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Easing the airport traffic jam

News Analysis: London's air terminals are not going to be able to cope with rising passenger numbers. Can the regions come to the rescue?
LONDON'S AIRPORTS are bursting. A decision on the proposed Terminal 5 at Heathrow is still months away, let alone a start to the building work. Passenger numbers are growing at 8 per cent year. The Government's solution? The country's regional airports.

This week the Government cleared the local authority-owned airports for take-off by relaxing Treasury borrowing restrictions. The airports have been clamouring to be set free, claiming that it would be good for them and their regional economies, and would help to cope with the growth in demand, currently sharply skewed to southern England.

John Reid, the Transport Minister, outlined the Government's thinking, saying the move would pave the way for local authority-owned airports to meet the challenges of the new millennium. "We want to maximise the contribution these airports make to their local economies, and to relieve congestion at airports in the South-east. Giving financially sound local authority airports the power to raise private finance for development work will help us do that," he said.

The move will allow local authorities to raise development capital on the money markets from April 1, enabling them to bring forward expansion plans to cater for growing demand.

Although there are nine council-owned airports, only four are on the Government's radar for next year - Manchester, Newcastle, Leeds/Bradford and Norwich. Two others, Teesside and Gloucestershire, are on the margins of profitability while applications from Blackpool, Exeter and Humberside are considered extremely unlikely by the Department for Environment, Transport and the Regions.

They will be able to expand more quickly than they would have done under the current rules, which allow them to invest their retained profits. This could mean the development of hotel and shopping facilities - all vital for attracting the modern air traveller.

The latest annual report for BAA, which owns seven UK airports including Heathrow, Gatwick and Stansted, illustrates the point. Whereas airport and other traffic charges amounted to pounds 507m, a growth of 8 per cent, retail revenue leapt 45 per cent to pounds 877m.

But BAA, which also owns Glasgow, Edinburgh, Aberdeen and Southampton, is not convinced provincial airports can provide the solution. Des Wilson, director of corporate affairs, said the company had lobbied strongly for the move the Government announced this week, stressing it was not a question of competition. But he said: "This will lead to very little relief for the South-east problem."

He said 80 per cent of passengers for London's airports came from the South-east and would be unlikely to want to travel to northern England for a flight. BAA expects the 95 million passengers at the London airports to double by 2015. "Even if Terminal 5 is approved and Gatwick and Stansted realise the full potential of their runways we won't have sufficient capacity to meet demand."

Manchester Airport believes it can make an important contribution but wants the Government to go further in allowing it to operate commercially. The airport has seen passenger numbers soar by 60 per cent to 16 million over the last six years.

A spokeswoman said Manchester, currently the third largest in the UK, could overtake Gatwick within about 10 years. "The South-east is congested and there is no more space at Heathrow or Gatwick. BAA is pulling forward its expansion plan for Stansted. It is very helpful that the Government has seen the role places like Manchester have to play."

She said regional airports feared that European terminalssuch as Amsterdam, which has seen a growth of between 30 and 40 per cent in the number of UK passengers, would simply suck up the spare demand.

She said Manchester could easily attract more transatlantic airlines once it was able to expand and pointed to the 1 million passengers using shuttle services to Heathrow, half of whom she said were transferring to long-distance flights.

The regional airports want more from the Government. Even under the new rules, Manchester would not be able to invest as an equity partner in projects such as a high-speed transit system. As BAA has shown with its Heathrow Express, such schemes are crucial in attracting passengers.

Even the predicted levels of growth could turn out to be a severe underestimate if the "open skies" pact between the UK and US - currently grounded after a breakdown in talks - ever takes off. This would end restrictions on access to Heathrow for all US carriers.

BAA's Des Wilson said the solution was twofold. First, the green light for Terminal 5 and for a planned pounds 200m expansion at Stansted would allow for another 7 million passengers. Secondly, the Government had to decide whether another runway was needed in the South-east and where that should go.

The Government's thinking will be revealed in its aviation White Paper, promised in the transport White Paper next summer. It will contain a new policy on UK airports, looking 30 years ahead. More importantly it will contain the Government's policy on coping with South-east demand and therefore cannot be published until after the final decision is taken on Terminal 5, something that could still be 18 months away.