Aberdeen International Airport Consultative Committee 3 June 2016 Fiscal Responsibility Division Scottish Government Area 3D-North Victoria Quay Edinburgh EH6 6QQ CONSULTATION ON A SCOTTISH REPLACEMENT TO AIR PASSENGER DUTY SUBMISSION ON BEHALF OF THE ABERDEEN INTERNATIONAL AIRPORT CONSULTATIVE COMMITTEE Introduction The Aberdeen International Airport Consultative Committee is the committee established under UK civil aviation legislation to enable the operator of Aberdeen International Airport to consult with a range of stakeholders on issues relating to the operation and development of the airport. The Committee, which was established in 1953, has some twenty members, including four Aberdeen City and three Aberdeenshire Councillors, a representative of each of the two community councils whose areas are most affected by the operation of the airport, representatives of economic and trade bodies, including the Aberdeen and Grampian Chamber of Commerce, Scottish Council Development and Industry and Association of British Travel Agents/Scottish Passenger Agents’ Association, and those associated with aviation, including NATS Aberdeen, the Airport Operators’ Committee and the UK Helicopter Operators’ Association. The Committee is independent of the airport management and has no executive powers. It meets under the chairmanship of Dr Peter Smart, who is independent of all stakeholder interests. It is advised by the Managing Director of the airport. The Committee meets quarterly and has a record of responding to government and similar consultations on issues within its competence. We are therefore pleased to make this submission in response to the present consultation on a Scottish replacement for APD. We seek to agree submissions by consensus, since the members of the Committee represent such a diverse range of organisations, and we are apolitical in our responses. We ensure that we only respond to questions that we believe are within the remit and competence of the Committee; in the case of the current consultation we have therefore restricted our responses to chapters 1 to 5, leaving chapters 6 to 14 to the aviation industry. Support in principle to the present review As a Committee, we have consistently lobbied successive Chancellors of the Exchequer to reduce substantially or abolish APD, or at least to review the double whammy effect whereby return domestic flights within the UK attract APD in each direction of travel, whereas return travel to destinations outside of the UK only attract APD on the outbound sector. We therefore support in principle the current review and the opportunity for APD to be reduced on flights from Scotland. Meeting the Scottish government’s objectives We note from the opening paragraph of the consultation document the presumption that a reduction in APD in Scotland will help to achieve the Scottish Government’s objective of boosting Scotland’s international air connectivity. We believe that this is a means to an end, and not an end in itself. The aim of any reduction in APD must ultimately be to support and nurture the growth of the Scottish economy to the point where the additional revenue raised from a higher level of exports, in-bound tourism and developing Scotland further as a location of choice for international business will greatly exceed the revenue ‘lost’ through the reduction in APD. New routes and connectivity will be one factor that should lead to such economic development. We are prepared to accept that a reduction by 50% in the level of APD payable in Scotland, compared with the rest of the UK, should offer a mild encouragement to passengers wishing to fly from and to Scottish airports. However, we are not entirely convinced that it would be the sole, or even a major, factor in attracting new long haul air services to Scottish airports, as a proportion of the overall fare, nor sufficient per se to entice a substantial increase in the number of flights taken by Scotland-based passengers; we believe that there would need to be much more of a business case to attract airlines and passengers, as has clearly been made by all four main Scottish airports in their route development activities over recent years; there is evidence from south of the border that Birmingham and Manchester airports have had to fight hard to attract additional long haul services to Asia, particularly China; furthermore, they have had to rely on foreign airlines to provide those services, since the UK’s only global airline (British Airways) shows no evidence of wishing to fly long haul other than from its bases at London Heathrow and London Gatwick airports, and the only other UK long haul airline (Virgin Atlantic) concentrates its services on Heathrow and Gatwick, with a limited range of routes from Glasgow and Manchester; at least one of the recently announced services from Birmingham and Manchester appears to be relying on a small, relatively newly established airline with little track record of long haul, that is, the service about to start from Birmingham to Beijing and Shanghai. Balancing the interests of the central belt with the other regions of Scotland We support in principle the Scottish government’s objective of attracting a greater range of long haul services to and from Scotland’s airports. However, in practice, though, only Edinburgh and Glasgow airports have a sufficient catchment area and runway facilities within Scotland to support long haul services; we are concerned that the interests of Scotland’s other main airports, particularly Aberdeen, are not overlooked in the Scottish government’s overall aviation strategy; whilst services to and through Turkey and Middle Eastern hubs are beneficial to residents and businesses located in the central belt, they are not a substitute for the current range of connecting services through the main UK and European hubs for passengers from Aberdeen; we should not wish the Scottish government to lose sight of this when developing their strategy for enhanced connectivity to the world. Furthermore, it is not just the catchment population and runway facilities at airports such as Aberdeen that affect their ability to attract long haul services; it is also our relative geographical isolation. As the Competition Commission concluded, in its inquiry into former BAA airports several years ago, Aberdeen is in a monopoly position simply because there is no other major airport closer than 125 miles away; in addition, because of our geographical location, both business and leisure passengers rely more heavily on air travel, even for domestic journeys, than is the case from Edinburgh and Glasgow; there are no major cities south of the border that are less than four hours by rail and road from Aberdeen; our fastest three times daily train service to London takes seven hours; even with Virgin Trains East Coast proposals to cut another 20 minutes off the Kings Cross to Edinburgh run when they introduce the new Hitachi Azuma train sets from 2018, the journey time between Aberdeen and London is likely still to be over 6½ hours; in the time it takes to travel by train from Aberdeen to London, it is possible to fly there, do half a day’s business and be ready to come home. In summary, we are heavily dependent on air travel. Aberdeen is fortunate, as the only Scottish airport away from Edinburgh and Glasgow, to have services to all the main European hubs (Heathrow, Amsterdam, Copenhagen, Frankfurt, Paris and more recently Dublin and Reykjavik), of which Heathrow has long been the most popular choice of hub. In addition, there is now access to a limited number of connections from Birmingham and Manchester, using recently established code share arrangements between Flybe and foreign airlines such as Etihad and Finnair. Put simply, we believe that any reduction in APD must be as beneficial to travellers from airports outside of the central belt as it may be to Edinburgh and Glasgow. In terms of international connectivity, there is no great body of evidence to show that large numbers of passengers from outside the central belt are travelling by road or rail to Edinburgh and Glasgow to make use of their increasing number of long haul services; rather, it appears that most travellers continue to prefer the convenience of hubbing within the UK and Europe from the airport local to their home or business. Why ‘a Scottish replacement for APD’? We are aware that the consultation is headed ‘a Scottish replacement for APD’. Since the consultation is about a reduction in APD compared with the rest of the UK, and there is no suggestion of introducing a substitute for APD in Scotland, we believe that for simplicity of reference the duty should continue to be called APD (or ‘Scottish APD’). Attached documents We attach a completed respondent information form (Annex A) and our detailed answers to the questions set out in chapters 2 to 5 (Annex B). We should be happy in due course to elaborate on our answers if requested. Wherever possible we base our comments on an evidential basis. You will note that, in our responses to individual questions, we qualify our support as appropriate. Dr Peter Smart, Chairman On behalf of the Aberdeen International Airport Consultative Committee Annex B LIST OF CONSULTATION QUESTIONS Chapter 2: Improving Scotland’s Air Connectivity – Strategic and Policy Objectives Q1: (a) Do you agree with our strategic and policy objectives for improving Scotland‟s air connectivity? Please answer yes or no. Yes, in principle (b) Please explain your answer to Q1(a). We agree with the objective of enhancing Scotland’s connections to new point-to-point destinations and developing services to key global hubs. However, as we have observed in our covering letter, section headed ‘Balancing the interests of the central belt with the other regions of Scotland,’ we are concerned that the government’s strategy needs also to be tailored to the needs and interests of those parts of Scotland away from the central belt, including Aberdeen, where air connectivity is critical to support economic growth at a local level as well as ensuring connectivity within and beyond the UK for both business and leisure purposes.