AOA Annual Conference: “Back to the Future”

Tuesday 19 October 2021

Some conference highlights

• Transport Secretary Grant Shapps MP commits to publishing a new strategic framework for aviation by the end of the year and offers a New Year review of remaining international travel restrictions.
• Shadow Transport Secretary Jim McMahon MP positions Labour as the champion of transport and calls for Government support to enable aviation to deliver on decarbonisation.
• Climate Change Committee Chairman Lord Deben says he is opposed to airport expansion but recognises aviation’s importance in giving people freedom.
• Heathrow Airport CEO John Holland-Kaye calls on the Government to give a permanent guarantee of regional airport links to his hub airport.
• London Gatwick Airport CEO Stewart Wingate urges Government to reinstate “use it or lose it” airline slot rules across the UK for summer 2022.
• Regional airport chief executives set out their ambitious decarbonisation plans for Aberdeen, Birmingham, Bristol, Glasgow and Southampton airports.

A summary of all this year’s conference speeches and panel contributions

Introduction:  The aviation year in review

Baroness Ruby McGregor Smith CBE, Chair, Airport Operators Association

The AOA Chair said that for UK airports the pandemic had been a time like no other.  She told the conference: “Airports have been fire-fighting.  They have had virtually no customers.  They tried to navigate the changes in the rules regarding international travel. They have had a lack of proper support from the Government”.

She said: “They have had to safeguard operations.  They have had to keep the lights on at their airports for lifeline services, ensuring the vital delivery of PPE, vaccines and other Covid-19 related freight.  At the same time, they have had to take difficult decisions on staffing and financing the airport.  However, despite all of this, I have been really heartened by the resilience of our sector and all of our people, because it really is that resilience that will turn these horrendous 19 months towards rejuvenation and regrowth, which is beginning”.

Karen Dee, Chief Executive, Airport Operators Association

The AOA Chief Executive said that aviation had faced its worst ever crisis.  The Office for National Statistics had confirmed that the sector had been the worst hit and would be the last to come out of the crisis, with one of the highest numbers of people still on furlough when that scheme ended.

She told the conference that, given the great strides the UK had made with vaccination, the AOA had hoped that would lead to a rebound in international travel to and from the UK, but that had not happened.  Where countries had adopted a more pragmatic approach, as in the EU, passenger numbers had recovered much more quickly.  Sadly, that meant that airlines had been moving their fleets to where it made more commercial sense and that was not something that had helped UK airports.

Dee said that recent relaxations in the UK’s travel rules had been very welcome and the AOA hoped that would begin to boost consumer confidence.  Nevertheless, she added, “as AOA we do not see this as job done.  We still believe that Government has some way to go in terms of delivering and facilitating a more pragmatic approach, particularly setting out a pathway to where we can get back to a more normal way of international travel, with no restrictions”. She said that the Government also needed to set out a clear recovery plan for the industry with policies and fiscal measures that would help to drive recovery, with most estimates suggesting that is going to take three, four or possibly five years for the industry to get back to where it had been.

The AOA Chief Executive concluded her remarks by underlining UK aviation’s commitment to the decarbonisation agenda.  Just before the pandemic struck the industry had committed to achieving net zero and Dee said that she had been “really struck and really pleased that, despite all of the challenges that we have faced, nobody feels that there is any less commitment to that.  It is a given.  We remain committed.  What we need is a sensible way of delivering that in a way that works for aviation, works for consumers and can meet the Government timetable”.

She said that, to coincide with the conference, the AOA had published its own report showing what UK airports have done to control and reduce their own emissions.  She told the conference that the report “shows some really great progress, which I hope that we can continue to build on”, noting that between 2010 and 2019 airports had halved their emissions at a time when passenger numbers were increasing.  Looking ahead, she said there would be “real opportunities for Government to ensure the UK can take the lead in this agenda”.

The view from the Opposition

Jim McMahon MP, Shadow Secretary of State for Transport

The Shadow Secretary of State for Transport said he was very proud of the fact that the UK has the largest aviation sector in Europe and the third largest in the world, noting also that regional airports were a source of pride in their regions as they provided both a gateway to the world and valuable high-skilled jobs.

McMahon said he was very disappointed that the Chancellor had not delivered on his promise early in the pandemic of a sectoral deal for aviation.  He couldn’t see how the Government could deliver on its levelling up agenda if it allowed regional airports to go unsupported.  He said Ministers should deliver a joined-up single plan for the sector to provide the support that would enable aviation to deliver on decarbonisation.  Labour had been very clear that “if you want aviation to be decarbonised, to lead from the front on new technology, that can only be done if the industry is in a healthy state, financially supported and sustainable”.

Drawing attention to his speech at the Labour party conference, McMahon said that he had sought to reset the tone, positioning Labour as the champion of transport.  He said he was opposed to demonising hard-working families who saved for a summer holiday.  “The Labour party doesn’t want to lead the world by grounding planes” he said, “We want to lead the world by leading in green technology and investment”.

Keynote Speech

The Rt Hon Grant Shapps MP, Secretary of State for Transport

The Secretary of State acknowledged that 2021 had been “an incredibly difficult and frustrating year for airports” and he said there had been “some pretty frank conversations” about when to relax international travel restrictions.  Nevertheless, he said, there had been “considerable progress” during the year and the recent relaxation of restrictions were “a clear sign that we are well on the way to recovery”.  Airports would be able to “ramp up their operations this winter and look forward to a much better and busier 2022”.  Shapps said that the Government would “review our international travel rules once again in the New Year to see if we can move even further towards restriction-free travel”.

Stressing the importance of domestic services from regional airports, he said that the Government was currently reviewing responses to the Treasury’s consultation on aviation tax reform and “looking at the options to reduce effective rates of Air Passenger Duty on domestic flights”.  The Government was also working on a new and wide-ranging strategic framework for UK aviation, which would be published by the end of this year.  He described Public Service Obligations as “critical to regional connectivity”.  The Government would continue to protect “existing UK routes to London that are in danger of being lost” and would consider whether there were further opportunities to use PSOs “to help every part of the country stay connected as we recover from Covid”.

On climate change, the Secretary of State said that Government and industry working together had made “substantial progress” by establishing the Jet Zero Council.  A consultation on Jet Zero proposals had recently closed, and consultation responses would help to shape the Jet Zero strategy, to be published early next year.  He said that the COP26 meeting in Glasgow could show the world that aviation was serious about taking practical, immediate steps to tackle greenhouse gas emissions and he thanked those airports that had been part of a group working together to deliver a supply of sustainable fuels to be used by delegates on their return flights from the summit.

Aviation:  Powering the recovery – global, regional and local

Shevaun Haviland, Director General, British Chambers of Commerce

The Director General said that airports were crucial for the British Chambers “in terms of regional and international connectivity and the broader economy because they are centres of employment, they enable international trade, as well as the visitor economy.  Inward investment of course is crucial and supporting the manufacturing and just-in-time economies in their areas”.

She said that “their recovery is going to be crucial to ensuring the UK economy emerges from the pandemic in a balanced and internationally competitive way, not only building back greener, but building back stronger”.  It was important to keep reminding the Government that airports were huge employers, but there was also a bigger impact from the businesses that rely on them.

John Holland-Kaye, CEO, Heathrow Airport

The Heathrow CEO said that one of the things that had struck all airports over the last 18 months had been “how little support we have had from the Government, how little understanding we have seen from Government of the vital role that we play in connecting our country together and connecting us with all parts of Europe and the wider world”.

He said that: “As we start to see that we are coming out of this crisis, we need a better plan and we need to be thinking about what is the UK’s role in the world, how do we want to make sure that all of the UK benefits from that and we also need to think about how do we protect the benefits of aviation in a world without carbon”.  Holland-Kaye said: “We need a really good plan for how we are going to make sure that the UK of the future is still one of the world’s great trading nations and we have got to be very outward-looking to do that”.

The Heathrow Chief Executive said that all parts of the UK should be connected to global markets through his hub airport.  That would require, he suggested, taking “advantage of the slot policy freedoms that we now have to make sure that every corner of the country has a guaranteed flight in the morning and a guaranteed flight in the evening so that business people, students, tourists in those regions can get easy access to the first wave going out and coming in and the last wave going out and coming in, in perpetuity”.

David Kerr, Managing Director and Co-Head, Ontario Airports Investments

The Ontario Managing Director explained that Ontario Airports Investments is wholly owned by a £200 billion Canadian teachers’ pension fund.  Its UK airport assets are Birmingham, Bristol and London City Airports.  Kerr said that the fund could invest in any country that was open for investment and, while the UK had a good track record as a safe and good destination for investment, there would always be competition.  With signs of slowing growth in China, the economic environment could become more challenging.

Considering the UK during the pandemic, he said that Ontario’s airports had taken advantage of the furlough scheme, but, otherwise, the fund’s view is that it should manage without public funding and look to 2024 to get “a better view of what is the new normal”.  The debt hangover would inevitably lead to lower investment and there would be no need to invest in capacity for a while, but there would continue to be investment in technology.

Paul Maynard MP, Vice Chair, APPG on the Future of Aviation 

The Former Aviation Minister suggested that the present moment, when there is a pause in the development of global aviation, would be a good time for the Government to decide on its vision for aviation.  There needed to be an exploration of the extent to which the sector needed intervention and whether there was any appetite for such intervention within Government.  He said he was particularly concerned that regional, small airports had less access to Government than large airports and lacked parity of esteem.

Maynard said that for months the Government had been in crisis management mode, and he was concerned that officials lack the bandwidth to take a strategic and long-term approach to what now needs to be done.  He said that the aviation sector should engage with Government on what being a strategic partner might mean in the short term and how Government could gradually withdraw again as the industry hopefully becomes more successful.

Stewart Wingate, CEO, London Gatwick Airport

 The Gatwick CEO said it was important that airports continue to hold the Government to account and encourage it to take timely decisions to get the UK aviation sector back to a position where it would once again be the envy of the world.

He said that Gatwick had three key asks of the Government:  firstly, to remove all travel restrictions for doubly vaccinated passengers and to work to achieve common international standards; secondly, to reinstate this winter the slot utilisation rules ( the “use it or lose it” rules) at airports across the UK for the summer season of 2022, to put in place the correct incentives for airlines to operate at scale to and from our airports; thirdly, to provide policy and financial support for the businesses that would have to scale up to support the green technologies that the aviation sector will need to use.

Wingate said that Gatwick continues to work on a Development Consent Order, which it expects to submit in the second half of next year to the Planning Inspectorate.  That will take forward the airport’s plans to routinely use its Northern runway, giving it a platform to contribute to aviation growth towards the end of the decade.

Q&A with the Aviation Minister

Robert Courts MP, Minister for Aviation, Maritime and Security, Department for Transport

The aviation minister said that the conference was taking place at a strategic moment in the recovery from Covid and the next stage.  He said he accepted that there were still challenges and there was further to go, but he said: “I can see the edge of the woods.  We can start to look forward, to going forward together”.

He said that towards the end of the year the Government would produce its strategic framework for the recovery of the sector, which would look at both the recovery from Covid and wider strategic issues.  The Department would be seeking the aviation sector’s views to make sure that the framework would be “relevant, practical and useful”.  He stressed that the regional aspect of aviation would be “absolutely critical” for levelling up, for connectivity across the four nations of the UK and for trade policy – “that is very key.  We are going to want to make sure that the regions are fully a part of that too”.

Courts said that the aviation sector could rely on the Department for Transport being “the standard bearer, the advocate for aviation” across Government, including with the Treasury.  He said that the fiscal environment was key, and the Department would be seeking to ensure that “the environment that exists is positive and helpful”.  He said that UK aviation had enormous underlying fundamental strengths and he was “very confident that we will bounce back”.

Zero emissions 2040: How will airports deliver

Catherine McKinnell MP, Co-Chair of the All-Party Parliamentary Group on Sustainable Aviation

The APPG Co-Chair, whose constituency includes Newcastle Airport, described climate change as “the greatest challenge of our time” and said that it would require “significant changes to our economy, to our society and the way in which we travel”.  She said that, at a time when the pandemic had devastated airports’ balance sheets, there was a need for the Government to provide aviation with ongoing support linked to climate change policies.

McKinnell said she saw “a big chasm between the Government’s green rhetoric and grand statements” and its lack of action.  The Budget would be an important moment to “put its money where its mouth is”, saying that she worried that “there isn’t enough commitment to partnership with the private sector”.  Stressing the time-critical nature of the challenge, she said that “if we don’t invest now, the damage will be irreparable”.

She said she was concerned that “the Government doesn’t yet fully acknowledge its role in not just helping the private sector to do its part, but to really rocket-boost it, to really super-charge it in terms of the time frame that is required.  That is the big challenge.  Its not going to happen by itself.  It needs investment”.

Nick Barton, CEO, Birmingham Airport

Birmingham Airport’s CEO recalled that his airport had announced in 2019 that it would seek to achieve net zero carbon emissions by 2033.  Although the pandemic had set back the delivery programme by two years, the airport will stick to that target.  He said that at the time of the announcement he “hadn’t got the foggiest idea of how we were going to get there” but making a public statement had provided the airport with a very strong incentive to work out what needed to be done.  The airport is now revising its capital plan and was clear that achieving the target would require “significant investment”.

Barton emphasised the importance of airports and aviation more generally communicating to the public what they have done already to reduce their carbon emissions and what is planned.   He said that would be “one of the key guiding lights for how we operate as an airport, making sure that everyone understands what we are doing, which we might take for granted, but actually a lot of people don’t really know about”.  Barton said: “We are still very optimistic about what we can do.  I do believe this industry will really deliver, but, crucially, it has to tell people what it is doing, not only in the here and now, but what it has got in the pipeline, because otherwise it will be liable to become the whipping boy of general perceptions about the delivery of carbon”.

Dave Lees, CEO, Bristol Airport

Bristol Airport’s CEO spoke of four key ingredients in “a decade of change”, investment, innovation, skills and collaboration. On investment, he said that tens of millions of pounds would be required “at a time when the industry is on its knees”.  Bristol Airport has announced a plan to be net carbon zero by 2030.  That was “a very bold statement but supported by our shareholders”.  On innovation, he said that the airport had set up an aviation carbon transition fund, offering a quarter of a million pounds each year for the next ten years to encourage innovation in the wider aviation eco-system.

On skills, he forecast that finding and training the engineers of the future would be one of the industry’s biggest challenges.  On collaboration, he said that the airport is at the heart of the UK’s aviation cluster and is working with the region’s aerospace companies to examine the part that airports would need to play in terms of refuelling aircraft and handling the aircraft of the future.  The airport had also announced a collaboration with EasyJet, offering itself as a test bed for trials that would push the boundaries of what new approaches could be adopted to reduce emissions.

Derek Provan, CEO, AGS Airports

The Chief Executive of AGS Airports (Aberdeen, Glasgow and Southampton) said that all three of the Group’s airports are currently carbon neutral and committed to achieving carbon neutrality by 2035.  The Group’s environmental credentials are strong with the latest global monitoring report listing the airports as one, two and three in the UK and one, five and seven globally.

Provan said that AGS is focussed on partnerships and innovation.  As an example of the partnership approach, AGS is leading a consortium that will develop and trial what will be the UK’s first national distribution network to use drones to transport essential medicines, blood, organs and other medical supplies throughout Scotland, which would be particularly important for remote rural areas.  On innovation, AGS is working to see how electrically operated vertical take-off and landing aircraft could ultimately replace helicopters at Aberdeen, currently the world’s largest heliport.

The Rt.Hon. The Lord Deben, Chairman, Climate Change Committee

The Climate Change Committee Chair said he thought that the airport operators and the aviation industry generally had “done a great deal to improve the relationship that it has with those who are concerned about climate change over these past 18 months.  There was a time when aviation was always used as the people you beat about the head if you were a campaigner and I think that has really changed.  They have understood that the industry is very seriously committed to fighting climate change.  I think that is very noticeable and it is a very good beginning”.

Lord Deben said he agreed with those who say that the Government has got to play an important part.  His message all the time was that Government had to show that it was serious and not only had ambitious targets but also a programme of implementation, creating at least some certainty in an uncertain world.  Government needed to “make it easier and cheaper to be good and harder and more expensive to be bad”.

On airport expansion Lord Deben was clear about his view.  He said “The Government has to say some tough things.  I do have to say that I don’t think there is any space for airport expansion.  I just think that you have to recognise that.  The idea that we are suddenly going to have a whole lot of airports expanding and we have really got to look at all that – I don’t think we are in the world that that is so”.

On a more positive note, he also said: “We have got to continue to establish the importance of aviation, to recognise that it is a widely-felt freedom-giving area for many people.  The idea that somehow we would all be better off if we didn’t travel is a kind of Greenpeace puritanism of which I don’t approve”.

Closing remarks

Baroness Ruby McGregor-Smith CBE, Chair, Airport Operators Association

In her closing reflections the AOA Chair said that the aviation industry is vital to the UK’s economic success and without the industry it would be very difficult for the Government to achieve its objectives.  The industry and the Government needed to collaborate to find solutions to the challenges that both faced.

She also said that without help regions outside London and the South East would see a much slower recovery and that would impact on the UK Government’s levelling-up agenda and the devolved governments’ economic priorities.  Both needed to “step up now and really help boost airports’ chances to make a success of the recovery.  We will be competing fiercely with other countries for the return of airlines and routes.  We really cannot allow the UK to lag behind our global competitors”.

Looking ahead to 2022, the AOA Chair said she is “very hopeful that next year we can meet up in person at a time when the recovery of the sector will be fully under way”.  She said that she and the AOA Chief Executive “really look forward to that and we think the headwinds hopefully will be calmer and there will be a more prosperous outlook for the industry”.