£26bn cash injection for UK economy up for grabs with a reopening of international travel this summer

£26bn cash injection for UK economy up for grabs with a reopening of international travel this summer

• New report details massive opportunity for the UK economy through trade and tourism so long as current restrictions on air travel are eased this summer
• Report makes clear the urgent need for the Global Travel Taskforce to recommend a safe and sustainable resumption of international travel on 17 May
• It highlights the cost of a ‘lost summer’ of international travel – £55.7bn in lost trade and £3.0bn in tourism GDP if reopening delayed until September – putting more than half a million jobs at risk.
• Being unable to re-open to the EU would cause the most damage, followed by the United States, with no air link to the US until September costing the UK £2.4bn (£23m per day) putting 51,600 jobs at risk
• Vaccine rollout in the UK and abroad, ever-increasing testing capability and new health certification technology can allow international travel to resume in summer 2021 and avoid costing the UK £47.6bn in GDP this year (over £200m a day) removing the risk to more than a million jobs

A new report reveals the size of the opportunity for the UK economy by reopening the border with key markets including the US, by the summer.

Read the report here

The Government has established the Global Travel Taskforce to recommend to the Prime Minister ways in which international travel can reopen safely and at scale from 17 May. This new report details the catastrophic impact that only a limited reopening of travel from May, would have.

It reveals that the hit to UK GDP of delaying any restart until September would be £26.2bn, in addition to lost trade, encompassing imports and exports, of £55.7bn. Around 574,000 jobs would be at risk including 73,000 within UK tourism. The wider hit to the UK’s tourism sector would cost £3.0bn.

In contrast, enabling a safe and sustainable resumption of international travel from 17 May for the whole of the remainder of 2021 would generate a GDP injection of £47.6bn and help secure more than a million jobs otherwise under threat – worth some £200m a day to our economy. This report builds on earlier work that demonstrated that the loss of air connectivity to the UK’s largest trading partner (the US) cost the UK some £30m a day in 2020. Overall, an estimated 5,164 UK aviation and related jobs have been lost every month since February 2020, according to Unite the Union.

As the vaccine rollout accelerates both in the UK and abroad, and with widespread testing becoming ever further embedded, a phased easing of restrictions is required to help the UK’s economy recover. International travel can safely resume on 17 May, through a tiered system based on risk. The UK Government has the opportunity to set a framework to re-establish international travel, for others to follow.

The aviation industry’s focus remains on working with Ministers on such a framework for travel that is safe, robust and workable. It is critical that this can stand the test of time throughout the summer and beyond, ensuring that a stop/start approach is never seen again as the sector looks to rebuild confidence.

Tim Alderslade, Chief Executive of Airlines UK, the industry association representing UK-registered carriers, said: “For many of us, aviation is associated with a holiday or much needed break. However, this new report demonstrates just how vital the UK’s air links are to our economic prosperity, be it for British exporters, the hospitality sector or companies with an international footprint. The data refutes the claim that keeping aviation shut down, or delaying restart beyond the summer, is a price worth paying – with each day planes are grounded costing tens of millions of pounds and putting thousands of jobs at risk. The priority now is clear; ensuring a durable framework for a risk-based approach to reopening air travel from 17 May”.

Sean Doyle, British Airways CEO, said: “The emotional and economic cost of not starting to re-open international travel on May 17 is clear. With more than 50% of the UK adult population vaccinated in a programme that has been the envy of the world the Government must now urgently provide a phased, risk-based framework for travel to re-start this summer that will save the economy and jobs, allow business to re-start and reunite friends and families.”

David Evans, Joint CEO at Collinson, said: “This summer, a hybrid of testing and vaccine verification must be used to provide a safe and sustainable model to reopen travel that removes or dramatically reduces restrictions and quarantines while protecting both individuals and our economy. We are in a very different position today than we were a year ago, with an accelerated vaccine roll-out taking place and advanced testing capabilities up and down the country. Testing alone is already playing a critical role in keeping aviation moving: Collinson has safely delivered over 200,000 tests in the past half year, and we know first-hand the power of testing and of science to keep travellers safe and to provide them with peace of mind.”

Stewart Wingate, Chief Executive, Gatwick Airport, said: “The aviation sector had been hit hard by the pandemic and we cannot afford to leave it behind as the rest of society opens up, otherwise UK plc will lack the vital infrastructure, supply chains and logistics operations it needs to recover quickly through trade and all the other economic activity that airports and airlines generate. 

“Public health is of course the absolute priority and – provided vaccine rollouts across Europe succeed and restrictions ease as we start the summer – a flexible risk-based approach to reopening international travel would not only help us reopen, rebuild and protect jobs, it would start to restore consumer confidence and allow people to see family or enjoy a well-deserved break”.

Heathrow CEO, John Holland-Kaye, added: “Advances in testing technology, coupled with the country’s incredible vaccination progress means a safe and irreversible resumption of international travel from May 17th is within our sights. For over a year, travel restrictions have effectively severed the UK’s ties with its key trading partners, stunting the country’s economic growth. For example, resuming transatlantic travel would add £2.4bn to the national economy this summer alone and help protect over 50,000 jobs. If this Government is serious about delivering a Global Britain, the Travel Taskforce must seize this opportunity to put in place a risk-based framework that protects public health and rebuilds vital trade links to countries like the US.”

Shai Weiss, CEO, Virgin Atlantic said: “The free movement of people and goods by air is vital for competition, connectivity and supporting the UK’s economic recovery. This report presents evidence that the resumption of international travel, specifically between lower risk countries such as the UK and US – our largest trading partner accounting for 15% of all UK trade – must remain the objective. In 2019, Transatlantic connectivity underpinned trade worth $273bn. As an essential driver of global trade, FDI and our hospitality and tourism sectors, a thriving and competitive aviation market is more important than ever to the future success of Global Britain. 

“A phased easing of testing requirements and border restrictions, that follows the scientific evidence, will protect public health and ensure that skies can safely reopen from 17th May, safeguarding half a million UK jobs reliant on the sector.” 

Read the report here

Infographic summary here

UK economy loses £32m every day as result of no airbridge with the US

• New report details massive daily cost to the UK economy of lack of air link to the US
• £121bn in UK exports and £417bn in Foreign Direct Investment at risk as air link remains closed between the UK and its most important trading partner
• £3.5bn lost from US tourism and business travellers is revealed to be having a major impact on the restaurant, hospitality and retail sectors, impacting thousands of jobs
• UK-wide issue, not just London and the South East, with 80 weekly flights between the US and six regional airports currently on ice
• Report states the urgent need for bilateral agreement between the US and UK for city or state-based travel corridors and a robust airport testing programme to begin opening up this key trade, tourism and business corridor

A new report jointly commissioned by Airlines UK, International Airlines Group, Heathrow Airport and Collinson reveals the true economic and social impact of the closed borders between two of the world’s most critical trading partners. The report concludes that while the closed border has had a major impact on the aviation sector, the impact across the entire UK economy is devastating.

The impact of COVID-19 on the air transport market between the UK and the US has been dramatic and widely reported. As travel restrictions came into force in late March, seat capacity fell by around 92% compared to April 2019. In September, published seat capacity is around 85% down on 2019 and high capacity summer months have been lost.

The new joint report provides critical insight into the broader impact of the closed route between the US and the UK, revealing that the hit to UK GDP in 2020 is estimated to be at least £11 billion, with a significant proportion falling in Q4. By the beginning of October the closed air corridor between the US and the UK will be costing the UK economy £32m each and every day the air corridor remains closed.

John Holland Kaye, CEO of Heathrow Airport, said: “This is a stark warning that action is needed immediately to safely open up connections with our key trading partners in the US. We can start with flights to New York, a city where infection rates are now lower than here, and which is the UK’s most valuable route. PCR testing in private labs, both pre-flight and on arrival, would ensure that there is no risk of importing COVID and could pave the way to a Common International Standard for aviation testing.”

The UK sees more visitors by air from the US than from any other country, ordinarily welcoming nearly 4 million visitors each year – making the US the largest single source of inbound tourism and business travel to the UK economy. Visitors from the US spent a total of £3.8 billion during 2019, but this figure is expected to fall by £3.1 billion in 2020. Critically, the average duration of a trip by US visitors is seven days, meaning that current quarantine rules effectively lock these high-spending visitors out of the UK.

Alex Cruz, CEO of British Airways, said: “Government inaction on aviation and its impact on Britain’s economy couldn’t be clearer. Time is running out. Ministers must reach agreement with their US counterparts on a testing regime that minimises quarantine and permits regional travel corridors to re-open the UK-US market. They must learn from trials across the globe and start implementing new measures as soon as possible to return confidence in flying and protect thousands of jobs.”

While recognising that public health cannot be compromised, there is widespread industry and public frustration that blanket country-level travel restrictions are a blunt tool that unnecessarily sever economic ties when viable alternative policies like airport testing are available.

Airport-based COVID-19 testing has been embraced by more than 30 countries around the world and is now in use at more than half the world’s busiest airports including Paris Charles de Gaulle, Tokyo Haneda and Dubai International.

David Evans, Joint CEO of airport services company Collinson, said: “We’ve always known that travel brings an immeasurable value to economies as well as societies at large, but Covid-19 has put into perspective just how critical and quantifiable it is. Testing at the border has been extensively trialled internationally, in locations with very strong scientific oversight such as Germany and found to be a safe means to get the world travelling again. We have a ready-built facility at Heathrow as well as private testing and lab capacity that will not impact Government supplies in any way. All we need is the green light from Government.”

Tim Alderslade, CEO of Airlines UK, said: “The US is one of our most vital markets, worth tens of billions of pounds in trade every year, and millions of Americans come to the UK to visit and spend money in our shops, restaurants and tourist attractions. It’s critical we reopen this link, starting with the all-important London-New York route, so our economy and aviation sector can start the long road to recovery, and we urge Governments on both sides of the Atlantic to redouble their efforts to launch a testing regime as quickly as possible. In the absence of a vaccine, testing for arriving passengers – alongside regional travel corridors – remains the only way to resume international travel.”

Shai Weiss, CEO of Virgin Atlantic, said: “Our economic recovery will not take off without the free movement of people and goods. The closure of the US border since mid-March, coupled with the UK’s 14-day quarantine policy, effectively cuts us off from our most important economic partner. We need urgent government action now to introduce regional travel corridors for mainland US states, starting with New York and New Jersey where infection rates are lower than in the UK. 14 day quarantine must be replaced by a robust passenger testing regime for countries and regions where the risk is higher. More than 30 countries have already stolen a march and introduced passenger testing. If we don’t act now Britain will be left even further behind, putting many more thousands of jobs at risk across the country.”

Federation of Small Businesses (FSB) National Chair Mike Cherry, said: “The ties between the UK and US have long been crucial to the economies of both sides of the Atlantic, and now more than ever we’re seeing just how important those bonds are. Small businesses in parts of the country rely heavily on tourists visiting from the US, whether that be in cities like London or Edinburgh or in popular scenic areas right across the country. The past few months have been difficult for all businesses who have lost out on this crucial market.

“And for small firms waiting on the delivery of products to sell or as part of supply chains, it’s been an equally difficult time with factories forced to close or restrictions delaying manufacturing lines. The US is the number one target for small businesses looking to export, which is why we need to see these quarantine rules reviewed to help our ailing small firms both in the UK and the US.”

UK USA Travel Restrictions Impact Infographic

Emergency Air Passenger Duty waiver would save 45% of lost air routes and save 8,000 jobs, study concludes

An emergency 12-month Air Passenger Duty (APD) waiver would save 45% of the air routes out of the UK that would otherwise be lost due to the impacts of the Covid-19 pandemic, a new report has found. In addition, the support could potentially save 8,000 jobs and contribute an additional £7 billion in GVA.

The study carried out by York Aviation and commissioned by Airlines UK, the industry association for UK-registered airlines, shows:

• Without intervention by the Government UK airports will lose around 600 routes initially, with the situation improving as the market recovers to being about 130 routes down by July 2021;
• In 12 months’ time, around 80% of the lost routes will be in the UK regions;
• With an emergency 12-month Air Passenger Duty waiver in place, the situation improves with the number of routes that would immediately return at around 35. This grows steadily as the market recovers, with an APD waiver supporting an additional 56 routes by July next year. In other words, by July 2021 it would have saved around 45% of routes that would otherwise be lost;
• The APD waiver would boost passenger demand by around 12% over the next 12 months. This equates to around 21 million passengers over the 12 months against a baseline of 170 million passengers.
• An APD waiver could potentially save 8,000 jobs over the next 12 months and enable the sector to support an additional £7 billion in GVA. This GVA saving is around 3.3 times greater than the expected revenue from APD over the next 12 months.

UK airlines are now asking for an emergency 12-month APD waiver to be announced no later than the autumn Budget to boost demand and enable the UK aviation industry to recover from the worst crisis in its history.

Tim Alderslade, CEO of Airlines UK, said: “UK airports are in danger of losing many valuable routes over the coming months unless the Government steps in with a support package for our sector – starting with an emergency APD waiver to get us through the winter and into the recovery. Some of these routes may never come back but APD relief will – by next July – save almost half that would otherwise be lost. The UK came into this crisis as the third best connected country in the world – it would be a tragedy if through Government inaction and neglect we needlessly forfeited this position to our closest rivals.”

Andrew Griffith, MP for Arundel and South Downs and former No 10 Business Adviser to the Prime Minister, said: “It’s never been more vital that Britain remains open for business. It would be disastrous for our regional and international airports to lose hundreds of routes to important global trading and tourism destinations. Whilst not the whole answer, if suspending the headwind of Air Passenger Tax can help get UK aviation – one of the jewels in our industrial crown – back on its feet sooner we would be remiss not to seriously consider it.”

Graham Brady, MP for Altrincham and Sale West and Chairman of the 1922 Committee, said: “We are in grave danger of causing real and lasting damage to UK aviation if measures are not taken to protect routes out of our airports and support the sector through what we know will be an extremely challenging winter. Almost alone within Europe we have been slow to appreciate the importance of aviation – not only as an industry that supports a million jobs – but as an enabler of the outward facing trading nation we wish to be.”

Notes:

• The situation facing UK aviation remains highly precarious. Passenger demand is around 70% down in August 2020 compared to August 2019.
• Over thirty thousand jobs have either been lost, are at risk or subject to consultation amongst UK airlines.
• Airports, aerospace and ground handling businesses have also announced thousands of job cuts.
• A report by the New Economic Foundation suggests that without additional government intervention the aviation industry and its supply chains could ultimately lose up to 124,000 jobs.
• In 2021 global passenger demand is expected to be 32% lower than IATA’s October 2019 Air Passenger forecast for 2021.
• Bookings for intra-EU routes are slowly increasing but are a long way from pre-crisis levels. Recovery is not yet in sight on extra-EU routes.
• Data shows that the intra-EU market is slowly picking up following opening of borders on the 15 June, but as of 1 July remained 72% lower year on year compared to 2019.

Download the full report here:

UK depends more on air freight services than most EU competitors

A major new report published today shows that the UK is more dependent on air freight services compared to most of its EU competitors.

The report, commissioned by Airlines UK and supported by Heathrow Airport, Manchester Airports Group and the Freight Transport Association, shows that while only a quarter of German exports to non-EU countries in value terms are transported by air, for UK exports it is nearly half.  Only Ireland ships a greater share of its non-EU exports by air than the UK.

The report calculated the total economic contribution of the air freight sector to the UK economy, and found:

• UK air freight imports and exports were worth £181 billion in 2017
• Air freight services contribute £7.2 billion to the UK economy and support 151,000 jobs
• Critically, looking at air freight’s wider contribution to UK PLC, the study shows that across all sectors of the economy £87.3 billion of GVA is currently dependent on air freight exports, including a very significant proportion of some key industries’ output:
• Pharmaceuticals – £13.9bn
• Computer, electronic & optical – £8.3bn
• Creative arts & entertainment – £5.3bn

The report also shows how vital air freight is to the UK’s regional economies. Whilst less than 2% of London’s production is dependent on air freight services, equivalent figures across some of the UK’s other regions include:

• 9% in the North West (worth 14.9bn)
• 8.6% in Wales
• 7.6% in the East Midlands
• 6.8% in the South West.

Air freight is essential to the transport equipment producing industries in the East Midlands, the North West, the South West and Wales, while pharmaceutical manufacturing in the North West makes very significant use of air freight.

Airlines UK Chief Executive, Tim Alderslade, said: “This report gives us the hard evidence of just how important air freight is to the national economy, our regional economies and to the international trade which will be increasingly important to us as we leave the EU.  The upcoming Aviation Strategy must look to how the UK can support its air freight sector thrive, both by creating the conditions to help grow our international connectivity, as well as by recognising where barriers exist and, in particular, the important role and contribution of Night Flights in facilitating cross-border trade”.

The report makes clear that there are real opportunities, particularly for regional airports, arising from improved air connectivity. It cites as an example the fact that the value of exports travelling to China from Manchester Airport has increased by nearly £300 million in the two years since a direct route to Beijing was introduced.

Making the link between connectivity and trade, the report cites how the UK has more freight capacity to the US than any other EU country, ensuring that last year 60% of the UK’s trade value with the US was transported by air (compared to 51% for France and 36% for Germany). By contrast, the UK currently has less capacity to China than either Germany or the Netherlands.

The report also provides a timely reminder of the damaging effects of Night Flight restrictions on UK competitiveness, since the express business model of the major international freight companies is increasingly dependent on being able to ship goods during the night, not least to meet growing consumer expectations of fast delivery.

Aviation Minister Baroness Sugg said: “Air freight is vital to the UK and global economy, delivering jobs across the country and transporting goods to people and businesses. I’m grateful for the work that Airlines UK does to promote the importance of the air freight sector to the UK and our Aviation Strategy will consider how best to support the future growth of this important industry in the UK.”

Lynne Embleton, Chief Executive, IAG Cargo, said: “Air freight is vital for the UK economy as this report demonstrates. The industry is built on speed and reliability – characteristics that helped IAG Cargo carry billions of pounds of UK exports and imports last year including life-saving drugs, fresh produce, essential tech and machinery parts. This supports a wide range of British businesses. As we prepare for Brexit, the Government’s Aviation Strategy must take the value of air freight to the UK economy into account and help the industry grow and further connect Britain to the wider world”.

Nick Platts, Head of Cargo, Heathrow, said: “The UK has always been a great trading nation and Heathrow plays a unique role today in continuing that legacy. As the country’s most valuable port handling over £106bn of trade annually, Heathrow already connects Britain’s businesses with new customers in growing markets all around the world. Our expansion plans are on-track and will see us double our cargo capacity and add up to 40 new long-haul routes. But we can’t be complacent. Policymakers must not underestimate the competitive advantage of Britain’s air freight strength and ensure the right policies are in place that will enable us to keep Britain at the heart of the global economy.”

 Tim Hawkins, Chief Strategy Officer, Manchester Airports Group, said: “Air freight plays a critical role in supporting continued growth of the UK’s world class industries. The Government’s new Aviation Strategy is the opportunity to understand the future needs of these industries and the role that key strategic hubs across the UK can play in delivering a global trading network.

“The increasing range of ‘just in time’ express cargo services is appreciated by anyone ordering or sending a package via the internet, and airports like East Midlands and London Stansted have a vital role to play in keeping trade and e-commerce moving. At the same time, growth in long haul bellyhold cargo from airports like Manchester demonstrates there is huge opportunity to drive value directly into the UK’s regions.”

The full report is available here.

UK airports losing out on over 60 new direct routes because of sky-high rates of Air Passenger Duty, report concludes

UK airports could be losing out on over 60 new direct routes – including 15 long-haul connections outside of London – because of current Government policy on Air Passenger Duty (APD) – a new report has found.

A study carried out by Frontier Economics – commissioned by Airlines UK, the industry association that represents 13 UK-registered carriers – looked to identify potential new connections that could receive a viability boost if the tax were abolished. It concluded that 66 new routes could be added by airlines, including:

• 20 domestic connections
• 31 short-haul connections (excluding the UK)
• 15 long-haul connections outside of London

The report also found that of a sample of eight routes dropped by airlines in recent years on the grounds that they were loss making all of them could have been viable if APD had been abolished.

The purpose of the report was to describe how APD – the departure tax paid by all passengers taking off from a UK airport – impacts on airline route economics and capacity decisions. It concludes that by increasing the price of tickets for passengers, the tax dampens demand and impacts negatively on connectivity at UK airports. It highlights that:

• APD was found to constitute as much as 50% of the price of an off-peak short-haul ticket (from UK to Poland) and 44% the price of an off-peak long-haul ticket (from UK to Israel).
• By raising around £3.4 billion per year, APD represents around the same cost as the total aeronautical revenue (the money raised through charges paid by airlines) generated by all airports in the UK.
• Through analysis of 2017 schedules data at the 20 largest airports in the UK, by movements, a total of 66 new direct connections could potentially be viable if APD were abolished, such as:

Domestic connections – examples include Liverpool to Southampton; Bristol to Leeds Bradford; and Edinburgh to Guernsey

Short-haul connections (excluding the UK) – examples include Belfast to Madrid; Southampton to Barcelona; and Aberdeen to Munich

Long-haul connections – examples include Bristol to Dubai; Edinburgh to Delhi; and Birmingham to Tel Aviv

Commenting on the report, Tim Alderslade, Chief Executive of Airlines UK, said:

“As we prepare to leave the European Union we should be doing everything in our power to create the conditions for economic success – and as an island nation it is hard to see how levying the highest rate of tax on air travel in the world is compatible with this goal. Airlines are in the business of responding to demand, and by increasing the price of a ticket by such an extent the Government is directly contributing to fewer connections at UK airports and lower frequency on existing services. The costs of such a counterproductive policy are there for all to see – with dozens of potential services, including long-haul connections outside of London, proving unviable under current conditions, putting a brake on the UK’s economic growth. 

“The message from this report is clear – get rid of this damaging tax once and for all and carriers will be in a position to respond in kind with more routes, greater frequency and better connectivity for the whole of the UK.”     

Johan Lundgren, Chief Executive of EasyJet, said:

“Removing Air Passenger Duty would allow airlines to provide more routes and lower fares for passengers in the UK, offering even more choice and important economic connections. This is a clear opportunity for the Government to help business all across the UK to do more business abroad.”

Craig Kreeger, Chief Executive of Virgin Atlantic, said:

“With Brexit on the horizon the UK should be working harder than ever to demonstrate it is open for business, not levying the highest rate of tax on air travel in the world. We need the Government to send a clear signal that it is serious about helping us to connect to international markets and that it sees our world-class aviation sector as a key component of the nation’s future economic success.”

Priti Patel, Member of Parliament for Witham, said:

“Britain’s high rates of Air Passenger Duty act as a barrier to economic growth and this report shows how this tax is damaging our country. When we are competing in a global market for businesses, investors and tourists to come to Britain this tax on travel puts people off and is stopping business from creating jobs. This tax needs dealing with so we can open up more trade links and travel routes to the rest of the world and attract more businesses and tourists into Britain.”

Jim Shannon, Member of Parliament for Strangford, Northern Ireland, said:

“This is yet more compelling evidence that the current high level of UK APD is damaging the overall UK economy. We’re particularly hard hit in Northern Ireland as we share a land border with a country with no equivalent aviation tax. Every extra route means more quality jobs and increased growth. Northern Ireland needs action on this tax, and so does the rest of the UK; action to boost jobs and trade. My colleagues and I will be pushing hard for this in the upcoming Budget.”  

The full report is available here.