John Holland-Kaye sets out to AOA conference why Government should approve Heathrow expansion

Heathrow CEO closing speech to the AOA

Introduction

Ladies and Gentlemen.

Well you will be pleased to know it is almost all over – no I don’t mean this year’s excellent AOA conference, but the seemingly interminable expansion decision …

Did you know that in the time since the Airports Commission was set up, you could have enjoyed 485 excellent AOA conferences.

It feels like it has been one of the longest campaigns in British history - indeed, you could have had 26 general election campaigns… actually, I’ll take the Commission over that any day.

When the Prime Minister, with cross party support, took the decision to set up the Airports Commission to keep Britain as an aviation hub, he showed great leadership.  But he also set up what seemed like significant hurdles.  It couldn’t just be the right economic answer for the 21st Century, it had to work for local communities and the environment.

If this had been simple, it would have been resolved a long time ago.  But whether we are talking about railways, power stations or airports, big infrastructure projects are never simple.

The Airports Commission assessed the need, the issues, the pros and cons against the criteria the Prime Minister had set.  It also gave others the opportunity to promote any alternative, from Manston to “Heathwick” to the Essex marshes.  It is the most detailed analysis of airport capacity ever carried out and we should commend them for their thoroughness, and for their political savvy in making sure that everyone gets something with Heathrow expansion.  In fact, their approach is now being taken as the model for the new Infrastructure Commission.

And as we know they came to the unanimous and unambiguous conclusion that Heathrow’s new plan was the best answer.   We will deliver up to £211 billion of economic growth, and up to 180,000 new jobs across the UK, while being fair to local people, having no more cars on the road, fewer people impacted by aircraft noise than today, and meeting air quality and climate change targets. We will connect all of Britain to global growth.  They placed some conditions, none of which are show stoppers, and in fact several of which we had already proposed. In a few weeks we will know whether the government will back its Commission.

I think that given the strength of the recommendation, the weight of support that we have seen from local people, the majority of whom back Heathrow expansion, business groups, unions, politicians from Northern Ireland, Scotland, Wales and England it would be hard for them to do anything other than back Heathrow expansion.

You may have seen speculation that they could defer a final decision until after the mayoral election and think that a decision that has waited for 40 years, that will set up the UK for generations to come as a leading global economy, could wait another six months.

But most of the people I speak to, including those who still oppose Heathrow expansion, just want the government to make a decision and get on with it.  There is a real cost to delay – not just the £1 billion a month that the CBI spoke of, but also for people in our local community, and in particular the 750 households who are most affected by expansion and want certainty so they can get on with their lives.

We have been getting ready so that we can move quickly.  We have put the internal organisation in place, we have started tendering for the supply chain, we are working with the regions of the UK to create jobs while we build as well as when we have built, we are working with councils to ensure that we support local communities as well as provide skilled jobs following expansion, and we are engaging with those 750 households to listen to their concerns.  We are also working with airlines to reduce the build costs, reduce operating costs and improve passenger service.  So the only chandeliers will be in an airline lounge!

This may sound like a lot of planning, given that we don’t have a decision yet, but my experience from building T2 is that when you get to the end of a big project, you always wish you had another 6 months – so best to start early!

And that is the point - we are very experienced at delivering these big projects.  In the last 10 years we have done almost all of the things we will need to do in the next 10 years – £11 billion invested in new roads and railways, terminal buildings, baggage systems, airfield – delivered on time and on budget.  We have created an airport that is rated by passengers as the best of its kind in Europe, while also being a pioneer in environmental management and social responsibility.  In Heathrow we now have a national hub that we can be proud of, one that complements the role of all other UK airports.  With expansion, we can create the world’s best connected hub airport, designed around the needs of passengers and the environment.  It will provide value and choice for passengers, with more competition between airlines – and it is competition between airlines, not airports, that benefits consumers the most.

We are ready, and I hope the government will give us the opportunity to make it happen – so I thought that in closing a conference whose theme has been ‘UK Airports – connecting people, jobs and the economy’, I should reflect on some of the things I have learned in the last 2 and a half years.

I have learnt four key lessons:

…aviation’s role as an engine for the economy

…the importance of a UK-based global hub for our regions

…the critical role air freight plays to businesses

…and finally, that we need to earn our license to operate and our right to grow by being a good neighbour. 

I’ll take each in turn.

The economy … Aviation, simply put, is an engine for the economy.

The global economy is changing.  All the growth in the world is in Asia, the Americas and Africa, while Europe stagnates.  Technology firms will soon be selling more products to businesses in the emerging world than they do in the established economies.

We need to fight for our place at the economic top table.  If we are going to win the race for growth, we need not just to be connected to these markets, but be better connected than our rivals in France, Germany and the Middle East.  Just to be clear, we support the right for any airport to grow, including Gatwick.  But while there are other airports in the UK with capacity to do more point to point flying, we have seen over the last 10 years that none that can support regular direct flights to large numbers emerging markets.   Airlines can only make money on these thin new routes by pooling demand from across the UK and Europe at a hub airport.  And having one of the best connected hubs in the world here in the UK, serving 75 long haul destinations that are not served by any other UK airport, gives British businesses a competitive edge.

The Wood Group is a great example of this.  They are one of the leading players in the global oil and gas industry, operating in over 50 countries, and based in Aberdeen, which has no long haul flights at all.  How can you operate a successful global business with no direct flights?  Because eight flights a day to Heathrow puts them in touching distance of Almaty, Lagos and Houston, routes which will probably never be big enough for a direct flight from Aberdeen.

We’ve been working hard to increase direct flights to growth markets. In the last few years, airlines have added Guangzhou and Chengdu in China, Bogota in Colombia, Hanoi and Ho Chi Minh City in Vietnam, Manila in the Philippines and today, Garuda Indonesia has announced it will launch a direct service from Jakarta to Heathrow, starting with 5 flights a week, giving businesses across the UK access to one of the largest economies in South East Asia.

But I still have over 30 airlines who want to add services at Heathrow, but instead are going to Paris and Frankfurt.  You can imagine how frustrating this is, not just for me, but for thousands of British businesses who are forced to take a longer route than is necessary, and hand France the economic success that should be ours.

Just think how much more successful Britain’s technology sector could be if we could put it at the heart of its industry, with direct flights to Silicon Valley, Shenzhen, home of Huawei, and Osaka, home of the Japanese technology sector?  With expansion, we can do this, adding up to 40 new long haul destinations, making Britain the best connected country in the world.  Britain can be the winner in this race for growth.

So if the government is serious about growing the economy – they will back Heathrow expansion.

The second thing I have learnt is the importance of a national, home-grown hub to complement the success of regional airports.

Passengers will always want to fly from their local airport.  But where there is not enough local demand for direct flights, a link to Heathrow fills the gap.

When I talk to politicians and businesses in London about Heathrow expansion, they often ask ‘isn’t a flight to Amsterdam or Dubai just as useful to UK regions as one to Heathrow?’

I give them the same answer that regional businesses give me - they want easy access to the world’s best connected airport so that they can get to global markets to sell British goods and services. They want overseas businesses to be able to get to Britain easily so that they invest here and benefit from local skills.  They want it to be easy for overseas students and tourists to get here and enjoy Britain’s culture and universities.

The 6 daily flights from Newcastle to Heathrow are packed with people going to world markets.  From Heathrow, there are three flights a day to Tokyo and Seoul.  That is why so many Japanese and Korean businesses have chosen the North East for their investments. Would there be so many if they could only get there via Paris or Dubai?  Almost certainly not.

But while Heathrow has been full, we have lost connections to regional airports which has illustrated the value to regional economies of a Heathrow link. Durham Tees Valley airport experienced a 75% fall in passenger numbers following the withdrawal of its Heathrow service in 2009.

This is not something we had been aware of before the Commission process started, and perhaps the sale of our own regional airports has made it easier to engage with others.  But we are now working closely with British Airways and airports such as Leeds Bradford and Newcastle to protect and grow their connections to Heathrow, for example, with joint marketing and promotions and have planned a £10 reduction in domestic charges from 2017 to help make regional connections more viable – and we would be very happy to do the same with other UK airports.  I am delighted that British Airways has announced that it will reintroduce a daily Heathrow-Inverness route from next year and we will work with them and HIAL to secure its success.

But just think how much more successful Inverness, Liverpool and Cornwall could be if they were as well connected to the world as Aberdeen and Newcastle.  We have accepted the recommendations of the National Connectivity Taskforce, including a £10 million route development fund that will provide start-up capital to airlines who want to launch new services from an expanded Heathrow, and we support the use of airport specific Public Service Obligation routes to ensure that businesses in Newquay and Dundee can be connected to the UK’s hub.

Yesterday, I was delighted to see the Regional and Business Airport Group, representing 32 airports across Britain, throw its weight behind us, saying expansion of Heathrow can reverse the decline in domestic connectivity.  They are right.

If the government is serious about rebalancing the economy, in making sure that every region and nation of the UK is connected to the growing markets of the world – they will back Heathrow expansion.

BRITISH EXPORTS

The third thing I have learned is how important freight and exports are to businesses large and small. 

Air routes are this country’s vital trading routes.  And Heathrow is Britain’s biggest port – handling over a quarter of all British exports by value.  Anything high value, fragile, with a short shelf life or requiring just in time delivery goes in the bellyhold of a passenger jet from Heathrow – think Scottish Salmon, pharmaceuticals, Brompton bikes, formula 1 cars, or emergency aid.  Exports are not just about big business – for SMEs, exporting starts with a box on a plane, not a container on a ship.  You won’t be surprised to know that the fastest growing export markets are in Asia and South America, in fact exports to China via Heathrow at £7bn are up by 117% year on year.

You may not be surprised to know that we didn’t understand the significance of cargo to our airlines or the economy until we started working on the Commission process – because we make no money out of it directly, we had neglected it.  That has changed.  We have now appointed a freight veteran as Head of Cargo and last month I outlined our Cargo Blueprint which will help get British exports through the UK’s biggest port more quickly and predictably. We are working with SEGRO, Border Force and others to more than halve throughput time to just four hours. We will also become one of the first airports to be 100% digital. And we will have a dedicated air-to-air transfer service to speed up regional connections.

This will make our exporters more competitive – but it doesn’t get over the real issue that some of our cargo routes are already full.  How do you grow exports if your largest port is full?

With expansion, we will double our cargo capacity, providing the infrastructure needed to meet the government’s goal of becoming Europe’s second largest exporting nation.  And just think how much more we could export if we had direct flights to the great cities of China – Xian, Chongqing, Wuhan, Tianjin … cities that are already as large as London, whose names I can barely pronounce, and yet which will be as familiar to our childrens’ generation as Atlanta and Chicago are to us.

If the government is serious about keeping Britain as a leading trading nation, they will back Heathrow expansion.

RESPONSIBILITY

The fourth and most important thing I have learnt is that we need to earn our license to operate and our right to grow. 

We have all worked hard as an industry to be good neighbours.  Boeing, Airbus and Rolls Royce are reducing emissions and noise from aircraft; BA and Virgin are experimenting with biofuels and waste to energy; NATS is simplifying airspace to reduce carbon use; we have invested in public transport, car sharing, cycling, electric pods.  We are close to an historic global deal on emissions trading, something we have campaigned for for years.

Heathrow is quieter today than it has been since the 1970’s; we have doubled the number of passengers without having any more cars on the road and have reduced emissions by 16% over 5 years.  We meet EU Air Quality targets.  The big issue locally is through-traffic on the M4 – it would exceed EU air quality targets even if you closed Heathrow today.  However, I am pleased to say, thanks to collaboration with the Mayor of London, local boroughs and changes in technology, DEFRA now forecasts the M4 will be compliant by 2020.

I will not go into our work on biodiversity, recycling, and energy demand management – but I am proud that we are increasingly seen in the industry as a leader in sustainability, earning ACI Europe’s eco-innovation award earlier this year.

Aviation, and aviation growth in particular, is often portrayed as a conflict between airports and local communities.  But the reality is far different and more complex than that.  We are a critical part of our local communities.  We employ 76,000 people just within the airport boundary and provide almost 1 in 4 local jobs.

I spent my first day in this job visiting local schools, and it struck me that the kids in those schools are the children of my colleagues and many of them will come to work for us one day.  It is absolutely in our interests to ensure they have a good quality of life and get a good education; to give them rewarding and varied careers at the airport so that they can fulfil their potential – an environment where one day one of them could do my job.  They are certainly smart enough – in fact most of them are smarter than me!

So that is what we are now doing.  We train and find jobs for around 500 unemployed local people annually, we have increased the number and range of apprenticeships, and will soon open our construction academy.  We have sponsored the Heathrow Aviation University Technical College, and encouraged colleagues to become school governors and get involved with community projects.

I also met local councillors and MPs, including some of our biggest critics, and it became clear that there was so much more we could do to be a good neighbour, regardless of expansion.  So I tasked my team to come up with a more ambitious action plan, which became our Air Quality, Noise and Public Transport Blueprints.  We will make Heathrow an ultra low emissions zone by 2025, bringing in electric vehicles, installing more pre-conditioned air and FEGP.  We are increasing the number f people using public transport by providing free local buses 24/7 and reducing the cost of using Heathrow Express – you can now book in advance for only £10.   We reducing noise by doubling noise fines and increasing incentives for cleaner, quieter planes.  I also asked 40 airline CEOs to help and we now have 50 flights a day trialling steeper descents, 85% of our A320s are being modified to reduce noise on approach by 9 decibels, and we will have no chapter 3 aircraft in the fleet by 2025 – in fact by then almost the entire fleet with be new generation, such as A320 neos, A350s and B787s.  I want to thank the airlines for their support and for showing what a difference we can make by having a common vision and working together to achieve it.

There is more that we can do, and if anyone here has best practice we can learn from, we would love to do so, as well as sharing our experience.

I have met some in the anti-aviation lobby who say Britain should set an example to the world by having no new runways.  My answer is that we should set an example through responsible growth.  Let’s make an expanded Heathrow the most sustainable hub airport in the world.

Let’s minimise the impact of noise by having quieter planes flying higher and maintaining respite from noise for those in the flight path.  Let’s provide a world class school and home insulation scheme, for those in the existing as well as the new flight paths.  Let’s provide up to 40,000 local jobs, 10,000 apprenticeships, the opportunity to end youth unemployment in local boroughs.  Let’s be a world leader in recycling, using the energy from airport waste to provide the electricity to power our vehicles.  Let’s only release new capacity when we can be confident of meeting air quality targets.

Heathrow will be served by 5 railway lines and 5 motorways to North, South, East and West.  In 2018, Crossrail will make Heathrow an economic engine for East as well as West London - Stratford will only be 42 minutes away, making it as convenient for the airport as Slough is today.  In 2022, Western rail access will connect South West England and Wales – and mean that Slough will be only 17 minutes away, even more convenient than it is today.  HS2 and Southern Rail access will provide quicker journeys from North and South, and remove the need to go through central London.  Heathrow will be home to the UK’s biggest coach station and we will expand our free 24/7 bus service so that the new local people working at the airport can get there by public transport.  For the first time, this country will have an integrated transport network.

While we are rebuilding the airport campus, we can make it fit better with local communities.  We are already working with councils to regenerate the local area, for example the new Heathrow Garden City, which will create 9,000 new homes in Feltham.

Following consultation with local communities, today I am pleased to announce that with expansion we will create a 15 mile ‘green ribbon’ around the airport. It will transform land that has been brownfield sites or landfill, into parkland that is four times the size of Hyde Park. We will divert river channels to protect biodiversity and reduce flood risk and improve publicly available space, with wetlands, natural ponds for swimming, sports pitches and tennis courts, allotments, bridleways and even a mountain bike trail.

CONCLUSION

I have learned much during the last few years about Heathrow’s role as an economic driver for the UK, about the importance of regional links to the UK’s hub, about the value of freight and exports, but most of all about why we need to be a good neighbour and work together to support our local community.  Whatever happens with expansion, these are lessons I will not forget over the coming years.

But what I have also learned is that Heathrow gives the UK a unique competitive edge that we would be foolish to waste.  And there is a prize within our grasp – that of being the best connected country in the world, remaining an economic powerhouse, while being a showcase for responsible development.

If we are ambitious, Britain can make its own future.  The 21st Century can be our century.

That is why I believe the government will ultimately make the right decision and will back Heathrow expansion.

Thank you.

Ends -

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