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October 7, 2009

Airlines put Heathrow’s Third Runway in the Dragon’s Den

And so to the final ‘dragon’ in my review of the arguments for and against Heathrow’s Third runway.

If we just looked at the airlines serving Heathrow, then support for a third runway would be overwhelmingly positive. But no frills airlines such as Easyjet and Ryanair, who are being asked to pay increased landing charges at Gatwick and Stansted in order to help fund Heathrow’s infrastructure improvements, are less keen. As I haven’t yet mentioned the alternative High Speed Rail, perhaps this is the place to consider what ‘rail based airlines’ might think.

Heathrow’s existing Tennants

British Airways are unsurprisingly the most vocal in favour of a third runway at Heathrow, as they already benefit from having a massive hub operation in Terminal 5, which they want to expand by having extra runway capacity. In terms of the environmental damage caused by airlines, BA boss Willie Walsh was in New York recently, arguing that airlines across the world could achieve a 50% reduction in CO2 emmissions by 2050 - but many environmentalists are cynical about the industry’s ability to meet such targets, and even those that believe they are achievable do not consider that a 50% reduction is enough. So how does this relate to Heathrow, which is after all, just one airport out of several thousands worldwide which operate passenger flights, albeit the busiest one in terms of international passengers? The current government have made reductions in CO2 emmissions part of the conditions which would have to be met in order for Heathrow to gain approval. Obviously, this is all immaterial if the Conservatives stick with their policy to block an additional runway at Heathrow, but as Willie Walsh argued on Questiontime back in January, politicians in opposition can always play a completely different role once the enter government. At last week’s CIMTIG meeting, BAA’s director for Runway 3 said that “Conservative policy is about going after easy votes. As a transport policy, it is indefensible.”

Virgin meanwhile are pinning their environmental credentials on a massive investment of ‘all Virgin profits for the next 10 years’ in alternative fuels. Clearly both of these airlines believe that the aviation industry can still grow and cut emmissions at the same time. BMI also support a third runway, although speculation is that they will have been snapped up by one of their larger rivals by the time it gets built!

Non Heathrow based airlines

Ryanair in particular have launched legal challenges against BAA over the fees they are charged at Stansted, and have repeatedly refused to pay passenger handling bills, as they claim they are being forced to payin advance for infrastructure which they will never actually use.

High Speed Rail as an Alternative

The Conservatives have said that they will spend £20 billion on a high speed rail line between London and Manchester, and that they will encourage more people to travel to Continental Europe by train, in order to reduce the demand for a third runway at Heathrow. However, as BAA management have pointed out, offering easier rail access to Heathrow will only end up making it far more attractive for customers from the North of England. Meanwhile, Eurostar already have a 75% market share for point to point travel between London and Paris and Brussels, so there is little that government policy could do to switch more people onto the trains, apart from ban these flights entirely - a move which would be very un-Conservative! Although there is potential to see Eurostar services extended to cities such as Cologne and Amsterdam, this is a commercial matter for Eurostar to decide, and there is very little that a UK government could do to influence this, when the track and station access needed to make this happen is in other EU countries.

Verdict: Just as it goes without saying that most of Heathrow’s neighbours will be against further expansion, it can also be taken for granted that the main airlines using Heathrow would want to see it expand. But this misses out on the wider picture, especially as it is the no-frills airlines who are investing most heavily in new aircraft and new routes. It is therefore not a foregone conclusion to assume that the airline industry as a whole would say ‘we’re in’.

Final score - some of the referee’s decisions may be controversial, but my verdict is 2-3 against.

October 5, 2009

Environmentalists put Heathrow’s third runway in Dragon’s Den

Continuation from Heathrow’s Runway in Dragon’s Den | Neighbours | Passengers | Economy

I’m not going to look at the local environmental issues - these are covered under ‘Neighbours’. This section is about the contribution of Heathrow and the aviation industry in general to climate change.

So, the arguments against are well known and well practiced - aviation currently represents around 5% of the UK’s contribution to greenhouse gas emmissions, and this figure is set to keep rising as other industries clean up their act. There is a suggestion that if current trends continue, all other sectors would have to reduce their emmissions by 90%, rather than the previously suggested 80%, just to allow people to keep flying. The most efficient form of flying in terms of fuel usage per passenger kilometre travelled is to use no-frills airlines, as they offer the following environmental advantages:

  1. Point to point service meaning no wasteful connections.
  2. Younger business model almost certainly means newer fleet - especially in the case of Flybe, Easyjet and Ryanair.
  3. No frills airlines tend to operate routes with higher load factors, and are quicker to withdraw unprofitable routes.
  4. No frills airlines use less congested airports, cutting down on ground taxiing and pre-landing stacking.
  5. No frills airlines tend to ruthlessly cut costs - and lower costs usually go hand in hand with better environmental performance.

So how can Heathrow’s third runway possibly be justified in the face of such serious environmental concerns, and the lower environmental performance of traditional ‘legacy’ carriers?

Time to play devil’s advocate:

A new runway would reduce airfield congestion and stacking

More capacity means less congestion - this is a fair point, except that more capacity also means more flights to take up that capacity. And in Heathrow’s case, this would almost certainly mean going from being 99% full on two runways to 99% full on three runways. Result - some efficiency improvements might be created, but these would be counterbalanced by the increase in flights.

We still need hub and spoke networks

However much better the no-frills airlines might seem on paper, there will always be a need for some hub and spoke routes, and only Heathrow can serve these - not Gatwick or Stansted, even though those airports might have smaller noise footprints.

If Heathrow doesn’t expand, somewhere else will - and the UK loses out without any CO2 reduction

This is true to a point, but the passengers would still need to get to the other hub airports. Taking up slots with feeders into Frankfurt or Amsterdam will use up more runway space per passenger than operating direct flights to the destinations people want to go to (assuming long haul flights use larger aircraft), so whatever BAA claim, Heathrow will always cherry pick the most important and profitable destinations, rather than serve every route it can.

Expanding Heathrow means more direct flights, so less need for connections

With regards to flights into European hubs from other UK regional airports, passengers from cities such as Birmingham or Bristol are already more likely to transfer through Amsterdam or Paris, as they have feeder routes from most parts of the UK, whereas such a short route into Heathrow would not be viable. This is obviously more wasteful than a direct flight from Heathrow, so adding more capacity and building a high speed rail link into Heathrow would partially alleviate this problem.

Verdict: The environmental dragons would always be expected to shoot down any proposal for expansion at any airport. Although there are clearly some environmental benefits, these are often outweighed by other factors. For example, for every seat which an expanded Heathrow would enable to be filled on a point to point bases, how many other seats would just be filled by transfer passengers who might have gone elsewhere? Even if a clear distinction is made between the need to minimize the contribution made to climate change by aviation as a whole and the effects of one single airport, there is still an obvious correlation between more capacity and more flights. However much BAA try to massage the arguments, the concept of ’sustainable aviation growth’ is always going to be an oxymoron.

Economic Arguments for Heathrow’s Third Runway in Dragon’s Den

Continued from - Heathrow in Dragon’s Den | Neighbours | Passengers

According to the Institute of Directors (IOD), delaying further investment in Heathrow is costing UK PLC £1 billion each year in lost opportunity and congestion.  Heathrow employs 72,000 people, making it the largest single-site source of employment inthe UK. Yet a third runway is projected to cost a massive £8 billion. How will this investment be recouped? Clearly, BAA believe that they will get their investment back, and the IOD figure would suggest that UK PLC would see a return in just 8 years - not bad for such a huge piece of infrastructure. But what if the airline industry continues to see weak demand?

Heathrow’s attraction

In the current downturn, Heathrow has stayed steady whilst other UK airports have seen demand fall. Heathrow operates at 99% capacity, whereas its main three European rivals (Frankfurt, Amsterdam and Paris Charles De Gaulle) all operate at around 75% capacity. Neither Amsterdam nor Frankfurt has the population to support airports of such size in their own right - these two airports only thrive because of the huge volumes of transfer passengers they attract. Only London and Paris can claim to be true hub cities, where there is substantial latent demand together with the demand for inter-connecting flights, which makes more routes viable.

But does UK PLC really want all these transfer flights?

There is a legitimate argument to say that transfer flights are the most wasteful form of air travel, and that it would be better to encourage people to make such connections at airports like Paris, where there is a lower noise footprint. This is, of course, a blatant ‘not in my back yard’ argument, but in terms of economics, is it really worth building an extra runway just to encourage more transfer passengers? The argument behind such transfers is that they enable huge numbers of routes to be profitable, when they would not otherwise be viable. Typically, 25-40% of passengers on long haul flights to and from Heathrow are making transfers - without these passengers, there would be much fewer routes.

Of course, point to point flying is the most efficient way of getting from A to B, but there are always going to be journeys where the hub and spoke system will be needed - for example from Edinburgh to Entebbe or Oslo to Osaka. Is it really right that these passengers should be forced to be funnelled through Paris, Dubai or Amsterdam, just because Heathrow doesn’t have the capacity?

Verdict: UK PLC clearly sees the advantages of Heathrow’s third runway and says ‘I’m in’. Score so far: 2-1 in favour.

Continue to: Environment | Airlines

Passengers put Heathrow in Dragon’s Den

Continuation from: Heathrow in the Dragon’s Den | Neighbours

The recent deregulation of flights to the USA has shown very clearly that passengers vote with their feet, and choose Heathrow over Gatwick every time. Why else would Continental Airlines shell out £100m for two slot pairs at Heathrow in order to operate flights to New York, when they already have access at Gatwick? Despite the current economic woes, Heathrow has remained resilient as passenger numbers at almost all other UK airports have plummeted.

Do passengers like the Heathrow (or is that Hellthrow?) experience? Well, according to BAA’s own surveys, the user experience is slowly improving. Within two years, over half of Heathrow passengers will be using facilities that are less than 4 years old. Heathrow is already ‘moving up the table’ in terms of passenger surveys, and management claim they are hot on the heels of Amsterdam.

So would a third runway enable freer flowing traffic, or would it just snarl things up even more? Management claim that the new runway would preserve important feeder routes, and stop the airport ‘robbing destinations to pay for frequency’. Since 1990, Heathrow has gone from serving over 220 destinations to around just 180 today. This argument over hubbing is very persuasive. Most other arguments are essentially linear - i.e. more flights means more pollution and more contribution to the economy. The power of a hub increases dramatically due to the fact that doubling the number of routes means four times as many opportunities for connections.

Consider:

1 route = o connections.

2 routes = 1 connection pair (A to B via LHR).

3 routes = 3 pairs (A to B, A to C, B to C)

10 routes = 45 pairs - and so on.

This presents a very compelling argument on behalf of passengers. The key question to ask is what effect extra airfield capacity would have on the terminals. It is only natural to assume that BAA would want to build a sixth terminal in order to recoup their investment. Details of this are patchy at present - but anything which needs new terminal space to move outside the area in between the existing two runways is going to get very messy, considering how current rail infrastructure has to split to serve the central area (T1,2,3), T4 and T5.

Defending such claims, Heathrow’s Runway 3 Director argued that new capacity would make it easier to group flights according to airline alliances. Terminal 5 was already putting most BA flights under one roof, whereas Star Alliance would be hosted in the central area. This still doesn’t help passengers much who are connecting between different airline networks, or who might be using Sky Team airlines, who don’t offer feeder flights from within the UK and Ireland. However, these are in the minority, compared to BA or Star passengers.

Verdict - the most likely to say ‘we’re in’

Heathrow’s third runway in the Dragon’s Den

Last week, I attended a discussion organised by CIMTIG regarding the future of Heathrow Airport, and the aviation industry in general. Sadly, because of limited time, and the attempt to discuss the whole industry, rather than just Heathrow’s third runway, they didn’t explore as many of the issues as I would like them to have done - but it was still a very informative evening.

This week is the Conservative party conference, and we expect some further discussion from the government-in-waiting about why they believe there are better ways of handling demand than building another runway.

I’d like to put Heathrow’s third runway into a ‘virtual Dragon’s Den’ and see how it gets along. Prior to last week, I’d say I was probably against the plans, but the presentation from the BAA director responsible for the third runway gave a very strong case, so I’m firmily back on the fence. Let’s see if the proposal can survive in the den. So here we have it - billions sitting on the table, rather than the usual £250,000, and I think we need a majority of the ‘Dragons’ to ‘invest’, rather than just the usual one or two.

Introducing the dragons.

In other parlance, they might be known as ’stakeholders’ or ‘investment solutions partners’, but as I hate both of those terms, I’ll definetely stick with Dragons!

  1. Airport neighbours
  2. Passengers
  3. The Economy
  4. The Environment
  5. Airlines

The article will follow later in the week. What do you think? Would you ‘invest’?

March 30, 2009

Are British Airways always more expensive when they are the only airline offering direct flights?

In our news section, we’ve just looked at long haul routes where British Airways is the only airline offering non-stop point-to-point service.

The expectation might be that they would be able to get away with charging a premium for providing such a service - this has always been the way with the traditional airlines. However farcical it might sound, the logic has always been that the punter should be charged more for the direct routing, even though it costs the airlines much less to service such a route.

The article looked at flights to 10 different destinations across Africa, the Americas and Asia. Generally, the rule does still apply - regardless of the cost to the airline, consumers are prepared to pay more for the convenience of a direct routing, and the market is still driven by what the consumer is prepared to pay, rather than what it costs the airline to provide the service.

Infact, the main exceptions to the rule were where you might expect them - on flights to Bermuda, where British Airways were 18% cheaper than the nearest alternative, the non-direct routing would mean taking flights to New York, and then doubling back again to Bermuda - a route which hardly makes any sense at all, considering that Zoom Airlines used to offer flights from Gatwick to New York via Bermuda.

BA were also cheaper on flights to St Kitts and flights to Providenciales in the Turks and Caicos Islands - again, these were niche destinations where the alternative option would have been an unwieldy flight via the USA. However, BA weren’t always cheaper when it came to Caribbean flights where they were the sole direct provider - on flights to the Cayman Islands, it was cheaper to slug it via New York with Continental. Meanwhile, for flights to Trinidad (Port of Spain), BA were effectively competing against themselves, as the cheaper option was to fly with BA to neighbouring Tobago, and then take a short hop from there with Caribbean Airlines. However, the competition here is simply down to the fact that flights to Tobago are also available from airlines like Virgin and Monarch - therefore BA have to be competitive on that sector, making them competitive on the whole route through to Trinidad, providing you take the hop via Tobago.

On all the other routes we looked at, BA were still able to charge a premium for providing the non-stop service. In many cases, the difference was only a few percent, but when it came to flights to Entebbe / Kampala, the difference rose to 41% over the alternative of flying with KLM and Kenya Airways via Amsterdam. We can only assume that this is down as much to the perceived differences in service between British Aiways and their African rivals as much as it is down to the fact that BA serve the route non-stop.

Weigh me up before you go go

One of the most frequent complaints at the moment about low-cost airlines — and even some very high cost airlines nowadays as well, especially for flying across the pond — is the amount being charged for checked baggage, sometimes up to £16 for shorthaul flights within Europe.

Personally, I’ve always felt that it is much fairer to charge for baggage, rather than giving people who want to carry a lot more with them a free ride, but the flipside of this is that the legacy airlines which don’t charge for checked baggage can suddenly become much better value when compared with their rivals which do.

When baggage charges started at just a few pounds each way, the little bit extra didn’t make that much difference, but £16 doubled could make a seemingly expensive £100 flight with an airline like British Airways, which would also include free food and drink, become much better value than a £70 return flight with Easyjet, and this is before you add in the cost of getting to and from a more remote airport like Stansted or Luton.

However, these extra luggage charges really do just reinforce the argument in favour of travelling light, not to mention making sure that you do know how much you are carrying before you leave. For this, we would have to recommend buying some form of travel scale — I have a simple lightweight analogue scale, made by Gotravel products, and available in the travel department of many major stores.

Here are a few personal tips for travelling light:

  • Clothes — how many do you really need? Hotel laundry might still be ridiculously expensive, but you would probably be better off by washing your clothes halfway through a holiday at a local launderette, rather than paying for extra baggage charges. It’s always worth taking some clothing to cater for sudden changes in the weather, but if you are packing tight, isn’t it better to wear that raincoat through the airport, rather than having to take an extra checked bag?
  • Camera — I used to travel with a large SLR where I went, sometimes complete with long zoom lenses, but now I just take a compact digital camera. Where are your pictures likely to end up? If they are only going to be shared with friends on the Internet, resolution is never really going to be that important, so a decent compact digital camera should give you the versatility you need, especially if you can find a model with a high enough ISO for flexibility when taking photos at night. even if you do plan to print your images, aspect ratio (print shops still default at 3:2) might be a more important consideration than megapixels, as a standard 6×4″ print at 300 dpi will need just 2 megapixels (1800×1200px).
  • Laptop — are you travelling for business or pleasure? If the former, then lightweight models can certainly save considerable extra hassle, and if the latter, then I hope you can just ditch the laptop and enjoy yourself! Same goes for PDAs etc, but if you must get yourself connected, you can always use a hotel business centre or Internet cafe.
  • Adapters and chargers — I used to take a whole load of different power adapters, especially to go with my laptop on camera, but as their technology has improved, most portable devices will go for several days now without being charged. Many hotels will have chargers for standard mobile phones behind the reception desk. Can you get by with just taking a spare battery?
  • Buying stuff on the way — buying souvenirs and other products might be part of a travel experience, but they could end up by lumping you with a whole load of extra charges to get home. Always bear in mind that if your goal is hand luggage only, you won’t be able to take any liquids over 125 mL through security, so it is best not to even look at those cheap wines and spirits. With the buying power of modern supermarkets, not to mention online, can you actually get the product you are looking at back home anyway? Work out the difference in price, and the cost of getting it home, and make your own decision. If you’re getting someone a gift, it might well be cheaper to post it direct from wherever you are — this will save you lugging it around all day anyway. Using the postal system might also be a way of avoiding checked baggage charges for your own stuff – so if you want a little bit more space in your bag for non-liquid gifts, why not leave the task of taking your dirty laundry home to the Postal Service?

If you do find yourself scrunching everything down just to fit in one bag to get through the airport, you might want to take a foldable backpack so that you can put your coat in it once you have reached your sunny destination.

March 23, 2009

Introducing terminal A - can you book scheduled flights at less than cost?

Terminal A are a Spanish company whose unique proposition on the flights market is that they will sell you scheduled flights at ‘less than cost’, because they will hand some of the commission back to the user. This is a little bit of a cashback proposition for booking your flights, but is it worth the hassle?

I looked at Terminal A for flights from London to New York, departing 16 April 2009 and returning one week later. The best flights I was offered were with British Airways for £252.70. These flights come with a £1 discount — now I know that airlines have reduced their commissions lately, but am I really supposed to believe that British Airways and other airlines quoted on their New York flights results page pay just 0.4% commission on their long haul flights? Any commission-based discount is then wiped out by the £4 Terminal A service fee, leaving the British Airways flights at £256.70.

By comparison, Kayak.co.uk shows me direct flights with Kuwait Airways for £251 if I book with Ebookers, or £258 with British Airways — also booked with Ebookers, but only one pound cheaper than booking direct at BA.com. Checking Netflights.com takes the Kuwait Airways flights down to £249, but doesn’t get any further saving on other airlines. Meanwhile, a quick look over it Expedia shows that they might be giving away 200 nectar points, but they are charging £10 more for British Airways and £15 more for virgin — that looks like a handling fee, but they aren’t being transparent with their price breakdowns. The best Skyscanner can offer me is £287 — but this is hardly surprising, I don’t think Skyscanner’s strong point is on long-haul flights.

So is the consumer any better off by checking Terminal A as well as all the other flight comparison websites that are out there? I have to enter all my details to see if there are any more hidden fees for credit card processing or anything else — it doesn’t look like there are, but I always hate websites that want to take my valuable passport details from me before I can find out for certain how much they’re going to charge me.

Beady-eyed users might point out that is Terminal A have IATA membership at the bottom of their website, but no ATOL number — this is because they are headquartered in Spain, so that’s where you’ve got to go if you have any problems with your booking. In these uncertain times, I think that most passengers would want to choose security of booking over saving a few pounds, especially where there is such little saving on long-haul flights. If any users have any experience of terminal A, we’d love to hear them, just as we’d love to hear any samples of bigger discounts being available than the ones we found on flights to New York.

March 19, 2009

At last, a cheap alternative for Munich flights?

Ryanair’s latest seemingly middle of nowhere airport is just outside the picturesque town of Memmingen (FMM) in Bavaria, which they are marketing as ‘Munich West’. Cheap flights to Memmingen start on 1 May from London Stansted and Dublin. So is this going to be a viable alternative to taking flights to Munich Franz Josef Strauss airport (MUC), a facility that no-frills airlines have often described as being high cost, and aimed at traditional scheduled airlines like Lufthansa?On the other hand, Munich has recently become a bit of a hotbed for no-frills competition, with Aer Lingus launching cheap flights from Gatwick at the end of April, complementing easyJet’s existing routes from both Gatwick and Stansted. We looked at a weekend trip to Munich flying out on Friday 1 May, the launch date for this route, and returning on Sunday 3rd May:

Ryanair cheap flights to Memmingen

  • Outbound flight — £.79. Depart Stansted 13:40 and arrive Memmingen 16:00.
  • Outbound taxes and fees — £28.97.
  • Return flight — £.79. Depart Memmingen 16:25 and arrive Stansted 16:45
  • Return taxes and fees — £15.05.
  • Credit or debit card handling fees — £9.50 (see article on how to avoid these)
  • Return train fare from Memmingen to Munich — €39.20 (£37 — does not include transfer from Memmingen airport to centre).
  • Total — £92.10.

easyJet cheap flights to Munich

       

  • Outbound flight — £35.99. Depart Gatwick 12:55 and arrive Munich 15:45 — twice daily easyJet flights to Munich are also available from Stansted. Note that if you travelled the day before, the fare goes down to £25.99.
  • Return flight — £23.99. Depart Munich 16:30 and arrive Gatwick 17:25. A cheaper flight is available in to Stansted for £18.99, but this means leaving Munich at 11:30 — a bit early for a weekend break. Alternatively, you could stay until 21:50 and catch a flight back to Stansted for £20.99.
  • Debit card handling fee — £1.95.
  • Total — £61.93.
  • Aer Lingus cheap flights to Munich

  • Outbound flights — £14.99. Depart Gatwick 06:40 and arrive Munich 09:25 — if you are going to take a whole day of work, you might as well make an early start of it! As with easyJet, the flight is cheaper if you can go one day before — in fact, in this case Aer Lingus will ‘give’ it to you for nothing.
  • Outbound taxes and charges — £20.
  • Return fare — zero.
  • Return taxes and charges — £9.99. Depart Munich 10:05 and arrive Gatwick at 11:05.
  • Handling fee — £8 — as with Ryanair, this fee can be avoided by using an electron debit card, but Aer Lingus only tell you about that at the end of the booking process.
  • Total — £52.98.

British Airways not so cheap flights to Munich

  • £110 – depart Heathrow 07:50 and arrive Munich 10:55 / depart Munich 17:30 and return Heathrow 18:30.

Lufthansa decidedly expensive flights to Munich

  • £157 — depart Heathrow 09:35 and arrive Munich 12:25 / depart Munich 19:10 and return Heathrow 20:10.

Verdict — as is so often the case, Ryanair’s seemingly cheap flights of £.79 in each direction become massively more expensive when all the extra charges are taken into account. Even this is before you add on the cost of a train fare from Memmingen airport in to Munich.

Memmingen itself actually looks like quite a pretty town, so it would be well worth a visit if you were in the area, but for the price comparison we have done here, it certainly can’t be seen as a cheap alternative to Munich. On the other hand, Aer Lingus’ new flights to Munich are an absolute steal, especially as the £8 handling fee can be avoided by using an electron debit card. This goes to show that a bit of competition at the main airport can be just as good as having a cheap alternative somewhere else, and gives the prospect of a weekend away in the Bavarian beer capital for less than £50.

We will certainly drink to that!

 

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