Jane Middleton speech to Airlines UK Annual Dinner 2020
January 30th, 2020
Minister, Baroness Sugg, ladies and gentlemen, welcome to the 2020 Airlines UK Annual Dinner. For those of you I have not yet met I’m Jane Middleton, Chairman of Airlines UK and I would like to start by welcoming you all here this evening and by thanking our event sponsors Thales and Cranfield University.
I would also like to thank our airline members, associate members and especially our 6 Gold members – Thales, Farnborough International, ICF, Gallagher, ICTS and DXC Technology for their continued support of Airlines UK.
I would like to welcome and thank the Minister for Aviation Paul Maynard for joining us as our keynote speaker this evening.
Minister, 2019 was the year environmental issues rose to the top of the political agenda. The previous Government legislated to bring all greenhouse gas emissions to net zero by 2050, and the Committee on Climate Change recommended that such a commitment should include international aviation.
As an industry we now stand at a crossroads. We know that aviation must play its full part in helping the UK deliver a net zero future, and it’s essential we do so to enable our sector to thrive, meet growing passenger and cargo demand whilst maintaining our position as a world-leading aviation industry and the world’s third-largest global aviation network.
Be in no doubt this is understood across all parts of UK aviation and we are determined to play our part in helping the UK achieve net zero emissions.
It is wrong to say you can’t be both for the environment and aviation. The enemy is carbon, not air travel. Industry shares the CCC’s ambition to bring emissions into line with the Paris Agreement and has a long-term plan to achieve this. Already, within the UK, we have decoupled growth in aviation from growth in emissions, thanks largely to the tens of billions invested by airlines in the latest engine technology and airlines are committed to investing even further to achieve their climate goals.
Substantial additional contributions will be made through carbon pricing – via the existing EU ETS and from next year, the UN-led CORSIA programme, which will deliver carbon neutral growth for international aviation up to 2035. Through CORSIA, airlines will pay tens of billions of pounds to fund carbon reduction through high-quality carbon offsets, all the while being incentivised to reduce emissions at source through the effective functioning of the carbon market. CORSIA alone will mitigate around 2.5 billion tonnes of CO2 and generate over 40 billion dollars for climate projects between 2021 and 2035.
Moreover, airlines want to go further, which is why we’re calling on Ministers to work towards a more robust international commitment at the next ICAO General Assembly, which is consistent with the Paris Agreement. The UK Government has played an outstanding leadership role in these discussions at the UN, and will continue to have our unwavering support.
However, in order to achieve our ambitions, we need a renewed partnership approach with Ministers that provides support and investment in the green technologies of the future.
Minister, sustainable aviation fuels must play an essential role in helping deliver aviation decarbonisation over the next decade. Essentially, these fuels exist today, work in existing gas-turbine engines and with the right policy support could reduce UK aviation emissions by at least 30% up to 2050. Delivering these outcomes requires long-term policy stability and economic support for the scaling-up and rollout of sustainable fuel production capacity.
For £500m pounds of Government investment over 5 years, the UK through matched industry funding could establish a number of commercial plants across the UK, utilising wastes and residues to manufacture sustainable aviation fuels as well as develop a UK centre of excellence. The potential prize is huge: over 5,000 jobs and gross added value of over £700 million pounds and as we know sustainable aviation fuels offer a “bridge” to the game-changing future of electric and hybrid electric powered aircraft. These, in addition, could reduce UK carbon emissions by a further 24% by 2050.
Minister, there are those who say the only way to reduce our emissions is to curb air travel and deter people from wanting to take to the skies. This is a dangerous and ill-informed argument to make. Whether increasing APD or opposing airport expansion, punishing airlines and by extension our passengers is not the answer when in reality we are able to deal with our carbon whilst meeting future demand and allowing people and products to travel sustainably.
In October, Thomas Cook became the second Airlines UK member to cease operations in the space of two years. This was a tragedy for the thousands of employees who lost their jobs and a major headache for passengers. I would like to pay tribute to the Secretary of State, Aviation Minister, DFT personnel, and Richard Moriarty and his team for launching a successful repatriation effort. This demonstrated the effectiveness of Government at its very best.
We must now focus all our energies on ensuring such a mammoth effort is never required again and we support Government in its efforts to change the insolvency laws to ensure a carrier in administration can continue operating to bring people home before shutting up shop, but airlines remain opposed to another levy being imposed on passengers, at what is an increasingly turbulent and challenging period for the sector.
This brings me onto the events of the past few weeks. Minister, Airlines UK welcomes the recent announcement of an APD review ahead of the March budget, working alongside the DFT’s examination of ways to strengthen regional air connectivity. We have always said that the double taxation of domestic flights is an anomaly that damages UK regional aviation and should be addressed at the earliest opportunity.
However, we are very clear that any review must recognise the damaging impact the current levels of APD has on all routes, and not just domestic ones and just how uncompetitive the tax makes the UK as it looks to be open to the world. The review must be comprehensive and carried out across all aspects of the entire tax.
Last year, UK airport connectivity fell by 0.8% – the second consecutive year of decline. We know APD plays a material role in holding back UK connectivity by choking demand and making too many routes expensive to operate from and within the UK, particularly outside the South East. Recent Airlines UK research has shown that UK airports could be losing out on over 60 new direct routes – including 15 long-haul and 31 short-haul connections outside of London – just because of APD.
This situation serves nobody and is why it is so vital that any cut in domestic APD – whilst welcome – must not be paid for simply by increasing the other APD bands.
Minister, in the last Parliament a majority of MPs voted to support a third runway at Heathrow. The Conservative Party manifesto at the recent election, however, put Heathrow on notice that – despite this vote – it expects the airport to put forward a realistic business plan and a scheme proposal that does not hit passengers in the pocket by hiking up landing charges. As airlines we have been consistent that our support for expansion remains conditional upon Heathrow keeping charges at current levels, which was the promise made to MPs before the key vote in Parliament in 2018.
Heathrow will soon launch a public consultation to sign off its proposals following the recent – and welcome – decision by the CAA to place a cap on its early spending, although that cap still allows an incredibly generous £2.2bn to be spent before planning is achieved. The airport must ensure that its overall plan is affordable, operable and deliverable. It is therefore critical that it is developed with, and evidenced to, airlines before submission to the DCO.
In an increasingly tough trading environment for airlines, we need all our suppliers, in particular monopoly providers like Heathrow, to pare down on costs and adopt a mindset of achieving more for less, and we support the CAA’s critical role in protecting airlines and consumers from excessive shareholder returns and poor value for money.
The same principle must apply to NATS. The CAA has referred to the Competition and Markets Authority its national performance plan for ATC in the UK for the period 2020-2024. This follows the CAA’s announcement in September that NATS had rejected the regulator’s determination for this reference period. Airlines strongly support the CAA in their determination to achieve a cost-effective settlement for NATS, and hope it sets a strong precedent in support of lower fares for customers ahead of future rulings, including the CAA’s upcoming determination on Heathrow’s expansion and related costs, which of course will be borne by airlines and their passengers.
Now that the UK is set to leave the European Union, attention will turn to the long-term partnership between the UK and EU. We fully welcome the Department’s support for a standalone air services agreement on aviation, separate to the main trade agreement, and to be negotiated “as soon as possible”. After all, that’s what happens in every other aviation market in the world. We have been clear that the starting position should be the freedoms of the air already in place and full market access with EU reciprocity – only then can we ensure our industry continues to thrive and provide vital economic connections to the advantage of both UK and EU passengers and cargo customers.
We trust that you share UK carriers’ view that the provisions of the EU’s Basic Connectivity Regulation established in preparation for no-deal, are not an appropriate basis for a future relationship.
Alongside market access arrangements, continued UK participation in the EASA system, with the UK playing an active role and not merely being a dumb follower of EU rules, must also be a major priority. This has been an ask that unlike any other, has united all aspects of the sector, including manufacturers, and we would welcome early certainty that this remains the UK Government’s position and that it will be a strong negotiating priority with the EU. The UK would not be the only non-EU country to participate within EASA and – I’m sure you’ll agree – safety is too important to be a political football.
If this is not going to be the case – and I emphasise the word if – we would support negotiations starting as soon as possible on a Bilateral Air Safety Agreement with the EU, so this can be concluded by the end of December. Crucially, the starting point for this must be the current rule set for commercial aviation, which the CAA played such a key role in putting together.
Airlines UK and our members look forward to continuing our work with Government on these topics and more. Especially as we partner to find ways of supporting the sector on sustainable, carbon neutral operations whilst maintaining our remarkable position as the world’s third largest aviation network.
It now gives me great pleasure to introduce Steve Murray, Vice President of Avionics at Thales UK.