the demand, we think by the time you get into the mid to late 2020s then if we are to satisfy the demand to maintain connectivity to and from London, then inevitably at that point new runways will be required.

Caroline Pidgeon MBE (Chair): You think by the late 2020s that is when forecasts suggest to you there will be a need to increase capacity?

Stewart Wingate (Chief Executive, Gatwick Airport Ltd): Yes, that is what the forecasts suggest to us and we hear Nigel’s [Milton] arguments of hub, but we do think that they are somewhat overstated. If you look at Gatwick following the change of ownership three years ago we have actually been reaching out to many of the emerging economies, which previously people thought you could only get to through a hub. In actual fact, if you look at the flights we have managed to win at Gatwick now that we are marketing ourselves in separate ownership from the BAA monopoly, we have actually put in place flights to the likes of Istanbul and Moscow starting this summer - so two of the emerging economies on the doorstep of Europe - as well as announcing, as we did last week, a new flight to Indonesia, on top of the Vietnamese flights we put in place a year ago and Air China too. We disagree with the idea that you need a hub to reach out to these emerging economies, you actually just need to use more effectively the spare capacity that exists in our airports today.

Caroline Pidgeon MBE (Chair): That is very helpful.

Nick Barton (Managing Director, Stansted Airport Ltd): Chair, the point you originally raised in your question was whether we believed the forecasts and the answer is, yes, I do. My sense is that London is such a strong destination in its own right that the inherent demand for it, provided we can service it, will grow. The forecasts do talk about constrained and unconstrained demand, which is more technical in nature, but in essence, is London going to retain its attraction to international trade, tourism, business and friends and relative traffic, yes it will, it absolutely will. I think it is incumbent on a lot of the people around this table to make sure we can continue to deliver the infrastructure that will allow that growth to be realised.

The reality is, ultimately, travel is discretionary. Therefore if we simply do not have the capacity to meet it, it either will not be delivered and people will not travel to London, or alternatively they will go elsewhere, which is more concerning. From our perspective we absolutely do believe the forecasts. Even though they have been reduced in their scale, historically we have looked at growth rates of about 3% to 4% on a compounded annual growth rate basis. We are now looking at maybe 2.5%, something of that sort. In London that is still a very significant number per year in terms of potential growth that could be met through airport capacity or airport system improvements. To put that into context we are already looking at around 140 million to 150 million passengers a year in London. Therefore, even if it were ‘only’ 2%, that is still potentially 2.5 million to 3 million passengers that will be growing each year. That is an enormous number of passengers coming to London.

Caroline Pidgeon MBE (Chair): Thank you. You are working on the 2.5%, the revised figures?

Nick Barton (Managing Director, Stansted Airport Ltd): We accept the forecasts that have been prepared by the DfT simply because they are the most recent figures, but in terms of just sense-checking it, does it feel right? If anything it probably feels slightly light but it is something to aim for. What it is not saying is that traffic will be flat or declining.

Caroline Pidgeon MBE (Chair): Richard, in the work you are doing at TfL, do you have confidence in these figures? If it was to be 2.5% a year, reports suggest that actually airports in and around London will not be operating at full capacity until more like 2040. Is that the figure that you are working to?

Richard de Cani (Director of Transport Strategy & Policy, Transport for London): If you look at the document produced by the Davies Commission, which summarises the recent DfT forecasts and puts them in the context of forecasts produced by others, including EUROCONTROL, the USA and the aviation industry, the forecasts the DfT are producing are consistent with other forecasts that are produced, which show this continuous trend upwards in terms of demand. The issue that we have in London, as Nigel has already referred to, is that the pressure is on a certain type of capacity and demand around the hub and the forecasts highlight that growth at Heathrow, if unconstrained, would be considerably higher than at other airports. The pressure we have is around hub capacity and hub demand which is growing at a higher rate than other aviation demand.

Daniel Moylan (Mayor’s Aviation Adviser): It is also the case - if I may add just to complement that - that the DfT forecast said quite clearly that on their current revised projections the whole south eastern airport system would be full by 2030 and possibly 2025, not 2040. That was what the DfT said. That is a hop, skip and a jump away from where we are today.

Caroline Pidgeon MBE (Chair): Thank you for that. Hugh, as an airline, what is your feeling in terms of your projections? Also, perhaps you would like to comment on the issue that Stewart [Wingate] started to talk about, namely the level of spare capacity at airports and whether a better way to deal with the capacity is actually to use our existing airports in a smarter way.

Hugh Aitken (Commercial Manager, easyJet): First of all on forecasts, we feed into the DfT and other regulators what we believe the growth to be. EasyJet is an airline that is still growing in London. We are London’s largest airline with over 80 aircraft across the four airports out of which we operate: Gatwick, Luton, Stansted and of course London Southend, and we see further growth in all of those airports. Mirroring what Nick [Milton] said, there is still huge demand across Europe to bring people into London and also to connect London businesses with where we are in Europe.

We have just started a new route to Venice from Southend, we are putting new routes into Stansted, as Stewart said we have Moscow starting this summer from Gatwick, so again it is about connecting into it. We grew by 4% in January and we definitely see more potential to grow.

I think the capacity question is an interesting one because there is almost a preoccupation, for want of a better word, about the need for hub capacity, but 85% of passengers coming to and from London are point to point. We know that passengers want to make their travel easy, which is what we are all about, and that is about getting people directly from where they live to where they want to go. I would ask the Committee to look at the point to point market and not just the argument about hubs and how we develop those.

If you look at capacity now, mirroring what Stewart [Wingate] has said also, there is spare capacity in the London system. London Luton has a shovel-ready project now to double its size, and while that might not sort some of the longer term issues it gives us much needed capacity now. Southend opened up last year and again it is providing capacity and where passengers want to fly from. There is a lot of capacity in the system at the moment and we are focused on how we can develop and fill that.

Caroline Pidgeon MBE (Chair): Hugh, you are basically saying there is capacity and potential at many of these other airports and that should be used in terms of point to point, and that is where some of the focus should be?

Hugh Aitken (Commercial Manager, easyJet): Yes, absolutely. On the hub argument, absolutely the UK needs to be connected to the emerging markets and we are doing our part in places like Moscow and out to the Middle East. We have flights to Jordan, Israel and across the Middle East. I think the other question is, how do we smartly use the hub capacity we have at the moment? You will find it surprising that British Airways (BA) are starting flights out of Heathrow to Alicante and Ibiza this summer. That is not effectively using the hub capacity you have at Heathrow if you are flying to places that quite frankly should be point to point served out of other airports where they have the capacity to do that.

Caroline Pidgeon MBE (Chair): Iain, do you want to comment from the Civil Aviation Authority (CAA), both on the forecasts but also about using capacity at other airports?

Iain Osborne (Group Director of Regulatory Policy, Civil Aviation Authority): On the forecasts, we have no commercial ‘skin in the game’ but we share the consensus that it would be foolish to act as if they were wrong. It is not an exact science. We are talking about looking 20 to 30 years ahead, but in the UK over time and globally, the link between aviation growth and gross domestic product (GDP) growth is very strong. There are some people who think we should move towards a growthless economy. However, assuming that we are going to continue to see GDP growth, a bit slower or a bit quicker, then we will see aviation linked to that. The gearing between GDP growth and aviation also has changed over time and there is a maturing effect, but the idea that it would drop to zero does not seem credible at all.

The DfT central estimate seems a reasonable basis from which to work, but as things pan out it might turn out a little bit slower or a little bit quicker. The idea that you can aim to time big infrastructure investments so they cut in just when everything else is full is completely unrealistic. No other sector works on that basis. Also passengers, if we do not get extra capacity, will pay. We calculate that, with other airports and the London system as a whole becoming full, in 2030 it will be about £1 billion a year that passengers are paying more than they need to pay if we can secure surplus capacity. That is looking at the system as a whole. Subdividing the capacity into some animal called hub capacity as opposed to some animal called non-hub begs lots of questions that we can talk about later. At the growth level, yes, we will need more capacity and that means we need to start thinking about building it now.

Can we get more value out of the existing capacity? Well, the market provides lots of incentives for companies to do exactly that. What you have seen at Heathrow over the last couple of decades has been a very substantial shift from short haul to long haul. Heathrow soaked up the large majority of total long-haul growth out of the UK and that has been partly through a growth in the total amount of flights but very much also through a reasonably sharp reduction in domestic connectivity and short-haul growth, which nationally has grown enormously but has not grown particularly at Heathrow. Will we continue to see that, probably we will. The BA slots are a case in point. Airlines manage their fleets in such a way that to bring on a whole load of new long haul routes instantly is not a very easy thing to do. I suspect that we will see BA launching with some of these extra slots they have from the BMI acquisition with short-haul routes but then we will see the substitution kicking in as the market develops.

We have mechanisms that already achieve this. Are bureaucrats like me and politicians like you better placed to work out what would be a better pattern of connectivity? What we are talking about is whether we should actually be intervening so that people who would like to book a flight have fewer choices or less convenient choices against some notional pattern of connectivity that we think would be better. I think we have moved away from that by and large in the UK and for jolly good reasons.

Caroline Pidgeon MBE (Chair): Thank you that is very useful. Nick, do you want to come in from Stansted’s point of view about this issue of using spare capacity better? Obviously we have heard that you have spare runway capacity at peak periods particularly.

Nick Barton (Managing Director, Stansted Airport Ltd): That is correct. We are an airport that has a capacity of 35 million passengers per annum. It has planning permission to achieve that today and it has the infrastructure in place, substantially, to deliver that today. The capacity that is actually being throughput on an annual basis is around 17.4 million, so almost 50%. The airport did trade in 2007 up towards 24 million passengers per year, but the nature of our business is probably far more vulnerable to the vagaries of the UK and European economy and of course oil prices over the last few years. Therefore the market has contracted a little through what is regarded as probably the worst aviation recession in the history of aviation. The airport has contracted and we have seen 7 million or so of our passengers either not fly, which is probably the most likely outcome, or maybe even just slightly relocate their preferred options, because the market in itself has got better in London with greater exposure to the Low Cost Carrier (LCC) market and tremendous growth at Gatwick. You have seen greater choice and there has also been some repositioning of the market across London.

We have seen two impacts and it has left us with a magnificent airport that can cope with any type of aircraft in operation today - the largest aircraft can operate at Stansted - and we have the ability to handle those with the infrastructure that is already built. We have a number of issues in terms of how we therefore drive that capacity into London and make it more relevant - if you will - to the London market, and we have a number of strategies to try to deal with that. There is no question that we are almost the barometer of economic confidence where aviation is concerned, so far as London is the market.

We look forward with great optimism and in fact over the last three months we have started to see our passenger numbers grow in the same months year on year, for the first time in nearly five years. That has happened for the last three months on the bounce. That is very significant for us and we are feeling very optimistic about the future. However, Stansted’s ability to service the growth in London’s market is absolutely available today, and we are obviously going to try to influence and make sure we get us much of the growth as we can.

Caroline Pidgeon MBE (Chair): Some of that links to the airport which we will come onto with Paul [Harwood] from Network Rail later. Stewart, do you want to come in before I bring Nigel [Milton] in?

Stewart Wingate (Chief Executive, Gatwick Airport Ltd): In terms of spare capacity I do not think it is just about the spare capacity that exists today. One of the things we have done at Gatwick following the change of ownership three years ago is to look at the way in which the runway is operated, the way in which the airfield operation works, the way in which we work with our airline partners such as easyJet, the ground handlers and the air traffic controllers, and quite steadily we have taken what we inherited, which was a runway that had 50 movements per hour in the peak hours and was the best utilised runway in the world, and we have actually improved it further. Today we declare 53 movements at peak hours, we have a programme of works which by next year will see us declare 55 movements in a peak hour and we are striving to achieve somewhere close to 58 movements per hour.

One of the other factors we can introduce into the discussion is not to rest on our laurels with the runways we have, but to actually look at how we can further optimise those runways. If that sort of performance was achieved at Stansted, Luton and Southend in the future without building an additional runway in the near term that would actually put an awful lot of peak capacity into the system.

If I can just drop back onto some of the other things we have studied at Gatwick, we have taken a global view and looked around the world to see how other people are contending with these issues, because they are facing similar issues to those we face in London. There are a number of things we have taken note of. If you look at JetBlue in the United States, that is a low cost airline which is actually feeding long haul airlines. It is creating a hub for the new century. It is not a traditional hub where a BA plane would feed from a short-haul BA flight to a long-haul BA flight. There are agreements put in place between JetBlue and other international long-haul flights, which in the future is something that really interests us at Gatwick; a way in which you could actually create a hub at Gatwick or Stansted to increase the viability of some of the more marginal long haul routes.

It is not only happening in the United States, it is also happening across in the Middle East. Emirates only have widebodied aircraft; their entire fleet is a large, long-haul aircraft. They feed those aircraft with an airline called flydubai, which is a low-cost airline that was formed about three or four years ago by some ex-easyJet executives. That is providing the feed, if you like the transfer traffic, onto the Emirates aircraft. I do not think we should look in the rear view mirror at the way in which a traditional hub has worked for the past century. We actually need to be more creative and think about how we can utilise the new networks, particularly the feed networks that the low- cost airlines have so successfully set up in such a profitable manner.

The other thing we looked at was over in Milan where they offer products that a passenger can actually buy from the airport. If you fly in on a low-cost flight you go to the arrivals baggage hall and collect your bag, but then you deposit it in a check-in desk on the air side and then you go through to your connecting flight. You make it a lot more convenient for the passenger going through the airport and actually the airport, because people can go through the hub or transfer facility with convenience.

The final point I would draw to your attention is the mix of aircraft on order in the coming years, again looking forward rather than back. We have heard a lot about A380s which is an aircraft very suitable for hubbing, but in actual fact if you look at where the majority of the aircraft orders are placed they are not placed on A380s. They are placed on aircraft such as the Dreamliner, the 787, and the Airbus 350 which will start to come into operation in 2015. The significance of that is that those particular aircraft, the 787 and the 350, are specifically made to be environmentally friendly, to have lower fuel burn and to have longer ranges with fewer passengers on board. In other words, they are hub-busters. They are the aircraft which will connect the likes of Gatwick or Stansted to further afield destinations on a direct basis. If you have London on your doorstep with 10 million people within an hour’s drive of Gatwick, that is exactly the sort of aircraft and convenience that I think people from London and the south east want to have to get to the long-haul destinations.

There are a lot of innovations taking place that are live in the market today, which means that when we look to the future we do not see the need to lurch back towards a monopoly situation with a very dominant hub airport. We actually paint the picture for the future of having three competing airports offering good choice, good levels of service and better value for passengers going through which would actually, in my opinion, result in lower fares.

Caroline Pidgeon MBE (Chair): I just want to bring Nigel in. Keeping the focus on capacity, I realise Heathrow does not have spare capacity and very limited runway capacity. Its terminals may have some spare capacity but not in terms of your runways. What about if you took some of your freight out, because you do still have some solely freight planes that come in, and what about some of the private flights that come into Heathrow? Would that help with some of your capacity issues?

Nigel Milton (Director of Policy, Heathrow Airport Ltd): In a one word answer, no. The amount of sole freight aircraft we have coming into Heathrow now is very small, I think it is fewer than three a day on average. Then the private planes coming in, they do not have any scheduled slots. They have what are called ad-hoc slots. When a scheduled airline cancels a flight because the plane has gone tech or for some other reason why flights are cancelled, then the business aircraft can apply for the slot to land at Heathrow. They are never scheduled. Taking the private jets out of Heathrow does add to resilience because having aircraft coming in on a slot means that we continue to run at that 99.2% capacity but it would not add any capacity because those slots are already allocated.

Essentially the issue is that Heathrow operates at 99.2% capacity for its runway slots. We have been working this year on trialling ways of improving the resilience and punctuality, but in terms of actual new capacity, that 480,000 cap is there, it cannot be busted.

You raise the issue of terminal capacity and the investment that is going on at the moment into the new Terminal 2 which will open next year and will be a fantastic upgrade in passenger experience for people using Heathrow, and also will facilitate more passengers going through. We are currently at 70 million passengers and we are doing what we can to encourage more. By 2020 we will have the capacity for 90 million passengers but we will still be capped at that 480,000, so how do we increase the size of the aircraft? We are building additional facilities for A380s and larger aircraft and we are shifting our landing charges to encourage aircraft to use landing charges to make much more efficient use of the slot. However we are never going to get a situation - Stewart [Wingate] has already highlighted that airlines have a mix of aircraft on order - where all 480,000 aircraft flying into Heathrow are going to be A380s. Edinburgh to Heathrow is never going to justify an A380, so we are always going to have a mix. The issue for us is to work with the airlines to make sure that we have the right mix and the most efficient use of the capacity we have.

Caroline Pidgeon MBE (Chair): Iain wanted to come in and then I am going to move on to the next area.

Iain Osborne (Group Director of Regulatory Policy, Civil Aviation Authority): While the Committee is thinking about demand I just wanted to draw your attention to the importance of the mix in driving outcomes. There is a reason why Heathrow is chock-a-block and some of the others are not; it is because the airlines make more money by flying out of the Heathrow and the reason for that is because Heathrow is particularly attractive to premium passengers. There are quite a lot of routes where it is the front end of the plane that floats the economics of the route. Why is Heathrow more attractive? Partly because west London is more prosperous than other parts of London; partly that surface access makes it particularly easy to get to London because it is just closer for people starting from the City and so forth.

If you are trying to imagine alternative futures with growth, actually getting to grips with who the people are travelling on the planes, particularly the ones buying the expensive tickets, how they are getting to the airport and what their preferences are; that is the place to start. I say that partly because, as a regulator, it is all about passengers for us, but actually that is what drives the economics of the industry.

Caroline Pidgeon MBE (Chair): Some of the work we have been doing outside of the Committee has been looking at just that, and mapping it, which I am sure we will come on to later.

Murad Qureshi (AM): Iain, I am quite interested in what the CAA have said about the Visiting Friends and Relatives (VFR) movement. While much of this debate is led by business concerns and business classes, the reality is that something like one third of London’s population were born abroad. 40% of the minority communities in the UK are based in London and that naturally predicates a lot of visits to far flung places around the world. I just want someone independently to emphasise that in this whole debate because, I think, in long-haul flights they play a much more important role than I think many of the commentators give them credit for.

Iain Osborne (Group Director of Regulatory Policy, Civil Aviation Authority): I think that is right. I think the majority of people who use Heathrow are not flying on business. At the same time, because business disproportionately buys the expensive tickets, they are very important in the economics of that whole system. VFR is something that has grown over the last couple of decades. This is globalisation in action. It has grown from something relatively minor into something very important. It is not London but I was up at Leeds Bradford Airport the other week and I was slightly gobsmacked to see that Pakistan International Airlines has a direct route and then I thought, well yes, it is Bradford.

Murad Qureshi (AM): It makes sense.

Iain Osborne (Group Director of Regulatory Policy, Civil Aviation Authority): The same is true for London airports, that VFR is a very important sector.

Caroline Pidgeon MBE (Chair): We are going to move on to look at the hub and point to point debate which we have already started.

Onkar Sahota (AM): Indeed, we have already touched on this but this is to give you a really open forum, to have a real debate. We keep hearing about capacity, that is point to point capacity, but the argument some of you have put forward is about the hub capacity. We want to look at the evidence that suggests we need to increase hub capacity in this country. I really want you to address that fundamental question.

Nigel Milton (Director of Policy, Heathrow Airport Ltd): An airline only operates a route to any destination if it is economically viable to do so. There are different types of aircraft coming in but they are still large aircraft with 200 to 250 seats that need to be filled. In order to make a route viable and be attractive to the business passengers that, as Iain [Osborne] rightly pointed out, are the key to making a route viable, airlines need to be able to offer a daily service to these links. All the research shows us that it is the daily link to emerging economies and traditional markets that the UK trades with that makes trade, employment and deals happen.

In order for an airline to fill up a long-haul aircraft every day it needs to combine the local demand, so the people from London or the destination they are flying to flying home again, with the transfer traffic. For many of these destinations either there is not sufficient demand purely in London or, if it is a really popular market like New York, there is not sufficient demand to create the hourly service that produces the real close links that London has with New York.

What a hub airport allows the airline to do is combine the local demand with the transfer traffic to fill up those long-haul aircraft. Without that transfer traffic the long haul, the frequencies and the range of destinations that are currently available in the UK and at Heathrow, just would not be available. That is what makes a hub airport so key: it makes viable routes that airlines would not otherwise be able to operate.

Stewart Wingate (Chief Executive, Gatwick Airport Ltd): If you look at Gatwick today, somewhere close to 20% of the passengers travelling through are flying on long-haul aircraft. We have a lot of long-haul aircraft today, we have done historically and we are introducing new routes particularly to the emerging economies offering better value ticket prices as well to passengers choosing to fly to and from the UK.

For me it brings you back to the fundamental question which is, what is the use of the airport by passengers? When we have looked at the ticket data sales from the International Air Transport Association, which is the airline body, what that tells us when we look at passenger journeys is that 93% of them are made by passengers who are either starting or finishing their journey in London. Only 7% of journeys are passengers transferring through London. As Hugh [Aitken] pointed out earlier, the vast majority of passengers are travelling on either a point to point basis or are actually travelling on a journey that goes from London, for example, via Dubai, on to Australia. There are only 7% of journeys passing through London.

For us when we look at the hub argument, we accept that for the most marginal of routes hub capacity and transfer passengers are a very useful thing, but for the vast majority of routes, the likes of say our new Indonesian route to Jakarta, that is the first direct air link between the UK and Indonesia for a number of years and it has a population of 250 million people. I think often the debate makes you focus on the most marginal routes, while there are countries out there with populations the size of the United States that we are not serving, which clearly can be served on a point to point direct route, particularly when you look at the new aircraft that are coming in the not so distant future. The Dreamliner is already in operation and the A350 is just around the corner.

We certainly do not dismiss transfer traffic, we think it has a role to play and it should be used very wisely for the most marginal routes but we do think that the importance of transfer traffic has been exaggerated and that there are just other ways to get the connectivity that London requires. That is the key for me, and it is just too simplistic to say there is a hub system and there is a point to point system; it is more complex than that.

Onkar Sahota (AM): Last year I think you started a flight to Korea from Gatwick, which has now ceased. Why did it stop?

Stewart Wingate (Chief Executive, Gatwick Airport Ltd): Well that is a great example of competition starting to work between the airports now that they are in separate ownership. We worked very hard to secure a Korean Air flight to Seoul. It was very successful, over 75% of the seats were sold last year on the service and then there was a competitive response from British Airways. At Heathrow BA came in and put in place a six times per week service and Korean Air withdrew back to Heathrow. I think it is a great example of how competition is now starting to foster better connectivity overall for Londoners.

Hugh Aitken (Commercial Manager, easyJet): The key for us is the point to point market, that is our focus. 85% of people want to fly that way, as I have said. The question is, why do people want to fly direct rather than go through a hub? First of all it saves time. If I live in Glasgow and I want to go to Milan, do I want to spend a couple of hours going through a hub? I do not. I want to fly direct and that is what we are all about: making travel easier and cutting down the time spent flying. That is why we have a focus in the regions of the UK feeding directly into Europe rather than feeding everything into London.

It is also avoids more flights. Looking at the environmental side, if people can fly directly rather than take two separate flights, the overall environmental impact of that journey is lessened, and that for us is an important part of the equation as well.

There was a discussion earlier on about expensive tickets and needing business passengers to make routes viable. We will hopefully be in the FTSE 100 in March and I think we are a case in point, that a point to point airline can be financially successful and continue to be so. Our mission is to make travel affordable, we do not want people spending £2,000 or £3,000 flying to Moscow. We want to be getting them there for £100 or £200 and that means Britain is more competitive, it is cheaper to get to the UK and to London, and it means more people will be flying on those routes, which will help the UK and London economy.

Onkar Sahota (AM): Let us assume we do not have a hub airport in the UK, what would the consequences of that be to the economy generally? We are told that a hub airport could be built in Dubai, there is a lot of open land there, never mind six runways, they could have ten runways; we could never compete with them. Suppose we decide we do not want to have a hub airport, does the British economy suffer in any way at all?

Stewart Wingate (Chief Executive, Gatwick Airport Ltd): You have to start with demand and you have to decide, if you go down an alternative route from a hub airport, can you satisfy the demand that the British population has for connectivity? That is our starting point with the detailed work we are doing ahead of the Davies Commission. This is the piece of work we will be submitting in the coming weeks to the Davies Commission. The proposition we are working on is to have two runways at Heathrow, where you do have the traditional hub arrangement that British Airways primarily flies with the transfer traffic. Then our proposition is to develop Gatwick with two runways, giving them for the first time in a generation the ability to put in place the facilities to compete head on with Heathrow and to create new, innovative services that will support the demand requirement for London. Then in due course for Stansted to have a second runway and by doing that we believe that not only will you support the vast majority of the connectivity requirements for London and avoid the need for the hub airport, but to boot you will also spread the economic benefits that are driven by the airports around the city and you will also distribute the environmental impacts that are caused by aviation. That is our view.

When we look at it, the early analysis we have done essentially says that if you follow the philosophy we are laying out of having three competing two-runway airports, in actual fact you will be able to provide the vast majority of the connectivity that a hub airport would provide for residents of the UK.

Nigel Milton (Director of Policy, Heathrow Airport Ltd): There are a number of assertions Stewart has made that I would like to pick up on there. You asked the question, what is the damage caused to the UK by a lack of hub capacity. There is evidence Heathrow has commissioned - and his response to that would be well of course it would show that therefore there is a huge gap because it is in our interest to - but I think there is evidence from the Confederation of British Industry (CBI), from the Institute of Directors, from British Chambers of Commerce and London First consistently showing now that the lack of hub capacity in London is harming the UK and London today.

Stewart talks a lot and is very focused on demand from London but we are also looking for demand from other countries coming into London. What is going to kickstart the UK economy is foreign investment and tourists. The British Chambers of Commerce did a poll last year of 350 Board level executives from Brazil, China, Mexico, South Korea and India, and 92% of them confirmed what we already knew which was that direct flights are important to inward investment. When they are making decisions about where they are going to set up companies, direct flights matter. What is more worrying is that 67%, so two thirds of them, last year said that because of the better area connections they already had to the hubs in Paris, Frankfurt and Amsterdam, they are more likely to do business, set up companies and create jobs in those countries than they are in London. 62% of them said they would only invest in the UK if there was additional hub capacity.

That is the businesses, and businesses can only fly to places if the airlines do. BAR UK, which represents all of the foreign airlines that fly into the UK, they did a poll last year of all of their members and over half of them, 53%, said that they are either deciding to or are preparing to base flights in other countries because of the fact that Heathrow is full. 47% of them said they were not doing that, and congratulations to Stewart and his colleagues at Gatwick that they are starting to pick up some of those 47%, but over half of them are setting up new routes into our EU competitors. 86% of the members of BAR UK said they would only consider additional UK flights if there was additional capacity at Heathrow.

A real example of this is China Southern which flies to Guangzhou. It approached Heathrow in 2005 to set up a direct link between London and Guangzhou. There was no space at Heathrow. It did not go to Stansted, Manchester or Birmingham, it went to Paris and in 2005, China Southern set up a route between Paris and Guangzhou. In 2012 China Southern finally got some of the slots it was looking for at Heathrow. Again, it did not go to Stansted or Gatwick, it looked at Heathrow. So from last year London now has its direct route to Guangzhou, but for seven years between 2005 and 2012 London had no direct route to the fourth largest city in China, while Paris, Amsterdam and Frankfurt did. Anyone who thinks that does not matter or that that is not linked to the amount of Chinese investment going into continental Europe is deceiving themselves. What matters is hub capacity. Sure, you can try to spin it and say there are different ways but there are not. It is about hub capacity and providing those links to the emerging economies and the frequency of services to traditional markets. New York is just as important to us as Shanghai and Beijing will be in the future. What a hub airport gives us is the ability for London to be connected frequently to those traditional markets and to have those direct links it needs to those emerging markets.

Hub capacity is what it is all about and we are suffering today because we do not have the hub capacity that London needs.

Iain Osborne (Group Director of Regulatory Policy, Civil Aviation Authority): May I chip in here because this is getting slightly cartoonish I think. If you draw up a list of connections to Brazil, Russia, India, China (BRIC) markets, London collectively has by far the best connectivity to BRIC markets of any of the cities in Europe. If you look at a list of destinations where from somewhere else in Europe you have a direct flight but you do not have one from London, there are such destinations, but it is quite a thin list; I think the Philippines [Manila] is at the head of the list. However, these are places that are undoubtedly enormously important for our future. We are talking about whether we should begin developments that will not come on stream for 20 years, but the idea that today there is loads of trade, the bottom line is that airlines are not running the routes to Guangzhou because there are not that many people who want to fly on them. This is a future debate, not a present debate.

Nigel Milton (Director of Policy, Heathrow Airport Ltd): Iain, if that is true, why did China Southern want to start a route from Heathrow to Guangzhou in 2005?

Iain Osborne (Group Director of Regulatory Policy, Civil Aviation Authority): I am not saying there are no passengers, Nigel --

Nigel Milton (Director of Policy, Heathrow Airport Ltd): I am not saying every route. You call it cartoonish but again, the wild assertion you make Iain about there being no demand are also just as cartoonish.

Iain Osborne (Group Director of Regulatory Policy, Civil Aviation Authority): I did not say that.

Caroline Pidgeon MBE (Chair): OK, I think we are getting too much into that. Did you want to bring Richard [de Cani] and Daniel [Moylan] in on this?

Onkar Sahota (AM): I did because the Mayor is an advocate of a hub airport and I want to hear what the Mayor’s Office has to say about this.

Daniel Moylan (Mayor’s Aviation Adviser): What the Mayor has to say is that Britain and London in particular need to remain global cities and destinations for investment. The only way to do that is to have the infrastructure that guarantees you can have flights to a wide range of destinations with frequency. I agree broadly with what Nigel [Milton] has been saying and I think Stewart [Wingate] has misconceived it. The explanation for this is that if you look at a hub like Dubai you might say, well there is a marvellous example of a hub. However, London is never going to be like Dubai because Dubai has a relatively tiny population. London can draw on a population of 15 million in the wider south east, it is as large as the Netherlands, so there will always be a very large origin and destination market available in London.

Of course you could decide - and this is really Stewart’s pitch because he keeps saying, “Can you meet London’s demand?” - that you will have an airport system that simply tries to cater for the origin and destination market. If you do that of course it does not matter where you have your runways as long as you can get to them. You can stack them all over the place. However, you will always have greater efficiency, greater options, greater choices, greater frequencies, wider destinations if you add to that origin and destination market the transfer traffic that can come through, which you can only attract if you have an efficient way of making those transfers.

Stewart is slightly ambiguous because he actually said we do not need transfer traffic and then went on to describe how you can create a virtual hub like JetBlue and what they are doing in Milan and so on, so he was actually in the end singing the praises of a hub. You could decide to have distributed competing hubs around the place but that will never be as efficient as the alternative. Victorians understood this. We are all familiar with Clapham Junction. Clapham Junction is a hub. There is no junction for trains there, it is passengers who are junctioning at Clapham Junction. They come in, get off, go through that nasty tunnel and they get on another train. As a result of that they have an astonishingly wide range of journey choices, precisely because you bring all the trains together with their passengers in one place and that allows you to fill up lots of other trains going somewhere else. It is not a new concept.

You can do it in an economically efficient way that boosts Britain’s economy and London’s economy in particular, which is obviously at the top of the Mayor’s list, or you can do it in an inefficient fragmented sort of way. It does not mean your airport system closes down because you will have a lot of origin and destination traffic and Stewart will claim that as a great success. It is not a question of point to point or transfer flights, it is about what the passengers want to do and the journey choices you can offer them. You can achieve that best, like Clapham Junction, by bringing them all together in one place. That is a hub.

Stewart Wingate (Chief Executive, Gatwick Airport Ltd): Fundamentally, what I am saying is 93% of passenger journeys are journeys which either originate or have their final destination in London, the Origin and Destination (O&D) market. As Daniel says, it has always been the case that the majority of journeys in and out of the airports in London and the south east and indeed in the UK - I think Hugh [Aitken] you agree with this - are O&D. That is the vast majority of the market. From a Gatwick perspective, now that we are in separate ownership, what it gives us the opportunity to do is to look at different ways of creating means by which we can feed some of our low cost airlines on to our new, emerging, often foreign-based long haul airlines and create a hub for the future, a very different concept and model to anything the UK has ever seen before. This is why I say it is not a black and white debate, it is not a point to point debate versus a hub debate. These markets are very dynamic and are evolving.

Daniel Moylan (Mayor’s Aviation Adviser): Could I just come back on the point about the 7% because we absolutely do not accept those figures. I do not want to do the CAA’s job for it and I am surprised you have not jumped in, but the CAA figure for Heathrow, which is based on a different methodology, is that 35% approximately of passengers at Heathrow are transferring passengers. That is 35% of 70 million. Obviously, there are no ticketed transfers at Stansted and Gatwick because they do not cater for them.

Stewart Wingate (Chief Executive, Gatwick Airport Ltd): Well we do actually, we do at Gatwick --

Daniel Moylan (Mayor’s Aviation Adviser): If you only look at ticketed journeys you ignore the fact that there are actually huge numbers of passengers nowadays doing exactly what Stewart says, which is buying separate tickets and manufacturing their own transfers, sometimes very often from an easyJet flight or a low-cost flight onto a longer haul flight. The CAA methodology captures those people and the figure it has for Heathrow is 35%, obviously pretty well zero, close to zero at the other airports serving London.

Caroline Pidgeon MBE (Chair): Let Iain come in and clarify that, Daniel.

Daniel Moylan (Mayor’s Aviation Adviser): The 7% is not a reliable or accurate figure.

Iain Osborne (Group Director of Regulatory Policy, Civil Aviation Authority): I would like to clarify and explain to what extent it matters in our view. Daniel is right that one difference between the figures is the difference between looking at ticket sales which flag connections when it is sold as a connecting ticket and what we do, which is a survey where we ask passengers so we pick up self-connectors. I think the more significant difference is whether a connecting passenger is treated as one or treated as two. The 35% is data that is used to work out things like how many facilities you need to build. For instance, somebody who flies in, does a connection and flies out needs double the amount of airport facility than somebody who is making an O&D journey. Usually that is the purpose for which the statistics are being used and that is the basis of the 35%. It counts a connection as two.

What Stewart [Wingate] is saying is about passengers and journeys and it counts it as one journey whether they start in London or they transit through London. We have not completely been able to reconcile the two. We would struggle to get down to 7% but we can comfortably get down to 12% on the basis of the methodology Stewart is using.

To what extent does it matter? What Daniel is saying and quite a lot of what Nigel [Milton] is saying I think we absolutely recognise. There is no doubt that the hub factor is an important factor in aviation economics and nobody in the sector disagrees with that. We are disagreeing about how exactly it will play out into the future. The question is, how dominantly important is it? You talked about what London would be like if it did not have a hub. As long as London is a global city it will have a very important airport. A big, powerful airport underpinned by a big, powerful pool of demand. The way airlines put their schedules together is that they build them around the big blocks and then they use those to lever into more marginal markets, so you will get some level of connection. To the extent that Heathrow is hub-like today, it will continue to be.

What you will not get, and Daniel is absolutely right, is at the margins, today there is a marginal set of routes that we do not get, the ones that get squeezed out when you do not have capacity. Twenty years from now it will probably be a different set of routes but there will still be a marginal set. It will change because aeroplane technology is changing, the economics of serving different routes will change, the underlying demand patterns will be shaped by changes in GDP, but there will still be a marginal set and at the margins, not having access to that will matter. However, it does not matter as much as having good access to the places that are not marginal; they are important.

Also you need to keep an eye on things that are not about ‘hubbishness’. I would very much agree with Stewart about the importance of competition between airports. We have just run a 30 year live experiment in this country that has shown what happens if you do not have competition between airports and the results have not been very good. You end up relying on the regulator to achieve what you would really like the market to achieve and it is hard work, and regulating is less effective than the market if you can get it. As a country I think we should be really cautious before we go down a route which effectively says we are going to rely on a monopoly and aggregate everything.

Richard Tracey (AM): I just want to clear up one or things that have arisen over the last half hour. One thing, Hugh Aitken I think it was, mentioned was some new routes or flights being put on by British Airways. Alicante I think you mentioned, from Heathrow, and somewhere else, I forget where. Can I just put it to Nigel [Milton] who has been talking very fast about the need for hubs and all that, that surely there are far too many of these tourist flights, whether it be Alicante or as we heard in our previous session, Greece and Cyprus; these various south European destinations. Surely they should not be in the Heathrow mix, they should actually be somewhere else at one of the other airports that exists. I will go onto the noise factor in a minute but you just answer that one if you do not mind Nigel.

Nigel Milton (Director of Policy, Heathrow Airport Ltd): I would draw a distinction between Alicante and Ibiza and then Greece and Cyprus. Routes to Greece and Cyrus we would dismiss as unimportant leisure route at our peril. Greece and Cyprus are actually two of the only three EU other member states we have a positive trading relationship with. To say that Greece and Cyprus do not matter and are not an important business market would be doing a great disservice to the amount of investment and trade that goes on between us and Greece and Cyprus.

As regards to BA’s choice to use Alicante and Ibiza, that is an issue for you to raise with BA rather than with me. However, what I would say in BA’s defence is that they have inherited a significant number of short-haul aircraft and short-haul slots as a result of their BMI takeover and as Iain said, it is going to take a while for them to convert those into services that I think they would use for the hub.

The other thing I would say is that I agree with you and I think this is what the Davies Commission will do in terms of its short-term options. There is limited capacity at the hub at Heathrow and it is in the UK and London’s interest for that hub capacity to be used as efficiently as possible. Potentially there are routes into Heathrow that are less valuable to the hub than others, but quite where you draw the line-- I mean there may well be and I am sure there are people on those Alicante and Ibiza routes who are businessmen flying to other places via those places and that is part of BA’s hub network. The other point Iain made is that other people interfere in the commercial decisions of airlines at their peril. There are always unintended consequences.

To go back to your point, I think there are routes that currently operate at Heathrow that on the face of it you look at them and think is that really a business route, is that really adding to the hub? However, when you scratch below the surface and talk to the airlines about the makeup of passengers on those routes I think you might be surprised.

Richard Tracey (AM): It is possible to persuade airlines to go somewhere else. I suppose easyJet is a classic example. They have chosen to go to other airports and indeed the passengers follow them.

Nigel Milton (Director of Policy, Heathrow Airport Ltd): What do you mean by persuade them?

Richard Tracey (AM): Well, through price --

Nigel Milton (Director of Policy, Heathrow Airport Ltd): Yes, through charging. There has been a lot of news coverage about it over the last 48 hours. It is not cheap to fly to Heathrow and if airlines could fly to Gatwick and Stansted they could save themselves a lot of money. As I said, we are adjusting our pricing regimes to encourage larger aircraft so we are doing what we can, but as I say, you interfere in private companies’ commercial decisions at your peril.

Richard Tracey (AM): If we were to follow the logic of your argument we would just accept far more aircraft going into Heathrow. You have been quoting several hundred business people in a survey. Let me just put this to you: along with my colleague Tony Arbour, I represent a good many hundreds of thousands of people who live in West London and the political reality for you is that you cannot just carry on growing Heathrow. It is past its sell by date in terms of growing even larger because I promise you, we will stand against it along with all those thousands of people who live in West London. That is the political reality of this argument and that is why there has to be political consideration of either reducing the flights to Heathrow and sending them to other airports, or else building a new airport somewhere else.

Nigel Milton (Director of Policy, Heathrow Airport Ltd): You also represent thousands of people who work at Heathrow and tens of thousands of people who work at businesses based around Heathrow. There is a balance. I absolutely appreciate, understand and accept that the noise impact of Heathrow on the residents of West London is considerable.

Richard Tracey (AM): Unacceptable.

Nigel Milton (Director of Policy, Heathrow Airport Ltd): Well, that is a subjective view but they certainly are considerable. I think it would also be unacceptable for Heathrow to decline and lose tens of thousands of jobs; that is unacceptable. There is a balance to be drawn and I think what we have seen at Heathrow over the decades is that fewer people are affected by noise from Heathrow than at any time since the 1960s because aircraft are getting quieter and the procedures we are using and trialling are reducing the noise impact.

There is more we need to do, I absolutely accept that. There is more we need to do on mitigation, there is more we need to do to encourage airlines to invest in newer aircraft, there is more we need to do to work with aircraft manufacturers to reduce the impact of noise, there is more we need to do with National Air Traffic Services (NATS) to improve the way in which airspace is used to reduce the noise impact. It is not a black and white issue though. Heathrow is incredibly valuable to West Londoners, to many of the people you represent. They rely on Heathrow and its location for their economic wellbeing. To say “oh lose those jobs, take away those flights”, is very simplistic and I think you are doing a disservice --

Tony Arbour (AM): We did not say that, he did not say that.

Richard Tracey (AM): I just said it is large enough. I think we have probably exhausted it. It is just too big now, that is the point.

Nigel Milton (Director of Policy, Heathrow Airport Ltd): Then, Richard, you have to accept that taking away flights does affect jobs.

Caroline Pidgeon MBE (Chair): I want us to move on now.

Murad Qureshi (AM): Nigel, you suggested that point to point connections are critically important for investment here, but is there any evidence that UK businesses refuse to trade with other countries because they do not have a direct air connection?

Nigel Milton (Director of Policy, Heathrow Airport Ltd): They do not refuse to trade but there is evidence of less trade happening where business has to travel indirectly, yes.

Murad Qureshi (AM): I will give you an example. One of the emerging markets - it has not yet been defined as an emerging market yet by the ‘City boys’ but they are always six months behind anyway - Myanmar, otherwise known as Burma. I do not think there is a direct link at any of the airports that cater for London, but if you go through the Middle East you will get there. I am sure British businessmen are getting on planes, getting to Rangoon and doing the business there.

Stewart Wingate (Chief Executive, Gatwick Airport Ltd): The closest link is Vietnam Airlines from Gatwick flying into Hanoi and hopping across.

Murad Qureshi (AM): Do they? OK well thank you. I will take that tip if I go there. I suspect there must be a lot of British businessmen going there and they are going via places like Doha, Dubai and Abu Dhabi, and airlines like Emirates and Qatar are offering them that option. The reality is that we are getting a global tube network set up where actually it is going to be very difficult for us to compete against Middle Eastern hubs, because they are competing amongst themselves anyway, they can tolerate a lot more noise pollution than we are ever going to do, and they are better placed.

Stewart Wingate (Chief Executive, Gatwick Airport Ltd): Geographically they are better placed to serve the south eastern and the emerging Asian economies; they just are.

Nigel Milton (Director of Policy, Heathrow Airport Ltd): The evidence, Murad, from the report that Frontier Economics did, is that the UK trades 20 times more with emerging economies with which it has a direct link than those to which you have to travel indirectly. It does not mean to say we are not doing any business at all with those countries with whom we do not have direct links, but what the research shows is that we do far more trade with those with whom we do have direct links. The answer to your question is yes, it is harming the UK but we do not have those direct links. Trade still happens with the countries with whom we do not have direct links but not as much as would otherwise happen.

I think it is an interesting debate, the one about the extent to which we can ever hope to compete with certain places. I would add Istanbul to the list as well. I think everybody would accept we are competing with Amsterdam, Paris and Frankfurt and they do have more links to these emerging economies than we do and we are seeing decisions being taken by companies based in those emerging economies to set up their EU headquarters in other EU countries.

In the 1970s, 1980s, 1990s we saw the EU headquarters of international businesses being set up in London because London was the best connected. There were other reasons, there was the tax regime, the highly skilled workforce, the regulatory regime and other things, but international connectivity has been shown by all the surveys of businessmen to be a major consideration when they are making the decision about where to set up their HQ. In the past we have seen it become almost the default that international companies would set up their EU headquarters in London. London is not as well connected to these countries as other EU cities are. In the future we will still see some of them of course, but not as many as we might otherwise do.

Tom Copley (AM): Stewart, when Nigel [Milton] said you did not have transfers at Gatwick you seemed to object to that.

Stewart Wingate (Chief Executive, Gatwick Airport Ltd): Well Nigel did not say it, it was actually Daniel [Moylan]. If you look at Gatwick it has for many years had true transfer passengers going through on transfer tickets. Today if you look at the CAA passenger data then that would indicate that we have transfer passengers using our facilities; around about 8% of the total volume is the number today. That is what is happening.

In terms of the facilities we have, we actually have facilities that would enable us in the future if we chose to, to have up to 30% of our passengers going through as transfer passengers. Those facilities are actually in place today.

Tom Copley (AM): Presumably in theory, if Gatwick were to expand, maybe there was a second runway, you would anticipate more transfer passengers?

Stewart Wingate (Chief Executive, Gatwick Airport Ltd): As we look to the future, as has always been the case, the predominant mode of passengers will be O&D, those passengers who will get on or get off in London. Having said that, would we try to build further transfer passengers at Gatwick either on a single runway or two runways? Absolutely we would, but it would not be in a British Airways sense of creating a dual hub. BA have been quite clear that they are not interested in that, they have tried that. What we are more interested in is some of these more innovative solutions, the likes of the flydubai to Emirates, the JetBlue services that I described over in the United States, or the airport type products such as the via Milan product. By doing that we think we can create a very innovative and better value proposition for passengers to transfer through Gatwick in the future.

Fundamentally, my view is Heathrow, Gatwick, Stansted and all of the London airports will fundamentally be O&D driven airports into the future; they are today.

Tom Copley (AM): Thank you.

Andrew Dismore (AM): I just want to pick Nigel [Milton] up on some of the points he has been making about people investing in Paris or wherever. With Chinese people, for example, isn’t one of the biggest barriers the visa regime? We read about this all the time. If you are in Paris or Frankfurt or wherever you are within the Schengen Area so you do not have a problem about your business people travelling across Europe as you would if you were based in London. You are in the Eurozone. There is a whole series of other factors apart from whether or not there is a direct flight.

Nigel Milton (Director of Policy, Heathrow Airport Ltd): You are absolutely right and I think I highlighted a number of reasons. However, all of the surveys show that international connectivity is up there. I am not saying it is the only reason and I think that the visa regime, particularly with China, is a really big barrier. There are a number of issues why but the surveys show that when companies are making decisions about where to set up their headquarters, international connectivity is up there.

Andrew Dismore (AM): Is it not realistically the case that we will never be able to compete with the Middle East as a hub airport because they can build as many runways as they want. Is it not the case that what is really going to emerge in 20 years’ time is the Middle East effectively being London’s third runway? The Middle East is not going to be a destination in its own right. You can go and do a bit of shopping in the airport and lounge around on the beach for a bit in Dubai but that is about it. It will never have the same destination pull as London does. Should we not actually be looking at building much better business links with those Middle East hubs, building on Stewart’s [Wingate] point about making London more point to point, or getting our airlines to work much more closely with Emirates and somehow seeing that as our third hub?

Stewart Wingate (Chief Executive, Gatwick Airport Ltd): For the last half of the last century my view would be that London actually exploited its geographic position very well, when a lot of the trade on the long haul was done across to what we would now term our established markets; the likes of North America and Canada. Geographically we were in the right place to be a good point to touch down and transfer through. In the future as we look to the emerging economies it is undeniable that geographically we are at the wrong side of Europe and when you start to compare us to the likes of Istanbul and particularly the Middle East we are certainly in the wrong place globally, and there is not a lot we can do about that.

Daniel Moylan (Mayor’s Aviation Adviser): That is not the view of the Dutch or the French or the Germans. It is much more likely our new hub airport will actually be in Amsterdam. KPMG is not a Chinese company and they have set up their European headquarters in an office building six minutes’ walk from the checkin gates at Frankfurt airport. Microsoft is not a Chinese company and its European headquarters is within the curtilage of Amsterdam airport in a new office building there.

Andrew Dismore (AM): Yes and they do not have a visa problem, they are in Schengen and in the euro.

Daniel Moylan (Mayor’s Aviation Adviser): That is the offer and that is where people are going to go. Some might go to Dubai of course, but that is where headquarters buildings are going to go and that is where our passengers will have to go at extra cost and convenience to get the flights, including visiting friends and relations flights, in order to have that connectivity, and we will be a country station at the end of the branch line feeding into it.

Nigel Milton (Director of Policy, Heathrow Airport Ltd): Andrew, I think the original question was directed at me. You are right to identify Dubai, Istanbul, Abu Dhabi. We do not know what the demand will be in 20 or 30 years’ time. However what we can see is what is happening now as Daniel has pointed out, which is that the business case for Amsterdam’s sixth airport was predicated on the Conservative’s winning the election in 2010 and cancelling a plan for the third runway. That justified the business plan for Amsterdam’s expansion. It is a joke the chief executive at Schiphol airport makes that the sixth runway at Amsterdam is Heathrow’s third runway. It is justified by UK traffic. That is the choice.

The competition we are in is with Amsterdam, Paris and Frankfurt. You are right that there are other issues and Schengen is one of them; whether we are in or out of the EU, uncertainty over our EU future, the euro, these are all other issues. However, I keep coming back to the fact that surveys show that when companies are making decisions about where to set up their headquarters, Microsoft and all the examples of companies that Daniel just gave, when they are looking at where they are going to set up their headquarters, international connectivity is up there in the mix.

Caroline Pidgeon MBE (Chair): Iain wants to come in on this. Can I ask, if people want to come in, could they perhaps indicate? Also, Nigel please could you just be a bit briefer in your answers and slower, because it is absolutely impossible to fully comprehend what you are saying. Shorter points and coming through me as Chair would be helpful. Iain wanted to come in on this.

Iain Osborne (Group Director of Regulatory Policy, Civil Aviation Authority): A very brief point of information about the research base on this question of whether trade causes connectivity or connectivity causes trade. It is Murad’s question but it very underpins the discussion we have just been having.

On the research we have seen I do not think there is research that bottoms out, there is research that just maps how much trade there is in places we are connected to and places to which we are not, but that does not answer the causality question. That said, I think it completely flies in the face of common sense to say that it does not matter whether you have direct connections or not. If you broaden it out, infrastructure and economic development go together. If you do not have infrastructure then economic development withers and dies.

Stewart Wingate (Chief Executive, Gatwick Airport Ltd): You said earlier on that the countries to which we are not presently connected are the marginal ones. That does not really answer the point about the fact that these business headquarters are being set up in Amsterdam or wherever. If they are American companies they can get to and from New York as easily from London as anywhere else.

Iain Osborne (Group Director of Regulatory Policy, Civil Aviation Authority): Thank you for bringing us back to that because I do not want to be misunderstood. Our perspective is that voices that are saying this is an enormously important question for 20 years from now are quite right. As of today, the sense of crisis around this discussion is misplaced. We do not think there is an evidence base that it is causing a problem immediately.

Caroline Pidgeon MBE (Chair): I would like to move on to Jenny now and I would like to put on record that we had evidence very clearly last time from our guests who came before us that the Middle East was our competition, not these European hub airports.

Jenny Jones (AM): I do not want to gang up on Nigel like the rest of you, but can you give me a one word answer? I have heard this morning about better use of resources, better value from your slots and so on, yet Heathrow actually has more flights within in the UK than it does to the whole of Asia and South American combined. Are you really doing your best to improve international connectivity? What you are doing is actually preferring flights to Southampton over flights to São Paulo or flights to Bristol over Jakarta. Are you really seriously thinking about how to improve capacity without increasing it?

Nigel Milton (Director of Policy, Heathrow Airport Ltd): Yes.

Jenny Jones (AM): All right. Well thank you.

Nigel Milton (Director of Policy, Heathrow Airport Ltd): Chair, can I give an explanation as to why I said yes? We do not operate to Southampton or to Bristol. In order to justify those services that you did refer to, the long dual destination services, you need to fill up those planes with transfer traffic. That transfer traffic traditionally on the whole arrives on short-haul aircraft, then gets off those short-haul aircraft to get on to the long-haul aircraft to make the long-haul aircraft viable. You cannot operate just long-haul services, you have to have that combination of short and long haul.

Jenny Jones (AM): It still is staggering. I have to go on I am afraid. I am sorry. It is a fascinating topic and we are so short of time. There will be environmental impacts. I am not going to ask you. I will ask Richard de Cani because he has to deliver the Mayor’s carbon emissions reduction targets. There will be environmental impact from increased aviation. What are you going to do to mitigate that?

Richard de Cani (Director of Transport Strategy & Policy, Transport for London): There are a number of things about that. First the Government is going to issue its policy framework in a couple of months’ time to set the overall framework against which the Davies Commission will have to consider their options. That is important and that will happen in Spring this year. We have developed our own criteria on behalf of the Mayor so we can test the options that we are looking at against those criteria. Clearly the environmental impact is one of those. There are a broad range of environmental considerations we need to look at, whether it is to do with noise, flooding, habitat, impact, all those issues are things that the Davies Commission need to look at and the work that we will do will test the options against those criteria, and that is the work we are just starting now.

Jenny Jones (AM): Increased access to airport and the increased motor traffic, all of that comes in?

Richard de Cani (Director of Transport Strategy & Policy, Transport for London): Absolutely. There is a whole range of things there. There is a surface access that is needed to serve a new hub airport. There is the potential to plan and design that in a way that achieves a more positive outcome in terms of travel choices. Some of the existing surface access we have to Heathrow today is not great in terms of public transport mode share. We know there is an air quality issue around Heathrow that needs addressing. We have the potential in planning a new hub airport to addresses these things from the outset rather than incrementally trying to deal with them as we go along. There are important issues for the Davies Commission and the work we do looking at these new options.

Jenny Jones (AM): Do you seriously believe that we can hit national targets for carbon emission reductions and regional, our own London targets, if we increase our air capacity?

Richard de Cani (Director of Transport Strategy & Policy, Transport for London): The Committee for Climate Change have made their views clear on this and what they believe is the permissible growth in aviation within those limits. There is an element of aviation growth that they see as acceptable within those parameters and it is about how we plan and configure the capacity that gets the best outcome from that aviation demand.

Jenny Jones (AM): My understanding of that permitted growth of carbon emissions because of aviation increase is that in fact it is only if everything else stays the same; if there are no other carbon emissions from anywhere else in the system.

Richard de Cani (Director of Transport Strategy & Policy, Transport for London): I think they are fairly clear in terms of what they believe the acceptable growth in aviation is within those parameters and that is growth that does take into account the demand forecasts that the DfT is talking about, but also recognising that there is a big gap between where we are now and that upper limit, and it is about how we cater for that growth in the best possible way.

Jenny Jones (AM): The gap between our targets and our achieving those targets is widening. We are actually failing already on carbon emission reduction targets, so how on earth are you going to achieve the targets with increased carbon emissions?

Richard de Cani (Director of Transport Strategy & Policy, Transport for London): Looking at it just from an aviation perspective they have been clear about what they believe is the growth that is acceptable within those limits and it is about how we best cater for that growth that gets the best possible outcomes for the UK.

Jenny Jones (AM): That was assuming we hit the targets we have now and we are nowhere near hitting those targets. In fact they are now out of reach unless the Mayor does something dramatic. It is impossible, actually.

Richard de Cani (Director of Transport Strategy & Policy, Transport for London): I would go back to the same point. Over the 20 year period we are looking at there is an acceptable amount of growth for aviation within those climate change targets and it is about how we best accommodate the demand within those parameters to get the best possible outcomes.

Jenny Jones (AM): I regret I am going to have to leave it, sorry.

Tony Arbour (AM): As far as the environmental aspects of airport capacity are concerned there is a view which has been expressed perhaps intemperately by my colleague, Richard Tracey, but nonetheless true, which suggests that we have had more than enough in our part of London. I have to say that we object very much to the shroud waving that there is on behalf of Heathrow -- and I have reread your submission which basically says, “Either we get expansion or we will close down”. You are saying to me and my colleague that there is a political threat there that all those people who are employed at Heathrow will no longer have employment. There is no, as far as we are concerned, substantial and justifiable case for that and so far as I can tell - and perhaps Daniel [Moylan] will confirm this - the Mayor does not believe that it is all or nothing. We think it is a poor show, certainly I do - I do not know about you, Chair - if the operators of Heathrow come to us and say, “Either you do this or we will take our ball away’, and that is not acceptable.

Not that that was a trivial point but on a more serious point, those people who live close to Heathrow believe that the arguments of Heathrow Ltd in whatever guise the company is cannot be believed. We have heard arguments over the past decade, certainly since Terminal 4, which said, “Give us Terminal 4 and that will be the end of it. Give us a bit of relaxation on nights flights and that will be the end of it”. What has happened as far as those people that I represent are concerned is that you give Heathrow a few extra slots and they want a new terminal, you give them a new terminal and they want a runway. There is no end to it as far as we are concerned. Heathrow seems to want to grow and grow, and I have to tell you that enough is enough. I do not believe that to come to us and say the consequences of doing a particular action, ie not letting you have expansion, will have such dire consequences that in effect you are like Samson; you are bringing the whole of the local economy down with you. I am not certain that that is a question but I will rephrase and encapsulate within the question, why should we believe you now?

Nigel Milton (Director of Policy, Heathrow Airport Ltd): It is not a political threat, it is a statement of fact. We published a document last year called One Hub or None which basically made the argument that London can only have one hub airport. I have had conversations with Richard [de Cani], Daniel [Moylan] and the Mayor about what the future of Heathrow might be if a Thames Estuary [Airport] was to be built and there are varying views.

What is clear, where there is general consensus, is that Heathrow would not be the size or scale that it is today and therefore if it was not as big as it is today there would be consequences in terms of the number of people employed on the site and the number of businesses related to it. Our view and the view of British Airways, which is the largest airline operating at Heathrow, is that Heathrow would have to close. That is not a threat, it is just a statement of the economic reality that if you build a hub airport somewhere else then the current hub airport would no longer be viable and would have to change its use. That is why we are saying there is a clear choice. There is a clear choice not to do anything at all. You could follow Stewart’s [Wingate] view and leave Heathrow as it is but we do not believe that addresses the connectivity issue.

Tony, you and I have discussed in the past the issue of previous claims made by previous chief executives of BAA. They are what they are and I think we are suffering as a company from the consequences of the fact that the previous management of BAA have misled, have been economical with the truth and have not been able to stick to the promises they have made. All we can do is say that the current management are transparent, can be trusted, what we say is what we mean but only our behaviour can rebuild that trust. It is something we have to live with and deal with.

Daniel Moylan (Mayor’s Aviation Adviser): Tony asked for the Mayor’s view. Just to say very briefly, while we broadly agree with Nigel that we need one strong hub airport, the Mayor has made it absolutely clear that he agrees with Tony that expansion cannot take place at Heathrow, partly for the reasons Tony mentioned but for other reasons as well. 28% of the people in Europe who suffer from noise pollution in their homes are affected by Heathrow; 0.1% are affected by Charles de Gaulle. That is about 766,000 people, a number which is itself unacceptable in a civilised city and to increase it would be even more unacceptable. The logic of all of this is that we must go somewhere else at some point. The longer we defer that decision the more wasted investment is put into Heathrow when we could actually be making a transition somewhere else, and indeed much of the land that might be released at Heathrow through having a smaller operation there would be itself creating jobs, growth, and making that part of London an attractive investment destination.

It is not by any means all negative for the west London economy and it has huge advantages for the economy of east London which does desperately still need investment, despite the great improvements the Mayor has achieved there in the Stratford area in particular. If you look further afield from Stratford and the Lee Valley, that investment is desperately needed and the jobs and opportunities there that would arise from a new airport on the east side of the capital would be of huge advantage to the city.

Murad Qureshi (AM): On the environment side Jenny has covered the carbon emissions and both Tony and Richard have touched on the noise. If you do not mind, Nigel, I am going to pick on you as the lead from Heathrow. Noise has been a permanent issue. Can you just confirm whether Heathrow Holdings will be suggesting mixed mode to the Davies Commission?

Nigel Milton (Director of Policy, Heathrow Airport Ltd): No. We will not be.

Murad Qureshi (AM): You will not be. We have heard that as a statement. As confirmation. That is thing which I think a lot of knowledgeable people about noise issues in south west London want to be reassured about. You will not be asking for additional flights through mixed mode operations at Heathrow through the Davies Commission?

Nigel Milton (Director of Policy, Heathrow Airport Ltd): We will not be, no.

Murad Qureshi (AM): That is a good start because the next thing which is likely to happen on the noise front is consideration at the Department of Transport taking away the monitoring responsibilities, the mitigation, and the compensation aspects from the operators like yourself. Is that something you welcome?

Nigel Milton (Director of Policy, Heathrow Airport Ltd): We are looking at the proposal for the independent regulation of noise and we are working on proposals for that. We have had a discussion with you previously Murad. We are interested in the idea of independent regulation. It goes back to the point that Tony [Arbour] made about trust. There is not trust in Heathrow to monitor and mitigate, therefore how do we build greater trust? Is there an alternative mechanism we could set up which would rebuild that trust? That is something we are looking at, yes.

Murad Qureshi (AM): OK. That is something a lot of people will welcome around here I suspect. I certainly do. I think that is the way forward to get that trust.

On another environmental front there is also poor air quality or air pollution. It is not necessarily from the aircrafts themselves. Another Committee here at City Hall, the Health and Environment Committee, in its previous guise as the Environment Committee, made a whole series of recommendations on surface transport. Are you signed up to all those suggestions we made at that time so that the Transport Committee --

Nigel Milton (Director of Policy, Heathrow Airport Ltd): We are absolutely aware, whether Heathrow expands or stays the same, that the surface access options for passengers and staff getting to the airport need to be improved.

Murad Qureshi (AM): That is mainly aimed at reducing car movements into the airport through sufficient services on Crossrail, the Piccadilly line and Railtrack --

Caroline Pidgeon MBE (Chair): We are going to come on to that in a second. That is useful. Great. Thank you, Murad, for that very good point. Steve wants to come in and then we will bring Roger in.

Steve O’Connell (AM): To cover off partly my link in is the environmental point particularly around greenbelt, that aspect, and developing runways around that. That is one of my ins on this. It is particularly something that has been concerning myself. Is there a need for airport capacity? Being a principal opponent of High Speed 2 (HS2), for example, on balance I think there is a need for capacity. I would like to hear a little bit more from Stewart for the sake of balance because Gatwick clearly, as the representative of Croydon and Sutton, is only 15 minutes from Gatwick and that may have an effect on residents of Croydon.

I was interested, Stewart, on your earlier points around Gatwick’s plans up to 2020 but then, beyond that, considering the runway. Could you, for that point, bear in mind there would be environmental issues regarding greenbelt in Surrey, not in Croydon. I would be interested if you could have a resume on your thoughts and plans.

Stewart Wingate (Chief Executive, Gatwick Airport Ltd): The project that we are working on that we will present to the Davies Commission is to look at a different way of expanding the airports to serve the connectivity requirements for London. What we are proposing and what we are working on is a situation where, fundamentally, you would create three competing airports or large airports complemented by a number of smaller airports. So our vision would be for Gatwick to get a second runway and then, in time, for Stansted to get a second runway whilst, at the same time, Luton expands to make better use of its runway and Southend makes better use of its runway and thereby satisfy the demand for air travel.

From an environmental perspective in the written evidence - I am not sure if Members of the Assembly have got the written evidence that Gatwick have put in - on page 19 we have taken the noise impacts from the DfT document that was published last year, the sustainable aviation document, which clearly shows the disadvantage that Heathrow has being located to the west of the city and the impact on residents of noise that that creates.

On the right hand side of this chart you can see Gatwick and Stansted together. In actual fact, from a noise perspective, the number of people who are impacted by noise at both Gatwick and Stansted are less than the likes of Birmingham and Glasgow airports with 8 million or 9 million passengers. Having said that, that is not to say that at Gatwick we do not take very seriously matters of how do we go about working with air traffic control, working with our airlines and working on our own procedures and facilities to mitigate and minimise noise even further. It is fair to say that the noise impact created by either Gatwick or Stansted is of a totally different magnitude to Heathrow and, fundamentally, it is because Gatwick is located to the south of the city in a largely rural area. Likewise Stansted is to the north of the city whereas Heathrow is to the west of the city and flies immediately over the city.

Steve O’Connell (AM): Chair, the case has been pretty much made - particularly very strongly by my colleagues - against the Heathrow expansion piece. That, from my point of view, is there. I think the case is very strong around spreading flights out more evenly and equally, which again is an earlier point made. BA particularly, understandably, obsesses around Heathrow because its headquarters are there but I have got anecdotal evidence of colleagues who have had flights early. BA was at Gatwick and was taken away and that sort of stuff. To me that is the position I would be interested in and look more fully about and be speaking to my residents about. Particularly from a Croydon point of view and a regeneration of jobs, an expanded Gatwick is 15 minutes away from Croydon. Perhaps I could suggest it may well be called Croydon International Airport in years to come! I shall watch that closely and be a lobbyist. Thank you, Chair.

Caroline Pidgeon MBE (Chair): Thank you, Steve, for teasing that further information out. We are going to move on to surface transport issues now.

Roger Evans (AM): I want to just start with Daniel actually to see what the Mayor’s view is of improving surface access to some of the other airports apart from Heathrow and whether you feel that would be a good way of creating a bit more capacity without having to airport expansion?

Daniel Moylan (Mayor’s Aviation Adviser): The constraint on flights in the south east is fundamentally runways rather than surface access. We do not have enough runways. By 2025/2030 they will all be full. We need to start planning for that now. We need a proper hub airport and Heathrow is a hub airport that is not capable of growth and therefore we need a new hub airport somewhere else. Now it will take the period of 15 to 20 years to deliver that. It is an essential investment for London’s future into the 21st century. When we have agreement on that - in other words when we know where we are going - it will make sense, at that point, to talk about what interim measures we need to keep a creaking system on the road until we actually have that airport in place.

Now the Mayor is in favour of improved rail connectivity up the Lee Valley corridor in the direction of Stansted for its own sake and for the benefit of London, irrespective of what happens at Stansted. That is a very clear policy he has been arguing for and he is arguing for funding for that and that Network Rail should take that up. A very clear position. That would, no doubt, be capable of giving some better access to Stansted in any event.

The Piccadilly line, which serves Heathrow, is very much in need of an upgrade, as you know. Parts of it are run on computers that were actually bought second hand from the American military in the 1980s and I believe parts were procured on eBay. I do not know if that is in the public domain! I have actually seen these computers which are housed at Earls Court Station. Clearly, the Mayor is batting very hard for the next stage of Government funding to include the Piccadilly line upgrade as well as the other upgrades he is looking for. Again, he would do that irrespective of the future of Heathrow but clearly an upgrade of the Piccadilly line would improve connectivity to Heathrow.

It is important to remember that Heathrow is actually extremely badly served by public transport by comparison with our competitor airports. The railway stations under Frankfurt and Schiphol airports are not simply stations that take you to the centre of town; they are plugged directly into the European high speed network, as the station under the new airport would be, especially if it were located in the estuary close to HS1. You can go anywhere from Schiphol Airport on a train without ever going near Amsterdam itself. It is a city almost in its own right. That is what we should be aiming for.

If you are coming from the west to Heathrow there is very poor public transport accessibility so any assessment of the costs of a third runway and a sixth terminal at Heathrow - which incidentally are on the wrong side of the A4 which I presume would have to be put in tunnel - has to take account of the fact that an increase in passengers of the order of roughly 50%, which is what is envisaged, has to be accommodated to get to the airport in the most congested part of the motorway network system in the country and with very poor public transport accessibility at the moment - and that only from London. Not from the west. Not from the other catchment areas. That would need to be upgraded as well and the costs of that would be very considerable. When one compares the two realistic options which are the expansion of Heathrow to four runways - the third runway is a mere stepping stone - and a new airport that has four runways and room to grow, the costs need to be taken into account on a very comparable basis. It is not a straightforward choice that one is cheap and the other is expensive. They are both very major projects.

Roger Evans (AM): Thank you for that. Paul, you have heard there that surface transport is a key to the airport plan. Whereabouts does this fit into Network Rail’s wider list of priorities?

Paul Harwood (Principal Network Planner, Network Rail): A fascinating debate so far to listen to. I will start with Daniel’s point if I may. There is no doubt that we do not have plans at the moment for the capacity increase on any route of the sort of level needed for a four runway hub airport, be it an existing site or a new site, because the scale associated with that, as Daniel said, would be significant and would be considerably more capacity and financial investment than anywhere at the moment.

Our plans currently are all linked around the existing airports where they are currently. They are all, without fail, orientated around facilitating growth. Be that growth due to predicted growth in airport usage. All the airports are on corridors that are already producing commuter growth anyway and other transport growth. Daniel’s point about the Lee Valley is spot on. In some cases as well back to the point that Nigel made about mode share as well and shifting transport and making better connectivity to the airports and increasing the rail usage compared to other modes of access. They are all orientated around trying to facilitate growth in service quality, service quantum and, in some cases, service frequency to the existing airports. I can list those but I suspect everybody is quite aware of how they line up.

Roger Evans (AM): How do you feel about the decision not to link Heathrow to HS2?

Paul Harwood (Principal Network Planner, Network Rail): As I understand it it is a decision to hold that decision, effectively, because it is intrinsically linked to the debate about where we go with airport and airport capacity. An interesting fact we put into our response to the Committee is that, if you connect it in, you will actually have probably the fastest airport to airport link between Heathrow and Birmingham International, which threw me a little bit when I realised that.

It is an important part of the equation, it will be influenced heavily by where we go with the airport decision and must play a part, a little bit albeit I suspect -- the gentleman on my left will be able to reinforce that - in terms of using rail to serve some of the shorter distance traffic. I suspect that is quite a small part of the debate but it is an important use, potentially, for High Speed 2.

Roger Evans (AM): It is interesting because when I was listening to Daniel talking about having the airports on the rail route I was thinking about Birmingham International as maybe a smaller example of what we could aspire to. When I go to Birmingham by train quite often we do not stop at Birmingham International and I think most of us on the train are quite pleased about that because it is not where we are going. Is there really the demand when you set it against the demands of the wider railway using public?

Paul Harwood (Principal Network Planner, Network Rail): Not as the services currently operate.

Roger Evans (AM): Not for Birmingham but as a wider philosophy.

Paul Harwood (Principal Network Planner, Network Rail): It is probably relevant whether Birmingham plays a part in the debate about airport capacity because then you might see some demand between the two. That is, again, all subject to the issues that were raised this morning.

Daniel Moylan (Mayor’s Aviation Adviser): You cannot get to Birmingham in the morning for an early morning flight. That is one of the things at the moment.

Roger Evans (AM): Can I bring in Stansted because we have not heard a lot from Stansted today and I know that you are a preferred option in the Mayor’s plan if we do not get the island in the Thames. How important is it to you that we have an improved rail link to Liverpool Street? I have colleagues who do not live in the east of London, as I do, and they would never really consider using Stansted instead of Heathrow or Gatwick.

Nick Barton (Managing Director, Stansted Airport Ltd): The simple answer to your question is it is essential. The fact that Stansted is well served in terms of the destination the rail is linked into it is beyond doubt. It comes directly from the station. The station is in the terminal. It then delivers you at Broadgate. It is fantastic. It also connects well into west London through Tottenham Hale. The real issue for that line is twofold. One is the time it takes to get from the terminal into London itself. It can vary between 45 and sometimes 56 minutes1 or so, which is just too much. We have had research commissioned which suggests that if we could reduce that time down to around 30 minutes then we could drive about 1.5 million passengers2 simply on that improvement. That is an essential thing that we have been very, very keen with our Stansted in 30 campaign to try to bring to the attention of the authorities that can help us in this respect to make Stansted’s available capacity more available to the London market. We are absolutely clear in our view that if we can bring the airport, in a virtual sense, closer to London because it has got a shorter train time, that is a very, very important part filling the short and medium term issues about capacity issues in London. So we are very passionate about that.

The other issue of course is reliability which is one in six of our trains suffers significant disruption which is something that we need to get --

Roger Evans (AM): That many?

Nick Barton (Managing Director, Stansted Airport Ltd): It can be, yes. We have a great relationship with Network Rail and also Abellio who are running the line under a short term franchise. It is areas that we all recognise need to be improved because reliability and time are absolutely essential in the decision making process for the passenger.

Roger Evans (AM): For the record, I think it is a great facility, the station at Stansted, but it looks a bit empty. If more than one of us is travelling it is cheaper, and often quicker, to use a cab from east London than to use the rail network.

Nick Barton (Managing Director, Stansted Airport Ltd): The performance of Stansted in public transport is magnificent. Now over half our passengers use public transport which is very surprising when you think about its location being a very rural location as an airport. 50.2% of our passengers use public transport - and we include coach services in that measurement but a very, very significant performance for public transport use to the airport. It is something which we can be proud of.

Caroline Pidgeon MBE (Chair): Can I pick up, Paul, before I bring others in, the issue of Gatwick because there are huge concerns that the Gatwick Express was effectively downgraded and there are huge issues and other opportunities for faster routes from Gatwick into central London. Is that something that Network Rail is looking at as part of its forward work?

Paul Harwood (Principal Network Planner, Network Rail): Yes. That corridor, like many of the corridors, is subject to capacity constraints at the moment. Thameslink, when it comes on stream in 2018, will provide a significant uplift in capacity. We understand the desire for specific

1 Clarified by Stansted Airport following the meeting as up to 59 minutes 2 Clarified by Stansted Airport following the meeting as 1.4 million service provision for Gatwick Express on that corridor and we are supportive of it serving the airport. It is that slight compromise situation of it is on a busy corridor as well with heavy demand so it is about how we use that. Growth at the airport; it is critical to serve it with good quality train service. We recognise that.

Stewart Wingate (Chief Executive, Gatwick Airport Ltd): At Gatwick we have done a lot of work working with Network Rail and the DfT, and indeed Southern and First Capital Connect, the train operating companies (TOCs). If you just step back for one moment the importance of having great surface access to airports is a key to unlocking the use of the spare existing capacity, in my opinion. I think you have heard it from Nick, certainly from myself, you just cannot under estimate the importance of having great rail links and good quality services.

The work that we have done at Gatwick is to have Arup, the engineering consultancy, do some studies on this corridor and the studies have said that with the super franchise which is envisaged for the future. In actual fact not only can you meet the needs of the commuters, which is very, very important, but you can also meet the needs of the air traveller and the needs of the air traveller, from an express perspective, means non stop services taking 30 minutes, leaving every 15 minutes from the station - which is what we broadly enjoy today - but on new carriages of the sort of quality that is comparable to our competitors not only in London and the south east but also further afield. That is very much the agenda that we are driving.

One other short term measure that could be taken for Gatwick would be the introduction of extending the Oyster card scheme. At the moment, if you go down on one of the trains, when you get into Croydon it is actually announced that if you have gone in on the Oyster card you now need to get off the train, swipe out and buy a new ticket to go one more stop. One of the other things that we are pushing for is to bring the convenience of the Oyster scheme, which we think is just fabulous, to Gatwick. It would just make it so much easier to use the existing facilities.

In short, we are looking for new carriages, we are looking for Oyster and we are looking for maintaining great timetables not only to Victoria but of course we also can get to London Bridge in 28 minutes too. That is the advantage of being on a through line as Gatwick is, whereas the other airports are in a cul de sac underneath their runways!

Caroline Pidgeon MBE (Chair): Nick nodded along with that as well so Oyster to Stansted as well would be something you would welcome?

Nick Barton (Managing Director, Stansted Airport Ltd): Anything to make the whole of London more connected is absolutely in the interests of an airport.

Caroline Pidgeon MBE (Chair): That is great. That is really good. Richard, you wanted to come in?

Richard Tracey (AM): Just quickly on the Gatwick point. Can I put in a plea that the Gatwick Express, every single one that runs, ought to stop at Clapham Junction because - it has already been mentioned - Clapham Junction is a very major hub, that expression we have been using a lot this morning? Certainly that is something that would improve the service greatly.

Stewart Wingate (Chief Executive, Gatwick Airport Ltd): If you look at the connectivity of Gatwick one of the things we talked about earlier was how many rail stations can actually be reached from some of the European competitors. All be it on high speed rail which, clearly, we have not got. Of course one of the advantages Gatwick does have is that being on the mainline we already connect to over 120 stations on the rail network. A massive number compared to any of the other airports.

Richard Tracey (AM): One or two other things that I would just like to take up. Our previous witnesses several weeks ago completely rubbished the idea of what I think was called Heathwick, the rail link between Heathrow and Gatwick which was in the press a few months ago. What is the opinion of Network Rail about that, Paul?

Paul Harwood (Principal Network Planner, Network Rail): I will set aside my colleague’s comment on the use for it, effectively, but the actual engineering challenge associated with it is significant. It would need a phenomenally high quality line to get the kind of journey times that we are talking about. By definition it cuts across most of the corridors coming into London so you cannot have it on the surface because you would significantly influence the capacity at that point, therefore you are tunnelling therefore you are very, very expensive. A very difficult challenge in terms of the viability of it providing a useful service because it clearly would not serve any other particular purpose so very expensive with a specific use.

Richard Tracey (AM): I assume the same applies to any sort of link between Heathrow and Stansted too because that has also been mentioned certainly in emails flowing into the likes of me from different people?

Paul Harwood (Principal Network Planner, Network Rail): I suspect so. We have not looked at it in detail. Some of the links talked about could use other -- it is back to the Gatwick point that Stewart [Wingate] makes in terms of it could be linked to other connectivity. Inevitably you throw that in and then you get an increased journey time so it is that constant challenge between points that you can access the service and the time that that service is expected to take. You could possibly connect Stansted into some of the other airports more effectively if you are going through the middle of London but then you have got a significant journey time.

Richard Tracey (AM): Yes. Thameslink has already been mentioned, the new and improved Thameslink. Presumably also Crossrail 2 could contribute quite considerable connectivity. Should thinking be brought forward about the timings of building Crossrail 2?

Paul Harwood (Principal Network Planner, Network Rail): It links back into the points Nick [Barton] was making about the Lee Valley. It is certainly right that we would suggest that Crossrail 2 may provide opportunities for some of the service issues that Stansted have at the moment to be enhanced. We have not exactly refined it in how it would interface; whether it would be direct connectivity or whether the capacity improvement would then improve the services into Liverpool Street but it is definitely a part of the benefit.

Our plans for the Lee Valley are very much consistent with continued development there anyway - back to Daniel’s [Moylan] point so the work we are doing in our next five year control period is aligned with the long term ambition for significantly increased capacity on that corridor. That links back to a study that we undertook some years ago with the guys at Stansted to investigate capacity enhancement there. It is all linked to growth on that corridor as well so it is an opportunity.

Richard Tracey (AM): Thank you.

Hugh Aitken (Commercial Manager, easyJet): I want to build on a lot of what has been said to give the airline perspective. Getting passengers to and from an airport easily is absolutely in our objectives. Where we are at the moment, we serve four airports in London, all of them are connected to the national rail network. I do not think the travelling public really understand that so I do not think the travelling public understand that Luton is 21 minutes to St Pancras, which is faster than T5 to Paddington. I do not think they understand that they can go from Gatwick all the way through London. There is a huge job we have, as an airline with our passengers, to educate them and then, with yourselves, say, “How do we get people better informed of the options there are?”

Then building on that, also we find it incredibly worrying that there is a risk that the Gatwick Express will become a stopping service because that is diminishing the product there and also, we believe, reducing the effective use of assets in London. We are trying to get more capacity out of the London system. We have to be doing everything we can in the short term to make it easier for people to get to those airports. The Luton expansion, where it doubles in size, we need to be getting more and more of those passengers on the rail network in and out of London and not going on the road network and buses or any other transport method.

I would mirror (inaudible). As an airline we see it as absolutely vital that rail is prioritised. Getting good airlines into the airports and using them and having trains that meet our first and last flights and having the prices and the product that suits air travellers is absolutely vital for us.

Richard Tracey (AM): Actually there is one other thing. You have just sparked off a thought. Daniel earlier on mentioned that of course HS1 would be very well connected to the Foster/Halcrow proposal of an airport on the north Kent coast on the estuary. Apart from HS1 what other needs would there be in terms of rail connectivity there, Daniel?

Daniel Moylan (Mayor’s Aviation Adviser): It would be close to HS1. We think that surface access, especially by rail -- it has to be by road as well but especially by rail to a new airport in the estuary is extremely important. One can get at the moment from St Pancras to Ebbsfleet in about 15 minutes. It is 17 minutes with a stop at Stratford. So about 15 minutes. A new airport, we think, would be accessible by an extension of that line from St Pancras in 25 minutes.

There is also then a plan to connect HS1 to HS2. We would put that plan into effect, whether you built HS2 or not, as an independent project so those trains could shoot through from St Pancras straight through to Old Oak Common to be a western accessible hub, and we would bring a spur in off the same line, the same HS1 line coming in, so as to serve Canary Wharf and London Bridge. That is largely using existing and planned infrastructure. What we would really want is then the expensive bit; to tunnel that link from London Bridge through to Waterloo.

If you did that you would have connectivity to the new airport in the estuary in under 30 minutes from four major London points. This would actually give a better public transport experience getting to the new airport for people who live coming into Waterloo, for example, than they currently have to Heathrow where there is only the bus. There is no rail connectivity directly to Heathrow. It would also mean the new estuary airport would be capable of serving people to the west of London and far out into Wales at very similar journey times to what is accessible by rail at the moment to Heathrow from places like Cardiff and Bristol.

We think that it is possible - and we have included all of this in our estimates of cost - to have a new airport which will achieve the sort of mental modal shift to rail that we think is absolutely necessary and that this could be achieved within the funding envelope we have talked about and be absolutely crucial and would be a huge improvement on what is available at the moment to our main hub airport.

Iain Osborne (Group Director of Regulatory Policy, Civil Aviation Authority): I wanted to point out something which is perhaps obvious. If so, forgive me. It is a very important discussion about the airport end of the journey, and fixing that up is very important. If we want to see a significant modal shift you have to look at where the passengers are starting from. The reason people drive is that they are starting from home and they do not live round the corner from Liverpool Street. Unless we have got a credible vision for that - and I do not personally think I have heard one yet - then people are going to continue to drive to these airports in very large numbers so the roads will continue to be important.

That does pose real challenges to some of the propositions, particularly out in the estuary. You can have as good a train line as you like but if half the passengers want to drive and the roads are no better than indifferent -- and simply you cannot up the speed very much for a road journey. You can build a high speed rail link. Nobody is proposing roads that you can take at 120 miles an hour. So the ability to get from Bristol by road just is not there. On the surface access, just because the public transport modes are publicly funded and therefore the focus of a lot of public policy, do not let that distract us from the importance of the roads side.

I also wanted to very quickly put another nail in the Heathwick coffin! Not only does it not work operationally we do not think it works commercially either. To make sense an airline needs to be reasonably indifferent whether their plane is at the Heath or the Wick bit, which is to say charges need to be roughly similar. At the moment there is a reason why Heathrow’s charges are double Gatwick’s charges; it is to do with the assets. You would need to have a system put in place, massive cross subsidies - and cross subsidies are likely to distort asset investment and development over time - and there is absolutely no commercial or legal framework to achieve that other than reconstituting the British Airports Authority, that we have just spend the best part of a decade taking to pieces! It is not a good idea.

Valerie Shawcross CBE (Deputy Chair): Thank you very much, Iain, for raising the issue of the commercial frameworks because I think my question is the show me the money question. The three airports here, Transport for London (TfL) and Daniel for the Mayor have all got a clear preferred option for how they want to see airport capacity met in the future, even though we may have some differences about dates when we feel the pressures may become intense. Can each of you start off by telling us how it would be funded? How your particular proposal and your vision would be funded, including any requirements for public funding or support? Daniel, yours is the biggest I think so tell us --

Daniel Moylan (Mayor’s Aviation Adviser): Only a little bit the biggest when you take all the costs into account. The model for funding airports in this country is to expect the private sector to pay for them and then to allow the private sector to recoup the costs through charges with a reasonably high rate of return. There are options around making that model work for a new airport but an alternative - and one that probably would give better value for the public purse - for the construction of a new airport would be for the Government to bear the costs and for the airport to be sold as a going concern into the regulatory framework afterwards because there is a wider pool of investors willing to look at investing in existing infrastructure than there is willing to just look at a hole in the ground and take a risk on it. The model we would look at would certainly consider both of those options but I think that the costs would fall, in the first instance, on the tax payer.

I do not think that makes it an unaffordable challenge in any sense at all. We are talking about a project which would take 15 to 20 years to deliver. If it was £80 billion, which is, at this stage, the broad estimate, including the costs of compensation to Heathrow and the surface access. That is roughly the cost. Those are the figures that the Transport Select Committee have looked at. £70 billion to £80 billion. I am being on the top side because I want to make a point. If that was the case that would be, over 20 years, a cost of £4 billion a year. That is in the context of I believe we spend £13 billion a year on reoffending to take a random example. That is not in any way to diminish the value of what we do in that area. That is a perfectly affordable investment for the Government over a 20 year period. It is perfectly reasonable to say --

Valerie Shawcross CBE (Deputy Chair): Daniel, is that simply the airport infrastructure? What about the surface links as well?

Daniel Moylan (Mayor’s Aviation Adviser): Our estimates at this stage, and as you know we announced yesterday we are going to carry out more detailed feasibility studies to harden these numbers up --

Valerie Shawcross CBE (Deputy Chair): You were talking ballpark figures.

Daniel Moylan (Mayor’s Aviation Adviser): Subject to that, at this stage, our estimate is £70 billion to £80 billion to include the airport itself, the surface access, which we are estimating at £25 billion. The Oxera Report put into the House of Commons Transport Select Committee said £30 billion. At this stage we are happy to go with that £25 billion/£30 billion, that sort of ballpark. And the compensation to Heathrow for the coerced reduction in capacity at Heathrow. When one takes all those together it comes out at £70 billion to £80 billion. That is the figure we have been using publicly for months now. As I say, that adds up to about £4 billion a year over a 20 year period.

HS2 is predicted to take £2 billion a year from the DFT budget over a 16 year period at current prices. I am not saying choose one over the other. That is not my point. I am trying to put it in a context of affordability. Perfectly fair to say you do not want to spend it on an airport. That is what politics and elections are about. But it is not right to say that this is unaffordable.

The asset that would then become available for sale afterwards would have a value and the value of the land freed up at Heathrow in part for development would be deductible, so to speak, from the compensation element payable to Heathrow, so there would be an asset there as well that would contribute to defraying those costs but not, by any means, totalling meeting them. I am not suggesting that.

The business case for the surface transport links, the development and the opportunities and the growth that would follow that infrastructure investment would almost certainly generate a business case that would support them in their own right.

Valerie Shawcross CBE (Deputy Chair): What about any secondary costs such as the 120,000 people who are reliant on Heathrow for work so there will be job losses, business loss, businesses needing to relocate and impact on the existing transport system and the investment that has already gone in there? Are there any knock on costs that would fall to the public purse?

Daniel Moylan (Mayor’s Aviation Adviser): Thank you. On the west London economy Heathrow accounts for about 3% to 4% of the west London economy and it is a very important creator of jobs. There is no doubt about that. What we are talking about is not a car plant that is in business one day and a week later is in administration and you have no time to prepare for this. We are talking about a process which people and businesses will be able to plan for over a 15 to 20 year period. So many of the people employed at Heathrow will have retired or moved on. Others joining Heathrow will know that their job is going to take them somewhere else.

Commercial businesses very rarely enter into commercial leases greater than 25 years in any event and the property market over the last few years has allowed them to enter into much shorter leases. They would have opportunities to plan whether they thought it was appropriate to move or not.

Would this mean that there would be a huge hole in the middle of the west London economy? I have more optimism than that. First of all the development opportunities at the Heathrow site itself would create considerable jobs. Secondly, we have to remember that London is a very vital and positive economy and businesses grow up in unpredictable but positive ways in the interstices left by other vacancies. I have very considerable optimism.

The Leader of Hillingdon Council has said that he is now willing to contemplate the closure of Heathrow because, although it would have, in some senses, a damaging effect on the labour market now, it would not of course be closing now, and he thinks that with the right planning London’s economy is vital enough to fill that up. This is a price he is willing to pay.

Valerie Shawcross CBE (Deputy Chair): Let’s move round. Nigel, I think you are pretty clear about your preferred option which is to expand Heathrow. How would that be funded?

Nigel Milton (Director of Policy, Heathrow Airport Ltd): Yes. It would be funded through airport charges so the airlines, and ultimately the passengers, would pay for it.

Valerie Shawcross CBE (Deputy Chair): Roughly how much would you be talking?

Nigel Milton (Director of Policy, Heathrow Airport Ltd): We do not actually have a preferred option at the moment and we are going through the evaluation of options. There are many different locations and there have been some proposals for four runways at Heathrow as well. We are looking at a variety of different options so it would be premature to say how much it would cost.

Daniel is right to point out that whatever Heathrow option went with there would be surface access costs involved. We have also heard about the noise impact and noise mitigation. We are not in a position yet to be able to cost out how much expansion at Heathrow would be.

Valerie Shawcross CBE (Deputy Chair): What about any impacts on the public purse then? Do you see some of the surface transport links being funded --

Nigel Milton (Director of Policy, Heathrow Airport Ltd): I would not rule out there would be any call upon the public purse. We need to understand what the options are, understand what the commercial returns and abilities for airlines are and understand what the surface access needs would be before we could do that. We could not rule out there would not be any demand on the public purse, no.

Valerie Shawcross CBE (Deputy Chair): Largely private funded?

Nigel Milton (Director of Policy, Heathrow Airport Ltd): Yes.

Stewart Wingate (Chief Executive, Gatwick Airport Ltd): We are not in a dissimilar place to the one that Nigel describes. We started doing the detailed work assessing a variety of options at Gatwick in October of last year. Perhaps I will be a little bit more forthcoming though in terms of the cost estimates that might be expected for an additional runway at Gatwick. We would estimate that an additional runway at Gatwick, dependant upon the option, would be somewhere in the order of £3 billion to £5 billion. Included within that would be contributions to upgrading surface access in line with the increased demand caused by the development of the airport. Likewise we would also need to make contributions to an environmental impact of any expansion and that is taken into account in those estimates.

In terms of the funding of the airport development then we would see that as being privately funded but, at the moment, we are at the stage of developing the options and then building the business case and, at this point in time, that is work that is ongoing.

Valerie Shawcross CBE (Deputy Chair): Again, you largely see it as a privately funded exercise --

Stewart Wingate (Chief Executive, Gatwick Airport Ltd): We do. That is the presumption.

Nick Barton (Managing Director, Stansted Airport Ltd): Stansted has not proffered a view on runway locations. We welcome the Davies Commission’s work to get to the bottom of this with data and try to work out the strategy is for London.

For us as an airport I would point out to the Committee that actually the ownership of Stansted is changing in around two weeks’ time. It will come under the ownership of Manchester Airports Group (MAG), so I would not like to offer any guidance as to affordability or cost on a runway.

Valerie Shawcross CBE (Deputy Chair): Is it fair to say then that because Manchester have just bought Stansted there is not a clear vision plan for the future for Stansted at this stage?

Nick Barton (Managing Director, Stansted Airport Ltd): It would be wrong for me to suggest what the vision is and MAG will be very quick to get into this debate as soon as they have ownership of the airport. It is very poor timing, if you will, for this debate that ownership should be changing, but they are clearly a very experienced airport operator and will, undoubtedly, have views.

Valerie Shawcross CBE (Deputy Chair): Yes. Does that mean also you could not give any reaction to the Mayor’s second preferred option?

Nick Barton (Managing Director, Stansted Airport Ltd): Any views I have got have got about a 15 day lifespan!

Valerie Shawcross CBE (Deputy Chair): What about the Civil Aviation Authority? Have you got any views about the issues of whether there is a case for large scale public funding coming in? What do you think about cross subsidies? What is your view about how we fund our future capacity needs?

Iain Osborne (Group Director of Regulatory Policy, Civil Aviation Authority): There is plenty of cash available for infrastructure investment at the moment from the private sector. Daniel is right about that. The issue is about risk. If a project can be bundled up in a way that presents an acceptable risk in return for the reward then it could be funded. There are a whole load of factors that go to how projects will be viewed. Expanding an existing facility might be seen as less risky than building on a greenfield site. How the politics develops over the next few years will be relevant. Investors will look at the fact that the UK decided what to do in 2003; sat on it for a decade and then did not do it and an awful lot of money got burned in the meantime. Credibility is important for the country if we are looking to get private sector investors to build.

We do not have views on costings of individual projects. They are all so high level and sketchy at this point that all numbers should be treated with a certain suspicion at this point. Whether the country needs to spend cash on it - it is not obvious to us that they do - but the Government might need to guarantee certain kinds of investments.

Valerie Shawcross CBE (Deputy Chair): Guaranteeing …?

Iain Osborne (Group Director of Regulatory Policy, Civil Aviation Authority): Treasury does not see that as particularly different necessarily from spending money! But from the private sector point of view it will be about risks, about political risk, about construction risk and about commercial risk, what once were seen as open.

Valerie Shawcross CBE (Deputy Chair): I understand you cannot have a very clear preferred option at this stage but you would be saying, “There’s lots of private money around for the right kind of projects so why would we need to” --

Iain Osborne (Group Director of Regulatory Policy, Civil Aviation Authority): Our role is not to get involved in what are genuinely political decisions about what the country chooses to spend its money on but, factually, we can help in terms of looking at the market. There is quite a lot of money available globally for infrastructure spend at the moment.

Valerie Shawcross CBE (Deputy Chair): Right. Any other comments from any of you I have not come to? Hugh?

Hugh Aitken (Commercial Manager, easyJet): I struggle with some of the numbers! All I know is we fly close to 30 million people in and out of London every year. We are London’s largest airline. Our average ticket price is less than £50. We have not seen any business cases for any of the big infrastructure and runway developments that we can understand what the business case is and how much it is going to cost passengers. Ultimately there is lots of private money about but private investment is not a charity; they need a return on that investment and, ultimately, the passenger will pay. Our job is to make travel affordable because that is how we will get more people flying. We struggle with knowing how we can keep on adding more cost on to passengers because there is more infrastructure being put into the airports.

Valerie Shawcross CBE (Deputy Chair): OK. A question I tried to ask last time and I did not get anywhere with it but I will try to reword it. I should start off with Nigel on this one. If your preferred option was ruled out what would be your second preferred option? If you were sitting where we are sitting and we are looking at the future of London, what do you think would be the next preferred option?

Nigel Milton (Director of Policy, Heathrow Airport Ltd): I think we have made it clear now that, in our view, the connectivity issue - which is what, after all, this is about --

Valerie Shawcross CBE (Deputy Chair): Yes. You have made the case about Heathrow. If we turned round to you and said, “Actually because of the noise nuisance issue or whatever it is completely off the agenda and we cannot afford the blight of a conversation that is going nowhere. We need a decision”. What would be the second option?

Nigel Milton (Director of Policy, Heathrow Airport Ltd): We believe the options are to increase Heathrow. If that is ruled out then the option is to close Heathrow and build a hub somewhere else.

Valerie Shawcross CBE (Deputy Chair): That is helpful. All good. Anybody else want to come in on the second option?

Stewart Wingate (Chief Executive, Gatwick Airport Ltd): For me the future is all about having competing airports offering better service levels, more choice and giving passengers in different areas of London the ability to travel to more destinations. For me, clearly I think that Gatwick should be the next airport to get a second runway and that is the work that we are undertaking currently. As I outlined earlier, to be followed then by Stansted getting a second runway. If you were to say, “What would the alternative be?” then it would be a sequencing to maintain the principle of having competing airports but going the other way around. I happen to think it is a lot more compelling that Gatwick goes first.

Valerie Shawcross CBE (Deputy Chair): You think you are the alternative option but the alternative option to you would be probably Stansted?

Stewart Wingate (Chief Executive, Gatwick Airport Ltd): No, no, we are the option, in our view!

Valerie Shawcross CBE (Deputy Chair): OK. We get it. Nick? I am not sure this is a worthwhile question really!

Nick Barton (Managing Director, Stansted Airport Ltd): No, I do not. I would just have to defer to our new owners to advise you.

Daniel Moylan (Mayor’s Aviation Adviser): The first option is to set about, as soon as possible, creating a new hub airport to serve London and to deliver that some time in the 2020s. The second option will be to do that but deliver it in the 2030s and the third option will be to do it and deliver it in the 2040s. If we do not do this at some point -- we will eventually do this because, just like we lost the ports and now 50 years later we are rebuilding our ports. If we lose our airport connectivity and find that the best way to travel is like the 23 cities3 that are connected to Schiphol already directly by flights feeding into Schiphol - only 8 connected to Heathrow. If we lose that that is what is going to happen. Eventually we will come round and see that was a very bad choice and we missed an opportunity so we will come back to doing it at some point. It is a question of whether we have got the courage and the leadership to see that doing it now is better for the future than just kicking the can down the road and doing it in 10, 20 or 30 years’ time.

Iain Osborne (Group Director of Regulatory Policy, Civil Aviation Authority): Not so much to answer your question because we do not have a preferred option so I cannot answer it but just a comment on the way you framed the question. The comparison with ports is interesting. The UK has a national infrastructure planning statement for ports and it is not site specific. It does not say, “We thought about this and the best place to build is here and here”. It defines the kinds of capacity that are needed and the kinds of constraints that are acceptable and what is not acceptable and then it says go to it private sector and get on and build. Because we have a private sector port sector. Incidentally we have a private sector airport sector as well.

The way the debate has largely been conducted about pinning the tail on the donkey game, “Let’s do it here or here or here” is not necessarily constructive --

Daniel Moylan (Mayor’s Aviation Adviser): The idea that you can build an airport anywhere without the Government actually having that policy specific to that site is mildly fantastical. The port loss I am referring to is the fact that we had the major ports of Europe in the 1960s and 1970s, for a variety of reasons there was no investment and so the Dutch built the biggest port in Europe and that is what they have got today and we are, 40/50 years later, scrabbling to recover

3 Clarified by TfL following the meeting as 26 cities. that position to some extent. That is exactly the slow motion what we see happening today in respect of our hub aviation capacity and we need to grasp the nettle.

Iain Osborne (Group Director of Regulatory Policy, Civil Aviation Authority): In the last 40 years, Daniel, four times we have taken a national decision to build an airport and we have not built any of them. There has to be a time when you start saying, “Is a different way of framing the policy a question to start thinking about?”

Daniel Moylan (Mayor’s Aviation Adviser): Just throw it up in the air and see if something happens. Yes.

Onkar Sahota (AM): Daniel, you were making an argument for a hub airport and I hear perfectly the arguments about why there should not be one. Let’s say, for assumption, that we come in favour of this hub airport and that is going to be in the [Thames] Estuary - or elsewhere, but we have accepted the fact that Heathrow would go down. I heard evidence here last time saying if Heathrow goes down closing the coal pits of this country would look like an easy job in comparison with what the consequences are of if Heathrow closes down.

Daniel Moylan (Mayor’s Aviation Adviser): In what respect would that be a comparison? This is not an industry in decline, which coal mining was. This is an industry which is actually growing.

Onkar Sahota (AM): If Heathrow goes where will jobs go?

Caroline Pidgeon MBE (Chair): London First said to us last time.

Onkar Sahota (AM): My question is if Heathrow goes 200,000 jobs will go and what are the plans for the reinvention of west London?

Daniel Moylan (Mayor’s Aviation Adviser): I am not going to dwell that if I may, Chair, because I think I have answered that already. This would be a process over a 20 year period. There is no comparison with the coal mines. It would be over a 20 year period. It would be well managed and there are lots of things that would spring up, especially with the development opportunities created, that would fill that gap over a period. The suggestion that Heathrow has to be -- there is a sort of Labour suggestion that Heathrow cannot be allowed to grow but nor can it be allowed to get any smaller. It has got to be set in aspic to keep it just the way it is forever. That may be one’s aspiration. One can aspire to anything. But the idea that that is a realistic way forward nobody would accept that that is actually going to happen. Heathrow either has to grow or it is going to go into some sort of decline. That decline can be managed over a period as a new industry is created in a growing industry, which coal mining was not.

If it grows to the four runway airport it would need to be my view, and the Mayor’s view, is that is completely politically and environmentally and in other ways unacceptable. That is pretty well the choice. Nigel and I do not actually disagree very much about that.

It is a process we can turn our attention to. How you manage that over a 20 year period I think it is perfectly manageable. It is nothing like coal mining. I have no idea what London First is talking about. There was a strike. Are we talking about that? What are we talking about? I do not even understand what the reference is.

Caroline Pidgeon MBE (Chair): Perhaps you might want to look at the transcript because their evidence to us was talking about the impact on west London, “It would be very, very, very serious indeed and it makes closing down the pits look easy”. Onkar was quoting from evidence we had.

Daniel Moylan (Mayor’s Aviation Adviser): Well, I don’t think it would.

Tony Arbour (AM): Who provided that evidence?

Richard Tracey (AM): London First.

Murad Qureshi (AM): Can I come back to Stansted? The change of ownership there is a game changer. I want to ask Daniel whether you and the Mayor ever considered doing what Greater Manchester local authorities have done combined which is buy into Stansted as a consortium of local authorities along with private equity?

Daniel Moylan (Mayor’s Aviation Adviser): All I will say, Chair, is if we had done so it would be a commercially confidential matter.

Murad Qureshi (AM): One response. Quite honestly, for £1.5 billion what they have done is buy an option which is going to be far, far cheaper than chasing around Arab shacks next week for £80 billion.

Daniel Moylan (Mayor’s Aviation Adviser): I am not going to comment on the latter. It is certainly true that the people of Manchester and their representatives have always shown a commercial astuteness over the life of their city from which lessons might be learned. I applaud them for their commercial astuteness.

Murad Qureshi (AM): They are not the only one; Luton has done it as well.

Caroline Pidgeon MBE (Chair): Thank you. That is great. We are going to move on. We have already been touching on it so have taken some of our questions already. The Thames estuary new hub airport idea.

Tom Copley (AM): We had a session the other month where a panel of six experts laughed the idea of a Thames estuary airport out of the room. We should have a brief look at it. Daniel, it is not just the cost of a new airport that is an issue; there are some very serious practical problems. We had a representative here at our last session from the National Air Traffic Services (NATS) who said that the Thames estuary airport, were it built, would impede on Schiphol’s airspace and it would mean that you would have to have aircraft flying very, very low over central London. What consideration has the Mayor given to this?

Daniel Moylan (Mayor’s Aviation Adviser): Can I say first of all I have been working on this with the Mayor for about two and a half years. I think I have heard every conceivable objection or challenge that can be raised. My genuinely considered view is that all of these are manageable challenges. Of course if you want to oppose the idea of a new airport in principle you can turn them into show stoppers but that is a rhetorical device. They are not show stoppers and they can actually be managed.

The particular issues relating to NATS. NATS have not actually done any work on this. I find NATS’ reasoning very hard to follow because they are a commercial organisation, they are a business in existence for profit, they are actually owned by the airlines and they do not do work unless you actually pay them to do it. When I asked Richard Deakin [Chief Executive Officer, NATS] whom I ran into at another one of these interminable aviation events I now go to - I said, “Where did that all come from?” and I did not get a satisfactory answer on it.

I cannot account for what NATS says. All I would say is that it is clearly the case --

Tom Copley (AM): Are you saying they are wrong?

Daniel Moylan (Mayor’s Aviation Adviser): It is clearly the case, if you look at a map, just take Heathrow’s flight pattern now and how low they fly over a highly residential area, pick it up and transfer it to the estuary and say, “If you replicated that there the number of homes under the flight paths would be very, very considerably reduced”.

Now of course it has an effect on airspace more broadly and that would need to be remapped. NATS would expect to get paid a large amount of money to do that and that would affect the Dutch and so on but so does anything else that you might want to do. Heathrow expansion has an effect on airspace although it would be adjusting an existing system rather than redrawing it. We are moving slowly, gradually, potentially, to single European skies where, in fact, some of these national boundaries would be less significant. This is all perfectly doable.

Of course I expect the quiet and determined persistence of the Dutch to frustrate this development because they are sitting there -- and I sat with the urban planner at another event last night, the urban planner from Schiphol Airport and they are quite openly saying that their business is British. Their increasing business is coming from Britain. Obviously it would not be in their interests to have a new rival just across the Channel. What I always say is, “Would that stop the French?” No way. So why should it stop us?

Tom Copley (AM): Do you really think that the people of London are going to tolerate even more air traffic going over them, low flight --

Daniel Moylan (Mayor’s Aviation Adviser): There would be less air traffic going over residential areas manifestly than is currently the case --

Tom Copley (AM): Not according to the evidence we had last month.

Daniel Moylan (Mayor’s Aviation Adviser): I would like to know the basis for that evidence. Manifestly if you just pick up a map and look there would be less residential properties affected by a new airport that was not in the heart of west London’s residential suburbs. Please do not try to tell me otherwise because I cannot see on what basis you would claim that.

Tom Copley (AM): We had expert opinion here in our last session who said that was precisely the case.

Daniel Moylan (Mayor’s Aviation Adviser): Well if that is what they said they are clearly wrong --

Tom Copley (AM): Daniel, you do not have a vested interest, do you?

Daniel Moylan (Mayor’s Aviation Adviser): May I say, actually, I do not. The Mayor is one of the few parties to this whole debate who does not have a commercial vested interest in promoting a particular solution. I am glad you made that point because it is actually very significant. I do not have a vested interest. I do not come here and say that because I have got a vested interest. I am here and saying that it is clearly the case that an airport located in the Thames estuary is going to have a less dramatic effect on residential populations than expansion of an airport located largely in the centre of a residential west London suburb. If anyone who says there is something evidentially wrong about that they are wrong.

Tom Copley (AM): I have not heard a single expert opinion, independent of the various airports, who says that a Thames estuary airport would be a good idea. As I say, at the last session we had six of them and they all laughed the idea of a Thames estuary airport out of the ring.

Daniel Moylan (Mayor’s Aviation Adviser): You must take the evidence as you find it --

Tom Copley (AM): The Mayor, as far as I can tell, is the only person who is calling for this --

Daniel Moylan (Mayor’s Aviation Adviser): -- but, actually, the only person who does not have a vested interest is the Mayor.

Tom Copley (AM): I did want to bring Iain in because there are a couple of points that you made. First of all you were saying that you did not think it was a good idea to pick a location and say, “That’s where we’re going to build the airport”. Is that right?

Iain Osborne (Group Director of Regulatory Policy, Civil Aviation Authority): I think it is certainly worth thinking hard about whether the approach we have used in the past is the right approach. There is undoubtedly the need for some level of coordination, if only because of airspace issues. Some combinations of projects will not be viable and others might be. I am just flagging that it is not obvious that a site specific approach to a national planning statement is the right thing for airports when the ports version seems to be working quite satisfactorily on a non site specific version.

If I could comment on these operational issues which the Civil Aviation Authority (CAA) has some role in. There is quite a lot in what Daniel is saying that the work has not been done. There are no options for significant extra capacity that would not require a wholesale replanning of the airspace in the south east of England. Every option requires that. Indeed, it is going to be required anyway because even on the current approach it is full.

We are on the case. The CAA’s Future Airspace Strategy is looking to integrate technology development, changes in operational practices and the pressing environmental factors to try to produce a solution which allows more capacity and also optimal flight routings, less carbon - there is a whole number of benefits here. This is part of a wider European and global movement and it is going to take quite a long time to work through. Anybody who sits here and says, “We are really clear what the implications are of any project [whether it is the estuary or another] and it’s impossible” there are some hard questions to be asked there.

It does need to be looked at carefully. A commission is quite a good way to do that. We are talking to the Davies Commission to make sure they have got all the support that they need for that.

One other thing on airspace. There are well established processes for international cross border cooperation on these things. The UK is a bit unusual being stuck out on the fringe of Europe. We do collaborate very closely with the Irish and, to some extent, with people on the continent. The European frameworks, mostly, work on countries that are absolutely cheek by jowl with each other so of course cooperation happens. It may be that a UK project would cause some issues to Schiphol and, in total, those might be manageable or they might not. The fact that it is cross border is really not very important.

For other operational issues like safety and bird strike it is a similar comment. There is a whole category of issues which could turn out to be show stoppers but we do not yet know whether they will be. If the estuary options are going to be looked at properly then somebody - and it will not be us - needs to be doing a really detailed survey of what the bird populations are. As far as we know that work is not up to date and available. Then we, as the safety experts, can have a look at whether it is feasible to put an airport there safely. When we looked at Cliffe 10 or 15 years ago, in that location at that time, the answer was we did not think it was viable. But a) the approaches of the aviation community to managing bird strike risk have moved on in the last 10/15 years and b) we just do not know what the detail is of the extent of the risk and whether it is mitigated for the options that have been put forward.

Caroline Pidgeon MBE (Chair): OK. Thank you. Thank you, Tom. Richard, you wanted to come in on rail?

Richard Tracey (AM): Just the one point. We have discussed the possibility of putting rail infrastructure in to serve an airport on the border of the estuary. The one point we have not covered is the cost of that. I actually did attend a Select Committee meeting the other day and I heard the Secretary of State say that while the Government would be unlikely to contribute to the building of an airport most certainly the Government would be in charge of the infrastructure and clearly putting that in. What is the likely cost of putting rail infrastructure in for an estuary airport?

Paul Harwood (Principal Network Planner, Network Rail): Going back to Daniel’s earlier question we have costed a package of surface access improvements for the estuary at around £25 billion, recognising that there is a significant amount of connectivity that has got to be provided to serve a hub airport in that location. It is really important that we compare these options consistently against each other because doing anything at any of these locations - whether it is the four runway Heathrow, whether it is Gatwick or Stansted - the cost of surface access is considerable at any of those locations. It is not fair to suggest that there is a little bit of incremental work that needs to be done to accommodate Gatwick’s expansion plans.

All these airports are on corridors that are at tipping points. They are full of people and they are subject to further growth through London’s population growth anyway so there needs to be a commitment to surface access funding whatever the solution is and when you compare the options they are probably of a comparable cost.

What we have got in the estuary is an opportunity to plan it properly from the start so we can plan to achieve that 75% rail mode share that you have at Hong Kong or Singapore that we do not have at Heathrow because that is what delivers the speed and it is what delivers the broader benefits but also means the impact on things like air quality and congestion is less.

Caroline Pidgeon MBE (Chair): Can I finally pick up with you, Hugh. Obviously if there was to be this new estuary airport what would attract airlines out to use that? What would attract, say, easyJet to go and use an airport like that rather than existing capacity?

Hugh Aitken (Commercial Manager, easyJet): Chair, in one respect it is too early to say because we do not know the detail of it. Ultimately a lot of it is about cost and then are the facilities right.

The other piece we have got to remember is London is a system of airports. At the moment London has six airports which function well. To Iain’s [Osborne] point on competition, you now have a competitive situation between airports which, ultimately, lowers cost to the consumer and improves facilities. We have seen that definitely at Gatwick with some of the work particularly done with disabled passengers and passengers with reduced mobility. That has been great, Stewart. That is good because that is what competition drives.

Going to one super airport we would have a concern does that move you back to a monopoly position and what is the role of the other airports in that in satisfying the need for air travel and the 85% of people who go point to point. If you are living in Bedford travelling to the continent are you really going to go through central London on rail transport when you have actually got an airport just a couple of miles away. There are a lot of those details we need to understand and the debate needs to be on, alongside understanding what the costs are like and, ultimately, what that means to the passenger.

Caroline Pidgeon MBE (Chair): Lovely. Thank you. Thank you for clearing that up. I think we will finish our questions there. Thank you very much. It has been a very long session and we have over run considerably but it has been really useful and obviously contentious on a lot of the points that have been discussed. Thank you all very much indeed for your time this morning.